In the May 7 DBA International Member Alert, a change to the WA State Debt Collection Law was announced: “Earlier today, Governor Jay Inslee of Washington State signed into law House Bill 1822 that would require the licensure of debt buyers as ‘collection agencies.’ Specifically, ‘any person or entity that is engaged in the business of purchasing delinquent or charged off claims for collection purposes, whether it collects the claims itself or hires a third party for collection or an attorney for litigation in order to collect such claims’ must become licensed.”
NL Member Attorney Stephen A. Bernheim, of Edmonds, WA, agreed to speak with NL regarding the new law from his perspective.
NL: Tell us what you think NL members and clients/creditors need to know about this Bill.
The main thing they need to know is that debt buyers who are attempting to collect in WA will be required to be licensed, even if they are not collecting in their own name. Anyone who buys debt and tries to collect it from WA debtors has to be licensed. Becoming licensed involves the same process as any collection agency follows. You must apply for an out-of-state license, if your office is outside of WA State. If you’re out-of-state, even if you’re just sending collection letters and making calls in WA, those activities now legally qualify as doing enough business to require a license.
Some debt buyers have already become licensed in WA. Some legal cases were being decided based on whether or not the debt buyer was licensed. The new law added clarity in a pro-consumer way. Time and money has been wasted on court time spent arguing the license issue. The Bill’s passage was supported by debt buyers, collection agencies, consumer attorneys and creditors. It passed unanimously in both the House and the Senate.
NL: What prompted proposing/drafting/supporting the Bill?
It was proposed based on the rise in the number of debt buyers doing business in the state, and the desire to have them subject to the same regulations as in-state-collectors. Collection by debt buyers has become a much bigger business over the past several years. Everyone can agree that there is a potential for consumer abuse, when a conglomerate debt buyer comes after someone. We wanted to enforce their compliance with FDCPA and Washington State Collection Act regulations. Debt buyers suing in their own name now know they need a license to do so.
WA State has active consumer, as well as industry, advocates. They are highly qualified and dedicated. They are motivated by principle and are in favor of respectful consumer practices. They know it’s better for all if everyone follows the same rules. If bad apples are allowed to do business, it affects the reputation of everyone in the industry. Licensing is not that great of a burden on the debt buyers. It simply requires that they follow standard Federal and WA State collection practices and regulations, just like licensed in-state collectors are required to do.
There are prohibited practices in WA that debt buyers will have avoid. Like a collection agency, debt buyers will have to identify themselves to state authorities. There is some burden in the expense and there are some added regulations they will have to follow. For the most part, it’s pretty reasonable. I don’t think the fee has been set yet, but I’ve heard that licensing will cost between $500 and $1000 for an initial license, and then there will be an annual renewal. Oct. 1st the Bill goes into effect. You don’t need a lawyer to become licensed. You just need to read the information and fill out the forms that you can find here: http://www.dol.wa.gov/business/collectionagency/collicense.html.
NL: Will the requirements regarding information about the debt make it unreasonably difficult for a debt buyer, either in-state or out-of-state, to collect debt in WA?
NO. The burden is on the debt buyer to prove to the jury or the court via adequate records that the debt is owed. Debt buyers will have to act in compliance with WA laws of evidence and practice according to WA State standards. Washington collection laws and regulations often require itemizing principle, interest and interest rate, fees and costs. These figures have to be repeated in subsequent letters when the amount changes. I don’t believe this is “unreasonably” burdensome. Every bill can be figured out to the penny. If collectors find it too burdensome to itemize or track changes in the amount due, they can always ask for less and, for example, be willing to just collect the principal. Computers can be programmed to keep track of what is owed to the penny.
NL: Why do attorneys or debt buyers in other states need to be aware of this change to debt collection laws in WA?
It’s an added cost of doing business. If they are not licensed, they will face fines, or cases will be thrown out of court. A debt buyer can’t sue or even attempt to collect in WA without complying with this law and obtaining a license. A copy of the bill can be found here.
NL: The NL thanks Stephen for his time and expertise. We would like to tell you a little bit about him. He has a B.A. from Williams College and his J.D. from the Vanderbilt University School of Law. He was admitted to the Washington State Bar in 1985. He has an active retail and commercial collection practice and represents collection agencies before state and federal courts and administrative agencies in connection with FDCPA, FCRA and licensing proceedings. He is Washington State Resident Manager for national and international collection agencies and is Washington State MAP Chair. He also practices immigration law, is a member of the American Immigration Lawyers Association (AILA), and served on his hometown (Edmonds, WA) City Council from 2007-11.