Debt collection is a massive industry in the United States. According to a report from IBISWorld, there are nearly 8,000 debt collectors operating nationwide, bringing in a combined $19 billion in total revenue. Debt collectors are governed by a complex web of federal and state regulations.
All debt collection agencies operating in New Jersey must remain in full compliance with the law. Bere, our New Jersey debt collection lawyers provide an overview of the most important things that debt collection agencies should know about staying in full compliance with the debt collection laws.
New Jersey Collection Agencies Must File a Bond With State of New Jersey
New Jersey requires all collection agencies that operate in the state to fold a bond. As explained by the New Jersey Division of Revenue and Enterprise Services, all parties operating a debt collection to receive payment on behalf of others “must annually file a Collection Agency Bond Application.” As of 2022, the State of New Jersey requires the posting of a $5,000 bond. In addition, before a bond can be filed, collection agencies must have their business properly registered with state regulators.
A Debt Collection Agency May Need to Get a License
The majority of U.S. jurisdictions required debt collection agencies to obtain some sort of state license. In New Jersey, there technically is not a debt collection licensing statute. However, most debt collection agencies are required to obtain a license in practice. A 2014 decision in the United States District Court for the District of New Jersey (Veras v. LVNV Funding, LLC) complicated matters by increasing the circumstances in which debt collection agencies need to obtain a license in the state.
The New Jersey Consumer Financing Licensing Act (NJCFLA) is a state law that requires all “consumer lenders” to obtain a license from state regulators. Courts have held that companies that engage in debt buying—including collection agencies—are generally required to obtain a license under the NJFLA. If you have any questions about debt agency licensing requirements in NJ, an experienced attorney can help.
Make Sure You Know Your Obligations Under the Federal FDCPA
All debt collection agencies operating in New Jersey must comply with the Fair Debt Collection Practices Act (FDCPA). Passed in the late 1970’s, the FDCPA is a consumer protection statute designed to stop abusive, deceptive, and otherwise unfair collection practices. Four key things that debt collection agencies need to know about their responsibilities under the FDCPA are as follows:
- Initial Disclosures: When a collection agency makes initial contact with a borrower, the FDCPA requires them to make comprehensive, accurate initial disclosures regarding the debt. Federal law is clear that consumers have a right to information.
- Restrictions on Third Party Contact: To stay in compliance with the FDCPA in New Jersey, debt collection agencies can only make limited contact with third parties. Indeed, third parties can only be used to get basic contact information about a borrower.
- Prohibition on Material Misrepresentations: The FDCPA strictly prohibits the use of false statements and/or material misrepresentations for the purposes of collecting a debt. Agencies in New Jersey that use misleading practices could face liability.
- Liability for Abusive Practices: Finally, the federal FDCPA also strictly bars the use of harassment and any other debt collections practice deemed abusive. Collection agencies must avoid abusive practices to remain in compliance with the law.
How to Stay in Compliance: Review Practices and Procedures on a Regular Basis
Debt collection agencies that fall out of compliance with state or federal regulations could face serious sanctions—including the loss of ability to collect on a debt, other significant financial penalties, and even the potential loss of their ability to operate in the state. As a best practice, all collection agencies should review their practices and procedures on a regular basis. If you own or operate a collection agency and you have questions about state or federal regulations, please reach out to an experienced New Jersey debt collection lawyer for guidance and support.
Contact New Jersey Debt Collection Attorneys Today
At Snellings Law LLC, our New Jersey debt collection lawyers are devoted to providing personalized, solutions-driven legal guidance and support to clients, including collection agencies. If you have any questions about staying in compliance with New Jersey’s debt collection laws, we are available to help. Contact our legal team now to set up a fully private case review. We serve clients throughout North Jersey, including in Essex County, Morris County, Bergen County, and Hudson County.