Commercial Debt Collection Statutes for Michigan

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Commercial-Debt Collection Statutes for

Michigan:

MICHIGAN-Definitions

As used in this article:

(a) “Claim” or “debt” means an obligation or alleged obligation for the payment of money or thing of value arising out of an expressed or implied agreement or contract for a purchase made primarily for personal, family, or household purposes.

(b) “Collection agency” means a person directly or indirectly engaged in soliciting a claim for collection or collecting or attempting to collect a claim owed or due or asserted to be owed or due another, or

repossessing or attempting to repossess a thing of value owed or due or asserted to be owed or due another arising out of an expressed or implied agreement.  A collection agency shall include a person representing himself or herself as a collection or repossession agency, or a person performing the activities of a collection agency, on behalf of another, which are regulated by this act.  A collection agency shall also include a person who furnishes or attempts to furnish a form or a written demand service represented to be a collection or repossession technique, device, or system to be used to collect or repossess claims, if the form contains the name of a person other than the creditor in a manner indicating that a request or demand for payment is being made by a person other than the creditor even though the form directs the debtor to make payment directly to the creditor rather than to the other person whose name appears on the form.  Collection agency also includes a person who uses a fictitious name or the name of another in the collection or repossession of claims to convey to the debtor that a third person is collecting or repossessing or has been employed to collect or repossess the claim.

(e) “Creditor” or “principal” means a person who offers or extends credit creating a debt or a person to whom a debt is owed or due or asserted to be owed or due.  Creditor or principal shall not include a person who receives an assignment or transfer of a debt solely for the purpose of facilitating collection of the debt for the assignor or transferor.  In those instances, the assignor or transferor of the debt shall continue to be considered the creditor or the principal for purposes of this article.

(f) “Consumer” or “debtor” means a natural person obligated or allegedly obligated to pay a debt. Mich. Stat. Ann. § 339.901(a)-(b), (e)-(f) (West, WESTLAW through P.A. 2005, No. 1-103).

 

As used in this act:

(a) “Claim” or “debt” means an obligation or alleged obligation for the payment of money or thing of value arising out of an expressed or implied agreement or contract for a purchase made primarily for personal, family, or household purposes.

(b) “Collection agency” means a person directly or indirectly engaged in soliciting a claim for collection

or collecting or attempting to collect a claim owed or due or asserted to be owed or due another, or repossessing or attempting to repossess a thing of value owed or due or asserted to be owed or due

another person, arising out of an expressed or implied agreement. Collection agency includes a person representing himself or herself as a collection or repossession agency or a person performing the activities of a collection agency, on behalf of another, which activities are regulated by Act No. 299 of the Public Acts of 1980, as amended, being sections 339.101 to 339.2601 of the Michigan Compiled Laws.  Collection agency includes a person who furnishes or attempts to furnish a form or a written demand service represented to be a collection or repossession technique, device, or system to be used to collect or repossess claims, if the form contains the name of a person other than the creditor in a manner indicating that a request or demand for payment is being made by a person other than the creditor even

though the form directs the debtor to make payment directly to the creditor rather than to the other person whose name appears on the form.  Collection agency includes a person who uses a fictitious name or the name of another in the collection or repossession of claims to convey to the debtor that a third person is collecting or repossessing or has been employed to collect or repossess the claim.

(d) “Consumer” or “debtor” means a natural person obligated or allegedly obligated to pay a debt.

(e) “Creditor” or “principal” means a person who offers or extends credit creating a debt or a person to whom a debt is owed or due or asserted to be owed or due.  Creditor or principal does not include a person who receives an assignment or transfer or a debt solely for the purpose of facilitating collection of the debt for the assignor or transferor.  In those instances, the assignor or transferor of the debt shall continue to be considered the creditor or the principal for purposes of this act.

Mich. Stat. Ann. § 445.251 (West, WESTLAW through P.A. 2005, No. 1-103).


MICHIGAN-Exemptions

Collection agency does not include a person whose collection activities are confined and are directly related to the operation of a business other than that of a collection agency such as, but not limited to, the following:

(i) A regular employee when collecting amounts for 1 employer if all collection efforts are carried on in the name of the employer.

(ii) A state or nationally chartered bank when collecting its own claims. (iii) A trust company when collecting its own claims.

