Debt Collector vs. Debt Buyer

 

Did you know that the State of Nebraska requires debt collectors to register with the State of Nebraska if they are going to be doing business in Nebraska? It doesn’t matter if the debt collector actually has an office in Nebraska – if the debt collector is going to be collecting money from Nebraska residents, Nebraska law requires the entity to be registered with the Secretary of State.

 

The Fair Debt Collection Practices Act (FDCPA) regulates how debt collectors can collect consumer debts, and defines a “debt collector” in 15 U.S.C. 1692(a)(6) as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” For a shorthand understanding, this basically means that, according to federal law, a debt collector can be a collections agency, a lawyer, or even a forms writer.

 

It is also worth noting that because the FDCPA is a federal statute, it controls if there’s a difference between its rules and those propagated by state laws. In other words, the FDCPA is the law of the land when it comes to regulating how debt collectors collect consumer debt.

 

At my last count, there are 462 debt collectors registered with the Nebraska Secretary of State. Yowza. That’s a lot. That’s about one debt collector for every 4,073.59 Nebraska residents. I took Google’s numbers for Nebraska residents in 2014 (1.882 million) and divided it by 462 = 4,073.59.

 

And if you look at the meeting minutes from the Nebraska Collection Agency Licensing Board’s January 2015 meeting (I know, exciting and riveting stuff), the board had 14 new applicants! They only review new applications 4 times a year! If you assume the same rate for each quarterly meeting (for the sake of argument, not for the sake of statistical correctness or actual representative totals), you have 56 new applicants for the 2015 year. That’s a lot of collectors doing business in Nebraska.

 

But the interesting part to me is that the state makes a distinction between “debt collectors” and what I call “debt buyers.” Nebraska law defines a collection agency as anyone soliciting from more than one person or entity any kind of claims that are owed or due by the person or entity being solicited. I’m paraphrasing fairly loosely, if you want to look at the legalese of the statute, it is Neb. Rev. Stat. 45-602.

 

“Debt buyer” is not defined in Nebraska law, but it’s generally referred to as people or corporations who purchase debt accounts from another entity and then try to collect on that debt. There are a number of things wrong with debt buyers from a regulation standpoint and the shenanigans they pull on consumers, but for purposes of this article, why doesn’t Nebraska law address or regulate debt buyers?

 

I’ll tell you why – debt buyers are exempted under the collection agency laws. In the same statute I gave you, 45-602, Nebraska law makes sure to list out several types of entities that are NOT collection agencies. The last exception seems to fit the definition of a debt buyer: “(k) a person, firm, corporation, or association which, for valuable consideration, purchases accounts, claims, or demands of another and then, in such purchaser’s own name, proceeds to assert or collect such accounts, claims, or demands.” Sounds like a debt buyer, and looks like a successful end-run around Nebraska licensing regulations.

 

Can you imagine how many debt buyers, in addition to the 462-and-counting collection agencies, are out there turning a profit on the debt of average Nebraska residents?