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Financial Services Law Insights and Observations

Washington state Attorney General says debt buyers are collection agencies, files lawsuit for operating without a license

State Issues State Attorney General Debt Buyer Licensing Consumer Finance

State Issues

On September 21, the Washington state Attorney General announced that it filed a lawsuit against several collection agencies and their owner (defendants) for allegedly purchasing and suing on charged-off consumer debts in violation of the Washington Collection Agency Act (WCAA) and the Washington Consumer Protection Act (WCPA). The complaint alleges that defendants bought and then obtained judgements on at least 3,500 consumer debts without first obtaining a collection agency license under the WCAA. Under the WCAA, a debt buyer is a collection agency and must therefore “be licensed as a collection agency if it enters into contracts with sellers of debt accounts or takes other affirmative steps to acquire accounts for collection, either directly or through an agent.” Failure to obtain a license as required under the WCAA  amounts to a per se violation of the WCPA. Because defendants bought and sued on consumer debts before obtaining a license in 2013, the Attorney General claimed that they violated the WCAA and the WCPA. The complaint seeks civil money penalties of up to $2,000 per violation for each violation of the WCPA, restitution for affected consumers, and reimbursement of legal costs and fees.

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