Lessons Learned About Branch Licensing from States' Covid-19 Response

Lessons Learned About Branch Licensing from States' Covid-19 Response

One unexpected outcome of the coronavirus pandemic has been a renewed interest in location specific licensing for debt collection. Each state has the right to enact its own set of debt collection laws and requirements. As such, most jurisdictions have very different licensing and registration requirements. Failure to comply with state licensing and registration requirements could prove costly (civil and/or administrative action, negative press, etc.) not only to the collection agency but also to the creditors that they represent.

Certain jurisdictions require that all locations where communications with debtors take place maintain a separate branch license. The branch license can be as involved as the original debt collection license application or as uncomplicated as a letter notifying the appropriate jurisdiction of the branch location. Any communication with a debtor from an unlicensed branch location is unlicensed collection activity - carrying all the same consequences of unlicensed collection activity to both the agency and the creditors that they represent.

Licensing branch locations has historically been an area that is misunderstood. It is common to find collection agencies who have licensed the organization correctly at an entity level but have overlooked the physical location(s) of the respective call centers/collectors.

Along came Covid-19 – state governors began issuing shelter in place orders and restricting regular business activities. Regulators responsible for the monitoring of regulated industries responded by issuing their own guidance on how to operate within the bounds of the state-imposed restrictions. State after state issued temporary and conditional permissions for collectors to work at home even though their home address is not properly licensed as a location from which collection activity is legally allowed to occur.

Surprisingly, the temporary relief designed to allow collection agencies to continue to operate during the Coronavirus shutdown has seemingly highlighted a licensing blind spot for many. Once this virus has passed and life resumes some semblance of normalcy, the states will presumably resume enforcement of the laws as written and require that all collection activity occur from a legally licensed location. Will you be ready when that happens?