(iv) A state or federally chartered savings and loan association when collecting its own claims. (v) A state or federally chartered credit union when collecting its own claims.

(vi) A licensee under Act No. 21 of the Public Acts of 1939, as amended, being sections 493.1 to

493.26 of the Michigan Compiled Laws.

(vii) A business licensed by this state under a regulatory act in which collection activity is regulated.

(viii) An abstract company doing an escrow business.

(ix) A licensed real estate broker or salesperson if the claims being handled by the broker or salesperson are related to or in connection with his or her real estate business.

(x) A public officer or person acting under a court order.

(xi) An attorney handling claims and collections on behalf of clients and in the attorney’s own name.

Mich. Stat. Ann. § 339.901(b) (West, WESTLAW through P.A. 2005, No. 1-103).

 

What is the Fair Debt Collection Practices Act?

The U.S. Congress enacted the FDCPA in 1977 and added it to the Consumer Credit Protection Act in 1978. Its purpose is to eliminate abusive practices of third-party debt collectors. To that end, the Act establishes guidelines for the conduct of debt collectors, defines the rights of consumers, and prescribes penalties for violations.

The FDCPA defines “debt collectors” as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debt … asserted to be owed or due another.”

In other words, “debt collectors” are defined as third parties collecting for a creditor. (As of a 1986 amendment, the FDCPA definition of “debt collector” also includes attorneys who collect debts on a regular basis.)

“Consumers” and “debt” covered under the FDCPA are defined as specifically referring to personal, family or household transactions. Therefore, debts owed by businesses or by individuals for business purposes (commercial debts) are not subject to the FDCPA.

So, if the FDCPA does not apply to commercial debt collection by third parties, how are commercial collectors regulated?

There are no U.S. federal laws, similar to the FDCPA, that regulate third-party commercial (business-to-business) debt collection or provide guidelines for the conduct of commercial debt collectors.

Who is protecting the rights of commercial creditors and debtors?

Commercial Collection Agency Association

The premier body governing the activities of commercial debt collectors is the Commercial Collection Agency Association (CCAA), an arm of the Commercial Law League of America (CLLA). These organizations are not government bodies, nor do they have any jurisdiction over non-members.  However, both require high standards of practice and ethics in order for a commercial collection agency to become a certified member.

The Commercial Collection Agency Association was established in 1972 to “improve the quality and reputation of the commercial collection industry.” It currently has more than 200 members. Approximately 100 core members represent the most prestigious commercial collection agencies in the United States.

The CCAA is an arm of the Commercial Law League of America (CLLA), the oldest creditor’s rights organization in the country established in 1895.

Membership in the CCAA

Members of the CCAA are the only collection agencies in the United States certified by the Commercial Law League of America. In order to obtain certification, the agency must meet rigorous criteria.

Certification Requirements

  • The agency must have been in business at least four years prior to application for membership.
  • 80% of the agency’s business must be commercial (business-to-business).
  • The agency must maintain a separate Trust Account into which all monies belonging to creditors are placed. This Trust Account is reviewed twice annually by the Executive Director of the CCAA.
  • The agency must agree to abide by the CCAA Code of Ethics, which sets ethical standards for dealing with creditors, debtors and attorneys.
  • Executives of the agency must meet continuing educational requirements and attend regular CCAA meetings. The member agency must complete sixty continuing educational credits annually.
  • The agency must post a surety bond of at least $300,000 for the protection of the creditors it serves.
  • One person in the agency must also be a member of the Commercial Law League of America.
  • The agency must agree to random periodic site visits from the CCAA Executive Director.
  • The agency must be in compliance with all local and state licensing requirements and regulations governing commercial collection firms.

Primarily, the Commercial Law League of America and its Commercial Collection Agency Association have assumed responsibility for looking after the needs and rights of creditors and their customers/debtors. State governments that require licensing and bonding of commercial debt collectors also play an important role.

However, since membership in the CCAA is not compulsory, and some firms may provide collection services in a state but never get licensed, it is up to creditors to ensure they (and their debtors) are receiving the most ethical and highest level of commercial collection service.

How? Check to see if your Agency is both a member of the Commercial Collection Agency Association and therefore certified by the Commercial Law League of America, and is licensed in the U.S. states requiring such licensing.

Burt And Associates is a member of both CCAA and CLLA.  Also, we are licensed in bonded in all 50 states (where required).