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Minnesota Fines Collection Agency for Violating Escheat Laws and Inadequate CMS

The Minnesota Department of Commerce has entered into a consent order with Range Credit Bureau, Inc.  The order fines the collection agency for a number of practices including:

  • noncompliance with State escheat laws by failing file reports of Unclaimed Property for funds owed to customer who failed to negotiate refund or payment checks;
  • failing to implement a compliance management system representative of the size, organizational complexity and risk profile of the agency;
  • allowing unlicensed collection activity to occur in states that require a collection agency license;
  • having two unlicensed collection agency locations; and
  • failing to establish and follow procedures for annual screening an individual collectors prior to submitting applications for renewal of their collector permits.

The order requires the collection agency to cease and desist from the violations; to review, revise, develop and/or implement a proper risk-based Compliance Management System  including a comprehensive written compliance program to ensure compliance with all federal and state rules and regulations and otherwise ensure compliance with all applicable consumer protection laws;  to implement a proper background check policy that complies with Minnesota law and conduct background checks on all collectors whose background check is not in compliance; to conduct an audit and comply with the state’s escheat laws; and to license its previously unlicensed locations.  The collection agency was also ordered to pay all investigative costs associated with the investigation together with a civil penalty of $50,000.  $10,000 of the penalty is stayed unless the agency commits further violations of any applicable  law, rule, or order.

The consent order is a strong reminder of a number of considerations for debt collectors.  First,  the failure to follow state escheat laws can have serious consequences.

Second, the implementation of an appropriate compliance management system and compliance management program is not solely a problem for larger market participants.  Smaller debt collectors may believe that flying under the BCFP’s radar exempts them from having to invest in a CMS and CMP.  Minnesota’s Department of Commerce has shattered any such illusions, making it clear that implementation of a CMS and CMP are also state regulator imperatives.

Third, the order makes it clear that background checks on collectors is an annual necessity and not just a pre-hiring requirement.    Smaller businesses conducting business in Minnesota need to recognize that such checks are a part of the cost of doing business.

Finally, the order is a reminder that growth cannot move ahead of compliance.  Operating an unlicensed office in a state can certainly have consequences, but operating without a required license in one state can impact a license in another.