Utah State Court Rejects Claim Based on Debt Collector’s Alleged Failure to Register Under Collection Agency Act

Editor's Note: This article, authored by Ethan G. Ostroff, Anthony Kaye, Elizabeth Andrews & Nathan Marigoni previously appeared in Troutman Pepper’s Consumer Financial Services Law Monitor and is re-published here with permission. 

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The Utah court of appeals has recently affirmed the dismissal of a plaintiff’s suit against a debt buyer based on its alleged failure to register as a collection agency prior to filing collection lawsuits. The court’s decision in Meneses v. Salander Enterprises LLC, not only holds that a violation of the Utah Collection Agency Act (UCAA) is not a deceptive or unconscionable act under state law, but also calls into question whether the UCAA ever even applied to debt buyers. As discussed here, the UCAA was repealed by the state legislature earlier this year, but cases asserting this theory of liability remain pending before state and federal courts.

The UCCA provided that “[n]o person shall conduct a collection agency, collection bureau, or collection office in this state,” or engage in other collections-related solicitation, unless “that person or the person for whom he may be acting as agent, is registered with the Division of Corporations and Commercial Code and has on file a good and sufficient bond.” Utah Code § 12-1-1. The plaintiff alleged that the defendant, a debt buyer, was required to but failed to register as a debt collector under this provision, and that filing lawsuits to collect money owed to it without that registration constituted a deceptive or unconscionable act under the Utah Consumer Sales Practices Act (UCSPA).

The plaintiff’s argument relied heavily on Lawrence v. First Financial Investment Fund V, LLC, a 2020 decision from Utah’s federal district court holding that a debt buyer was subject to the requirements of the UCAA like a “traditional” debt collector who seeks to collect debts owed to others. The Utah court of appeals expressed significant skepticism that First Financial was correctly decided, noting that “the statute is open to multiple interpretations” and that “a reading of the wider statutory scheme of the UCAA suggests that its purpose was not to protect the interests of those who owed a debt but to protect the interests of those to whom the debt was owed, which supports the position that the registration requirement applied only to those who collect debt on behalf of others.” However, the court of appeals ultimately concluded it need not decide this issue, affirming on the alternative ground that a UCAA violation, standing alone, did not support the plaintiff’s claim for deceptive or unconscionable acts under the UCSPA.

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