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Minnesota and Wisconsin Fine Agency for Failure to Escheat and Individual Collectors for Failure to Give Mini-Miranda Warnings

The Minnesota Department of Commerce and the Wisconsin Department of Financial Institutions, Division of Banking have entered into their first joint consent order with a collection agency.  American Accounts & Advisers, Inc. agreed to a civil penalty of $200,000 of which $125,000 will be stayed upon full completion of all action items listed in the Order along with all action items in a separate set forth in a separate Examination Resolution Agreement.

Certain aspects of the consent order provide a clear warning to both collection agencies and their employees.  First, the order is based, in part upon perceived weaknesses in the agency’s compliance management system and compliance monitoring processes.  Second, the order was based upon failure to comply with state escheat laws.

Escheat laws govern the handling of funds that are unclaimed or undistributed.  The states found that the agency had not been complying with state law duties to account for and remit unclaimed funds (e.g., the proceeds of uncashed checks) to the states’ unclaimed property funds.  The agency was required to conduct an audit and to follow an agreed-upon procedure for the handling of unclaimed funds.  Industry members should see this as the warning shot that states are starting to look at how they handle unclaimed funds.  This is an area that may not always be considered by industry members as essential to a sound compliance management plan.  To avoid this sort of regulatory reaction, a state-by-state analysis of unclaimed funds statutes is a necessary part of a collection agency’s compliance program.

In five separate civil penalty agreements the Minnesota Department of Commerce fined individual collectors $1,000 each for failing to provide consumers with the mini-Miranda warning required by the FDCPA.  Those individual penalties may present a training opportunity, demonstrating to collectors that they have “skin in the game” when it comes to compliance.