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ACA International v. Healey - Will Massachusetts' Debt Collection Freeze Hold Up To Constitutional Heat?
May 03, 2020
A number of states have issued executive orders or other emergency declarations to provide relief from certain debt collection practices in the wake of the COVID-19 crisis. Such measures include ceasing new wage attachments and vehicle repossessions, etc. None have been as comprehensive as the regulation issued by Massachusetts Attorney General, Maura Healey, on March 26, 2020. The breadth of scope of this regulation, titled "Unfair and Deceptive Debt Collection Practices During the State of Emergency Caused by COVID-19", has resulted in a lawsuit filed by the Association of Credit and Collection Professionals ("ACA"), in the U.S. District Court for the District of Massachusetts. Along with its complaint challenging the validity of the regulation, the ACA filed a motion for temporary injunctive relief that, if granted, would immediately halt enforcement of the regulation.

The regulation went into effect immediately upon issuance on March 26, and provides that it is an unfair or deceptive act or practice for any creditor, including a debt collector (both of which terms are defined within the regulation), to:
  • Initiate, file, or threaten to file any new collection lawsuit.
  • Initiate, threaten to initiate, or act upon any legal or equitable remedy for the garnishment, seizure, attachment, or withholding of wages, earnings, property or funds for the payment of a debt to a creditor;
  • Initiate, threaten to initiate, or act upon any legal or equitable remedy for the repossession of any vehicle;
  • Apply for, cause to be served, enforce, or threaten to apply for, cause to be served or enforce any capias warrant;
  • Visit or threaten to visit the household of a debtor at any time;
  • Visit or threaten to visit the place of employment of a debtor at any time; and
  • Confront or communicate in person with a debtor regarding the collection of a debt in any public place at any time.
More sweeping than any of the above is one additional prohibition applicable to debt collectors only (not creditors, who are included in the above-listed prohibitions). This provision makes it an unfair or deceptive act or practice for a debt collector to initiate telephonic communication with a debtor unless requested by the debtor to do so. Per its terms, the regulation remains in effect for 90 days or until 30 days after Massachusetts lifts its state of emergency, whichever occurs first.  
The ACA's challenge to the regulation is multifaceted and includes challenges based on both the First and Fourteenth Amendments to the United States Constitution, as well as alleged violations of the separation of powers among the branches of government.

The complaint asserts that the regulation is an impermissible infringement of the First Amendment right to free speech in that it unlawfully bans truthful, innocent and even helpful commercial speech. The ACA points out that by prohibiting phone calls, the regulation blocks collectors from informing consumers of available resources that may be of particular importance to them during a time of financial strain. Assistance in the form of temporary hardship repayment plans, deferred payments, and other arrangements tailored to consumers' specific needs can be determined only with one-on-one communications. The complaint also notes anecdotally that the ACA's member collectors have reported an increase in consumer compliments since the COVID-19 emergency began. The ACA attributes the increase in positive feedback from consumers to debt collectors' ability and willingness to work with consumers to exhaust all options before resorting to litigation, and to honor crisis-related requests to forbear on existing legal remedies, especially during times of emergency. Stifling productive communications between collectors and debtors, the complaint argues, increases the likelihood of collection lawsuits eventually being filed against consumers and deprives debtors of the ability to have their debts resolved in the manner most advantageous to them. The ACA argues the prohibitions in the regulation are not only detrimental to collectors, but also (and perhaps even more so) to consumers.      

The ACA also argues the regulation violates Fourteenth Amendment's due process and equal protection clauses. The due process argument is based on the fact that the regulation became effective immediately upon issuance, with no advance notice and no time or ability to comment, exposing collectors to potential liability and sanctions without notice and jeopardizing their reputations, standing and associations in the community. The equal protection claim is based on the regulation's classification of certain individuals as creditors and debt collectors, and prohibiting them from seeking to collect certain kinds of debt, from accessing the courts to enforce their legal rights, and from initiating certain communications with consumers. According to the complaint, the regulation's exemption of certain creditors and debt collectors arbitrarily discriminates against the category of creditors and debt collectors impacted by the regulation.     

Additionally, the ACA asserts the prohibition against filing suits and pursuing enforcement of court orders is an impermissible encroachment on the inherent powers of the courts.

According to the ACA's website, the Court will hear the motion for temporary restraining order and preliminary injunction today, May 1. The outcome of this hearing will determine if the enforcement of the regulation will be halted pending final resolution of its validity, or if it will be permitted to stand pending final resolution on the merits.      
If you have any questions, please contact our COVID-19 Task Force.

Consumer Finance Kelly J. Kimble