What strategy should an agency employ to become compliant? First, the agency should identify the states where they are currently communicating with or anticipate communicating with debtors. The statutes are consistently clear among the respective jurisdictions that communicating with a debtor, whether by phone or mail, without being licensed is a violation of the law. The penalty for such violation varies significantly from state to state but ranges from administrative action (fines and a cease and desist) to potential criminal charges. As such, it is imperative to obtain and maintain the appropriate debt collection licensing and registrations in all states where debtors will be contacted.
Secondly, the agency should identify what types of credit grantors they are currently representing and more importantly what types of credit grantors they are working hard to attract. The credit grantors fully understand the debt collection licensing requirements and the related exposure that exists for them by forwarding accounts to agencies that are not appropriately licensed or registered. Most national credit grantors expect the agencies they use to be appropriately licensed in all jurisdictions that require licensing for the collection of debts and the performance of other related functions. As such, licensing has become one of the most significant barriers to entry into third party debt collection.
In summary, an agency needs to invest the time and resource necessary to develop and implement a licensing strategy that not only protects them from state imposed sanctions and possible civil litigation, but also attracts high-volume and high-yield clients. The perfect strategy for licensing couples the technical requirements imposed by the states with the intangible benefits of properly positioning the agency in a very competitive market.