Massachusetts Amends Debt Collector and Third Party Loan Servicer Laws
by: Margaret Wright
Massachusetts’s “Conduct of the Business of Debt Collectors and Loan Servicers“, 209 CMR 18, has been amended in order to further clarify and establish standards of conduct for debt collectors and third party loan servicers. Summarized below are the key amendments effective as of October 11, 2013.
Mortgage Loan Servicing Practices
The most significant amendment is the addition of Section 18.21A “Mortgage Loan Servicing Practices”. A third party loan servicer may not use unfair or unconscionable means in the servicing of a mortgage loan and this section outlines examples of conduct which will result in a violation.
Third party mortgage loan servicers must comply with additional requirements regarding the right of a borrower to cure default, loss mitigation options and evaluation requirements, and loan modification requirements prior to foreclosure among other foreclosure related servicing requirements. Additionally, a third party mortgage loan servicer may not collect private mortgage insurance past expiration date, knowingly or recklessly enable an illegal foreclosure to occur and may not fail to provide a borrower the contact information of the servicer’s designated contact individual.
Section 18.21A also outlines the requirements where a third party servicers is acting on behalf of the mortgagee in providing foreclosure affidavits or sworn statements and certifications.
General Servicing Practices
Section 81.21 “Unfair Servicing Practices” has also been amended to reflect a “General” designation and to include additional examples of third party loan servicer conduct which will result in a violation of this section.
The newly added examples of improper conduct include:
- Misrepresenting any material information in connection with the servicing of a loan;
- Not establishing and implementing procedures “to ensure accuracy and timely updating of account information” and “to ensure effective monitoring and oversight of law firms, subservicers, foreclosure firms, foreclosure trustees and other third party providers”;
- Requiring funds to be remitted by costly means;
- Refusing to communicate with a duly authorized representative of the borrower.
Violations and Penalties
The newly amended section 18.22 “Relation to Other Laws” outlines that a violation of 209 CMR 18.00 “shall be considered an unfair or deceptive act or practice under MGL c. 93A” and also subject to the penalties therein.
Definitions
The definition of debt collector has been amended to include “any person who buys or acquires debt that is in default at the time or purchase or acquisition and who seeks to collect such debt directly”. Excluded from the definition of debt collector are attorneys licensed to practice law in Massachusetts who are collecting a debt on behalf of a client.
Debt Collector Application Procedures
Section 18.03 outlines debt collector license application procedures. Applicants must submit financial statements, which include a Balance Sheet, Income Statement, Statement of Cash Flows, and Statement of Stockholder’s Equity. At initial application the financial statements submitted must be audited or if audit is not available at least reviewed by an independent certified public accountant. Section 18.03 has been amended to clarify financial statement submission requirements for applicants who have not yet conducted any business. In the case of an applicant who has not yet conducted any business financial statements may take the form of an initial Balance Sheet, which must also be audited or reviewed by an independent certified public accountant.
Debt Collector Licensing Standards
Section 18.04 outlines reasons an application for debt collector license may be denied, which includes the failure to comply with the application requirements of 18.03. This section has been amended to include an independent certified public accountant raising doubt as to “applicant’s ability to continue as a going concern” in a notation to an audited or reviewed financial statement as a reason to deny an application.
Significant Event Notifications to the Commissioner of Banks
In the case of the occurrence of a significant event, notice must be provided immediately in writing within one business day. Section 18.08 has been amended to include additional significant events relating to the activities of the debt collector or registered third part servicer:
- Conviction of any partner, member, officer, director, or principal employee of a misdemeanor related to debt collection or loan servicing activities.
- Conviction of any partner, member, officer, director, or principal employee of any felony;
- “Closing or shortage of any trust account where funds of clients paid to a debt collector are deposited”.
Debt Collection Communication
The regulation outlines requirements and restrictions concerning debt collection communication. New amendments include restrictions on causing additional communication expense to the debtor including long distance telephone calls, text messaging, download fees, data usage fees and similar charges. Telephone contact requirements and restrictions have been amended to include contact via both cellular telephone and text message.
Section 18.17 Unfair Practices in the collection of a debt have also been amended to include “taking or threatening to take any non-judicial action to effect dispossession or disablement of property if… the debt collector knows or has reason to know that demands for payment and/or legal notices were not directed to the consumer’s last known address.”
View the amendments in their entirety:
http://www.mass.gov/ocabr/business/banking-services/banking-legal-resources/laws-and-regs/dob-regulations/209-cmr-1800.html
About the Author:
Margaret Wright, J.D., is Manager of Regulatory Compliance at Bankers Advisory, Inc. She is a graduate of Stonehill College and earned her Juris Doctor at Suffolk University Law School. She serves on the Compliance Committee of the Massachusetts Mortgage Bankers Association and is admitted to the Massachusetts Bar. She can be reached at Margaret@bankersadvisory.com
Margaret Wright, JD, is regulatory compliance director with CLA. She is a graduate of Stonehill College and earned her juris doctor at Suffolk University Law School. She is admitted to the Massachusetts Bar.
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