Commercial Debt Collection Statutes for Minnesota

Commercial-Debt Collection Statutes for Minnesota:

MINNESOTA-Definitions

The terms in this section for the purposes of sections 332.31 to 332.45 shall have the meanings given them.

Subd. 2. Person.  “Person” means and includes individuals, partnerships, associations or corporations.

Subd. 3. Collection agency.  “Collection agency” means and includes any person engaged in the

business of collection for others any account, bill or other indebtedness except as hereinafter provided.  It includes persons who furnish collection systems carrying a name which simulates the name of a collection agency and who supply forms or form letters to be used by the creditor, even though such forms direct the debtor to make payments directly to the creditor rather than to such fictitious agency.

Subds. 4, 5. Repealed by Laws 1979, c. 144, §  7.

Subd. 6. Collector.  “Collector” is a person acting under the authority of a collection agency under subdivision 3, and on its behalf in the business of collection for others an account, bill, or other indebtedness except as otherwise provided in this chapter.

Minn. Stat. Ann. § 332.31 (West, WESTLAW through the laws of the 2005 Regular Session effective through June 1, 2005).

Exemption from licensure

A collection agency shall be exempt from the licensing and registration requirements of this chapter if all of the following conditions are met:

(1) the agency is located in another state that regulates and licenses collection agencies, but does not require a Minnesota collection agency to obtain a license to collect debts in their state if the agency’s collection activities are limited in the same manner;

(2) the agency’s collection activities are limited to collecting debts not incurred in this state from

consumers located in this state; and

(3) the agency’s collection activities in Minnesota are conducted by means of interstate communications, including telephone, mail, electronic mail, or facsimile transmission.

Minn. Stat. § 332.3351 (West, WESTLAW through the end of the 2011 First Special Sess.).

MINNESOTA-Exemptions

(a) The term “collection agency” shall not include persons whose collection activities are confined to and are directly related to the operation of a business other than that of a collection agency such as, but not limited to:

•           banks, when collecting accounts owed to the banks and when the bank will sustain any loss arising from uncollectable accounts;

•           abstract companies doing escrow business;

•           real estate brokers;

•           public officers;

•           persons acting under order of a court;

•           lawyers;

•           trust companies;

•           insurance companies;

•           credit unions;

•           savings associations;

•           loan or finance companies unless they are engaged in asserting, enforcing or prosecuting unsecured claims which have been purchased from any person, firm, or association when there is recourse to the seller for all or part of the claim if the claim is not collected.

(b) The term “collection agency” shall not include a trade association performing services authorized by section 604.15, subdivision 4a, but the trade association in performing the services may not engage in any conduct that would be prohibited for a collection agency under section 332.37.

Minn. Stat. § 332.32 (West, WESTLAW through  Laws of the 2012 Reg. Sess.).

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).