Alert

June 28, 2017

Maine Enacts Law Regulating Debt Buyers

On June 16, 2017, Maine Governor Paul LePage signed Public Law 2017, c. 216 (LD 1199), An Act to Promote Fiscal Responsibility in the Purchasing of Debt (the "Debt Buyers Law"), that amends the Maine Fair Debt Collection Practices Act (the "ME-FDCPA"). Under the Debt Buyers Law, a debt buyer may not collect or attempt to collect on a debt, or sell or otherwise transfer ownership of a debt, unless the debt buyer possesses:

  • the name of the owner of the debt;
  • the original creditor's name at the time of the charge-off;
  • the original creditor's account number used to identify the debt at the time of the charge-off, if the original creditor used an account number to identify the debt at the time of charge-off;
  • the principal amount due at charge-off;
  • an itemization of interest and fees, if any, incurred after charge-off claimed to be owed and whether the interest and fees were imposed by the original creditor or any subsequent owners of the debt;
  • if the debt is not from a revolving credit account, the date that the debt was incurred or the date of the last charge billed to the consumer's account for goods or services received. In the case of debt from a revolving credit account, the debt buyer must possess the date of the last extension of credit for the purchase of goods or services, for the lease of goods or as a loan of money;
  • the date and amount of the last payment, if applicable;
  • the names of all persons or entities that owned the debt after the time of the charge-off, if applicable, and the date of each sale or transfer;
  • documentation establishing that the debt buyer is the owner of the specific debt at issue. If the debt was assigned more than once, the debt buyer must possess each assignment or other writing evidencing the transfer of ownership to establish an unbroken chain of ownership, beginning with the original creditor to the first debt buyer and each subsequent debt buyer; and
  • a copy of the contract, application, or other documents evidencing the consumer's liability for the debt. If a signed writing evidencing the original debt does not exist, the debt buyer must possess a copy of a document provided to the consumer before charge-off demonstrating that the debt was incurred by the consumer or, for a revolving credit account, the most recent monthly statement recording the extension of credit for the purchase of goods or services, for the lease of goods or as a loan of money.

In addition, a debt buyer may not sell or otherwise transfer ownership of a resolved debt, an interest in a resolved debt, or any financial information relating to a resolved debt. "Resolved debt" means a debt that has been paid, settled, or discharged in bankruptcy.

A "debt buyer" is a person that is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes, whether the person collects the debt or hires a third party (including an attorney) to collect the debt, but does not include a state or federally chartered bank or a person that acquires charged-off consumer debt incidental to the purchase of a portfolio predominantly consisting of debt that has not been charged off. A debt buyer is considered a debt collector for all purposes under ME-FDCPA, including the requirement to obtain a license from the Maine Bureau of Consumer Credit Protection (the "BCCP"). "Charge-off" means the act of a creditor removing an account from its books as an asset and treating it as a loss or expense because payment is unlikely.

A debt buyer may not initiate a collection action against a consumer unless the debt buyer alleges all of the following in the complaint:

  • all of the information in the bullets above;
  • the basis of the request for attorney's fees;
  • that the debt buyer is the current owner of the debt; and
  • that the cause of action is within the applicable statute of limitations period.

The debt buyer must also attach to the complaint: (1) a copy of the contract, application, or other document evidencing the consumer's agreement to the debt, and (2) a copy of the bill of sale or other writing establishing that the debt buyer is the owner of the debt (including a document evidencing each assignment or transfer of ownership in order to establish an unbroken chain of ownership from the original creditor to the debt buyer). The Debt Buyers Law imposes strict evidentiary standards that must be met by the debt buyer in order to obtain a judgment against a consumer, even if the consumer does not appear in the court proceeding.

The Debt Buyers Law also requires each licensed debt buyer to provide documentation that the debt buyer has conducted a criminal background check prior to employment on every officer or employee of the debt buyer who engages in the active collection of debt for the debt buyer or has access to consumer credit information.

Failure to comply with the Debt Buyers Law subjects the debt buyer to liability for actual damages, additional damages as determined by the court of $2,000 or less, potential class actions, and reasonable attorney's fees and court costs. In addition, the Debt Buyers Law authorizes the BCCP (via the Maine attorney general) to impose civil penalties of $10,000 or less for willful violations of ME-FDCPA.

The Debt Buyers Law applies to all debt sold to a debt buyer on or after January 1, 2018 and will not affect the validity of any collection actions taken, civil actions or arbitration actions commenced, or judgments entered into prior to January 1, 2018.

  Chapter 216