Massachusetts Emergency Legislation Prohibits Certain Debt Collection Activities

By Michael R. Garcia

On Friday, March 27, 2020, the Massachusetts Attorney General’s Office issued emergency regulation 940 CMR 35:00: Unfair and Deceptive Debt Collection Practices During the State of Emergency Caused by COVID-19, https://www.mass.gov/doc/ma-reg/download . The stated purpose of 940 CMR 35:00 is to provide Massachusetts residents with temporary relief from the substantial economic and medical hardship caused by COVID-19 by designating certain debt collection activities as unfair and deceptive collection practices.

The protections of 940 CMR 35:00 are expansive. Effective immediately, it shall be an unfair or deceptive act or practice under M.G.L. c. 93A, § 2 for any creditor or debt collector to “initiate, file or threaten to file” a new collection lawsuit, or to “initiate, threaten to initiate or act upon any legal or equitable remedy” for garnishment a debtors wages, attachment of debtor property or repossession of a debtor’s vehicle. 940 CMR 35.03(1). In addition, debt collectors are forbidden from placing telephone calls or sending text messages to debtors’ residences and/or personal telephone numbers. 940 CMR 35.04(1). Attempts to collect rent and mortgage loan debt are exempt from the provisions of the regulation, as are communications initiated to discuss rescheduling court appearances.

These prohibitions are effective immediately for a period of 90 days, or until thirty days after the Governor lifts the State of Emergency that he declared on March 10, 2020, whichever occurs first.

The adoption of 940 CMR 35:00 has an immediate and substantial impact on the consumer finance collection practice. All creditors, whether or not they are also considered a debt collector under the regulation, should immediately cease the proscribed consumer collection activities, including filing deficiency actions and repossessing vehicles. A creditor is considered a debt collector where the creditor purchased an account already in default, or where it is attempting to collect a debt other than in its own name or the name of a corporate affiliate. Debt collectors are also forbidden from initiating any contact with debtors via telephone or text message during the effective period, except in the limited circumstances outlined above. However, creditors that are not considered debt collectors may continue to communicate directly with obligors via telephone or text message concerning their account obligations, subject to the provisions of other applicable Massachusetts regulations, but may not threaten repossession of a vehicle or legal action.

Failure to comply with 940 CMR 35:00 will subject a creditor or debt collector to the punitive remedies of M.G.L. c. 93A, the Massachusetts Consumer Protection Act, including double or treble damages for willful or knowing violations, and attorneys fees.

For more information concerning 940 CMR 35:00 and the impact of COVID-19 on Massachusetts consumer financing regulations, contact Charles A. Ognibene, Mike Garcia or Mike Grant, all in our Boston office.