While looking for Love's CA I found a company that helps CA's met compliances in bonded states. Here is some info regarding compliances in some states and exemptions that the states offer collection agencies. Kinda long but it might help someone out. Hopefully Each state has the right to enact its own set of collection laws and requirements. For agencies seeking nationwide compliance, this creates a gauntlet of regulations that is not only confusing, but can prove costly if misunderstood or neglected. Not all states issue collection agency licenses. Following is a list of cities and states that issue licenses, registrations, or have bond requirements: Alaska Arizona Arkansas Colorado Connecticut Florida Hawaii Idaho Illinois Indiana Louisiana Maryland Maine Massachusetts Michigan Minnesota Nebraska Nevada New Jersey New Mexico New York City Buffalo North Carolina North Dakota Oregon Tennessee Texas Utah Washington West Virginia Wisconsin Wyoming Some states offer exemptions to agencies, for example, if they don't have a client physically located in their state. The states that do not extend licenses may still require certificates of authority and/or bonds in order to be compliant. Depending on the state, the complexity of the requirements range from straightforward (like Florida and Iowa) to difficult (such as Massachusetts and Arizona). Ordinarily, to become licensed, an agency must fill out applications, supplements, provide financials, obtain the necessary statutory bonds, and prove they are qualified to operate in the state. This process can be extremely time-consuming and complex. Here is a short list of requirements and their description: â??h Certificate of Authority - Foreign qualification for companies to do business issued by the Secretary of State. A typical prerequisite to obtain collection agency license. â??h Statutory Bond - All but a few states require that agencies obtain a bond. The bond amounts can range from five thousand to thirty-five thousand dollars. â??h Trade Name - Any name other than the legal corporate name that an agency uses in collecting debts. â??h Resident Office - A physical office, setup and maintained, for the purpose of customers who choose to walk-in payments and a place for states to conduct audits. â??h Resident Manager - A person designated by an agency to serve as the principal contact for the state licensing division. What strategy should an agency employ to become compliant? First the agency should look at where it has customers and which states its debtors are located. Secondly, the agency should take a look at its marketing plan. Does it consider itself a national agency? Does it intend to pursue national credit card companies and banks? If so, a national agency is expected to hold licenses in all state and jurisdictions where required. Imagine an agency telling Citibank, "Well, we're licensed everywhere except Massachusetts and Arizona." Citibank will certainly look for another agency. Some agencies have tried to compensate by forwarding accounts out in certain states. This can be a flawed strategy for the following reasons. If the volume is small, your business is probably going to be handed off to a rookie. If the volume is large, then you are probably losing profits. In either case, your client placed the accounts with your agency so that your staff could collect them, not some unknown agency your collection manager found on the Internet. Suppose you decide that a middle-of-the-road approach is best for your agency. You decide to get licensed only in the states where you have customers and debtors. This approach eliminates your firm from being considered a national agency, but perhaps your business plan is built around local clients. What should you be concerned with? Foremost, if you ever decide to expand your sales territory, be careful. Case in point, Michigan offers exemptions to agencies that do not have a client physically located in the state. But as soon as your salesman solicits business from that state, you are in violation. Nevada offers the same exemption. Wyoming used to offer the exemption, but last summer added a subtle twist that poses some legal threat to agencies. The new rule states that agencies are exempt from licensing requirements as long as none of the debts were incurred in Wyoming. Suppose one of your clients is a large medical provider with branches located around the country. Should one of their customers receives service at a facility in Wyoming and never pays the bill. It is likely that the account will be forwarded to your agency for collection. What is your agency going to do with that account? If you attempt to collect the debt without a license, you are in violation. To become licensed, you need a resident office and manager in Wyoming, which is no easy feat. A handful of states impose a requirement that all licensed agencies must setup and maintain a physical office and in most cases appoint someone as the resident manager. This person is then considered to be the primary contact for the state licensing division. If an audit is ever necessary, it can take place at your resident office. Typically, setting up resident managers and offices is simple and inexpensive, but not in Wyoming and Nevada. The difficulty is that these states impose the rule that a resident manager can serve for one and only one collection agency. Other states like Massachusetts have looser restrictions, which means that a particular resident office may support dozens of collection agencies. This typifies the true problem with developing a licensing strategy from scratch. All of the states are different. All have different regulations, different requirements, and different exemptions, and the rules change continually. To become and remain compliant, an agency must either employ a full time compliance manager or outsource the project to a professional. More and more financial institutions are now starting to pay attention to state collection agency requirements. They recognize the collection agencies they employ affect their legal exposure. Most are now requiring their agencies to become compliant. The process of licensing your collection agency can be a daunting and time consuming process. But it is a prerequisite for most agencies to reach the next level. At the very least, any agency that intends to be recognized in the collections industry must insure their status as a legal entity fully authorized to collect debts. Furthermore, from a marketing perspective, compliance is becoming the hot topic for banks and credit card companies. Any agency that wishes to compete should invest the time and resources to develop a licensing strategy that not only fends off class-action lawsuits, but also attracts high-volume and high-yield clients. Some states offer exemptions to collection agencies. Almost all of the exemptions are based on the premise that the collection agency does not maintain either a physical presence in the state or collect on behalf of a client that maintains a physical presence in the state. The following states offer some form of exemptions to agencies: AK, HI, IA, NC, MI, NV, WI, and WY. Some states offer a special type of exemption based on a reciprocal agreement with another state. An example would be, State X agrees that a collection agency does not have to be licensed in their state if they are already licensed in State Y. The problem with such an exemption is getting the state to provide the status of the exemption in writing.
