Experienced credit personnel understand that seriously past due customers often necessitate the use of a collection agency if they have any hopes of getting their customer to pay. Unfortunately, the odds are overwhelming that these same credit professionals are unknowingly giving their past due customers a method to avoid payment.  Why?  Because when you place an account with an agency that is not fully licensed in all the states that require it, you could be giving the debtor a "Get Out of Jail Free Card".

Collection agency licensing is critical for both the agency AND the clients they represent! The negative effects an unlicensed agency can have on the client they represent are numerous but the most obvious one is a debtor using a lack of licensing to avoid paying your bill. If your company was getting a collection call from an agency that was unlicensed and thus illegally contacting you, would you pay them?  This is exactly why you need to use a fully licensed agency.

The Fair Debt Collection Practices Act (FDCPA) was created so that the Federal Government could regulate the actions of “consumer” collection agencies. However, the FDCPA does not have provisions that regulate the actions of “commercial” collection agencies that collect from businesses and not individuals. The regulation of commercial collection agencies is left up to each individual state and almost all states have different laws concerning commercial collection agencies.  Many states have laws in place that place the agency at risk for state imposed sanctions and or possible civil litigation for lack of compliance.  See the latest headlines showing actions taken by various states against unlicensed agencies.   

State Laws In nearly half of the states, if the agency is not legally licensed to perform collection services, there can be very serious consequences. In the states of Washington and West Virginia, if the agency is unlicensed and the debtor complains to the state regulator, then the agency has to give the money back to the debtor! Arizona, Arkansas, Florida, Indiana, Minnesota, Utah Nebraska, Nevada, Oregon, North Carolina and Tennessee require that an agency be licensed in that state to represent clients in their state.  Florida, North Carolina, and Idaho have laws, which when broken, are severe enough to be classified as a felony!   It's the law!  Review the list of states that require licensing.

How it affects you By using the internet, debtors can easily render a collection agency useless with a simple licensing search on the state regulator web site. Debtors use the agency's lack of licensing as an excuse not to pay.  All the debtor needs to do is threaten to call the state regulator and unlicensed agencies will back down. Unlicensed agencies make your company more likely to be enjoined in litigation.  If an unlicensed agency steps out of line with a debtor, it is standard practice for the creditor to be enjoined in legal actions. A debtor’s attorney will have a field day with any unlicensed agency since they are not compliant with state licensing laws.   Be aware. Protect yourself from common misconceptions about not being at risk.

What you can do Adhering to state law is not optional for an agency.  The states have ultimate reign and if they demand an agency be licensed, so should you. Know the facts.  Surety bonds, insurance policies or inclusion in a trade association is not a lawful substitute for proper licensing.  See what the regulators have to say about licensing. Contact VeriCore for a free report showing your agency's licensing status.  Our compliance team will research the agency's licensing and Secretary of State status from each state's public records. Contact state regulators.  Use this list of state regulator phone numbers and websites so you can verify the agency licensing yourself. Be prepared.  Know exactly what unlicensed agencies say to confuse you on this issue.