Arkansas Supreme Court: Out-of-State Debt Buyers Must be Licensed

  • Email
  • Print
  • Printing Articles

    1. Click here to print!
    2. ...or print directly from your browser by choosing File > Print... from the menu or by pressing [Ctrl + P]. Our printer-friendly stylesheet will make sure extraneous website stuff isn't printed.
    3. You're done!

    Close this message.

  • Comments
  • RSS

The Arkansas Supreme Court late last week ruled that an out-of-state debt buyer that “retains a licensed Arkansas lawyer to collect on the delinquent accounts and file lawsuits on its behalf in Arkansas” meets the definition of “collection agency” in the state and must be properly licensed as such.

The high court issued its opinion in response to a request from a district court in a case that saw a consumer suing a debt buyer for not being properly licensed.

The case, Simpson v. Calvary, was filed in 2013 after a law firm working on Cavalry’s behalf won a default judgment against Simpson over a past due $1,078 credit card account. Simpson argued that Cavalry violated the FDCPA and Arkansas FDCPA by assigning a debt for collection without being licensed to do so in the state.

Arkansas law does require a debt collection agency to obtain a license to collect or solicit accounts. No exemptions for out-of state agencies exist. But Cavalry argued that it does not meet the definition of a “collection agency” because it assigned the debt to a licensed Arkansas law firm for collection rather than collecting itself.

In its opinion, the Arkansas Supreme Court disagreed with this characterization and noted that the defense that the ARM firm was not “directly” collecting the debt lacks merit. “Cavalry did not ‘assign’ the debt to a law firm but ‘retained’ (as framed in the certified question by the Eastern District) a law firm to act on its behalf in collecting the debt, including the filing of a lawsuit,” wrote Justice Cliff Hoofman.

Cavalry also noted that the Arkansas State Board of Collection Agencies had previously weighed-in on the question and issued a clarifying statement in August 2012 that read:

“…the Arkansas State Board of Collection Agencies recognizes as exempt from collection agency licensure in Arkansas any entity that purchases or receives an assignment of ownership of a debt that is in default at the time of assignment provided that the debt buyer: 1) does not attempt to collect debts directly either for itself or others; 2) undertakes collection efforts solely through third-party collection agencies or law firms; 3) maintains no place of business in Arkansas.”

But the Supreme Court said that while the agency’s interpretation of the statute is highly persuasive, it read the law as unambiguous and could not read it any other way.

So the justices answered both questions from the district judge in the affirmative and said that an out-of-state debt buyer must get licensed in the state if they are retaining firms to collect on its behalf.

  • Email
  • Print
  • Printing Articles

    1. Click here to print!
    2. ...or print directly from your browser by choosing File > Print... from the menu or by pressing [Ctrl + P]. Our printer-friendly stylesheet will make sure extraneous website stuff isn't printed.
    3. You're done!

    Close this message.

  • Comments
  • RSS

Posted in Arkansas, Collection Law Firms, Collection Laws and Regulations, Debt Buying, State Licensing .

×
Subscribe to our email newsletters

Continuing the Discussion

We welcome and encourage readers to comment and engage in substantive exchanges over topics on insideARM.com. Users must always follow our Terms of Use. Also know that your comment will be deleted if you: use profanity, engage in any kind of hate speech, post an incoherent or irrelevant thought, make a point of targeting anyone, or do anything else we find unsavory. Your comment will be posted under your current Display Name, shown below. If you'd like to change your Display Name, you must update it on the My Profile page.

  • avatar BHA LLC says:

    “…the Arkansas State Board of Collection Agencies recognizes as exempt from collection agency licensure in Arkansas any entity that purchases or receives an assignment of ownership of a debt that is in default at the time of assignment provided that the debt buyer: 1) does not attempt to collect debts directly either for itself or others; 2) undertakes collection efforts solely through third-party collection agencies or law firms; 3) maintains no place of business in Arkansas.”
    How can this be interpreted any way other than written? are the judges illiterate?

  • avatar edward-boltz says:

    Not clear if BHA LLC was able to read the opinion, so here it is:

    http://law.justia.com/cases/arkansas/supreme-court/2014/cv-14-45-0.html

    Seems rather clear that Justice Hoofman and likely the other justices on the Arkansas Supreme Court are literate. They just unanimously agreed that the Arkansas Code was unambiguous and that the regulation/clarification promulgated by Arkansas State Board of Collection Agencies (and agency that has been accused of regulatory capture) was in error.

    Here’s the application for obtaining a license as a debt collector in Arkansas:

    http://www.asbca.org/pdf/Initial-Application-2013-14.pdf

    Looks like its a $140.00 fee, plus $20.00 for each addition collector, so perhaps Calvary should have paid that rather than trying to skirt the law.

Leave a Reply