Here's what you need to know about Massachusetts Debt Collection Laws

Living in Massachusetts can be expensive due to the state's high mortgage rates, rental prices, high energy costs, and other factors. On the other hand, the state has a higher-than-average income, with a minimum wage of $14.25 an hour — nearly double the federal minimum wage. No matter how high the minimum wage is, the residents of Massachusetts still suffer from the burden of debt.

If you live in Massachusetts and are burdened with debt or are being sued for a debt, you should educate yourself on the state's debt collection laws. It's important to know that the state of Massachusetts has a law that makes it illegal to use certain debt collection tactics. Debtors could use noncompliance with the law as a defense in any court proceeding if they did not follow it.

This way, you will know all the pertinent rules and regulations that may guide you while dealing with your debt.

Under Massachusetts debt collection laws, who is allowed to collect on a debt?

Debt collection refers to the act of pursuing a debtor for payment. Massachusetts debt collection law specifies the only parties authorized to collect on a debt from a borrower as follows:

Creditor

This is the individual or business that is owed money. When you borrow money from financial institutions like credit unions or banks, the institutions in question become your creditors. Creditors in Massachusetts do not need a license to collect a debt owed to them.

However, they must follow the debt collection regulations established by the Attorney General.

Debt collectors

This refers to a third-party representative who collects payments on behalf of a creditor. To collect a debt, a debt collector needs to apply for a license with the Division of Banks because they do not have direct authority over the debt that is owed.

Attorney

Instead of a debt collector, the attorney is responsible for collecting the debt on behalf of the creditors. Although they do not have any rights to the debt that is being collected, they are already licensed to engage in the activity of debt collection within the Commonwealth.

When it comes to the collection of a debt, attorneys are required to abide by the Rules of Professional Conduct established by the Supreme Judicial Court, the Debt Collection Regulations established by the Attorney General, and the restrictions set by the Fair Debt Collection Practices Act (FDCPA).

Debt buyer

These are organizations that buy past-due debt from creditors who are attempting to collect on an outstanding balance. Because they do not have a direct relationship with the customer, they use attorneys or debt collectors to collect. Because debt buyers take ownership of the debts they purchase, they are exempt from the licensing requirements necessary to collect the debts.

However, they are obligated to comply with the Fair Debt Collection Practices Act (FDCPA) and regulations regarding debt collection established by the Attorney General's Office.

Statutes of limitation on debt in Massachusetts

The statute of limitations is a piece of legislation that limits the time that passes between a breach of contract and the filing of a lawsuit to compel debt payment. The Massachusetts statute of limitations for consumer-related debt is set at six years, as stated by the state's laws.

This grace period applies to verbal and written contracts, including credit card debt. However, if the debt collector successfully obtains a judgment against the borrower, the statute of limitations is extended to 20 years. During this time, interest on the unpaid debt is accrued at a rate equal to 12% of the statutory maximum allowed.

Debt collection practices in Massachusetts what collectors can and cannot do

The debt collector may not contact the alleged debtor in any way that could be considered harassing or embarrassing under Massachusetts debt collection law. Creditors are not allowed to use abusive or threatening language. They are not authorized to threaten physical harm or act outside the ordinary course of business when communicating with debtors. (Mass. Gen. Laws ch. 93 § 49).

In addition, the Attorney General of Massachusetts has issued debt collection regulations that define unfair and deceptive acts and practices in the debt collection industry.

Such laws forbid any debt collection practices that are unfair, deceptive, or unreasonable, including but not limited to:

  • Calling you at your residence more than twice for each debt in any given seven-day period or calling you more than twice for each debt in any given 30-day period outside of your home, such as your place of employment.
  • Calling you at your place of work despite your express request that they do not do so. Written requests remain in effect until you revoke them, while verbal requests expire after ten days.
  • Calling you without giving their name or identifying themselves.
  • Contacting you outside of your regular waking hours. The collector can only contact you between 8:00 a.m. and 9:00 p.m., but if your waking hours are different, you must inform them of this.
  • Not only visit you at home but do so at odd hours and more than once per month for each debt owed unless you authorize more visits.
  • Making false threats of legal action or physical force, such as arrest or imprisonment, in the event of nonpayment.
  • The use of obscene or profane language.

Special Requirements in Massachusetts Debt Collection Lawsuits

Creditors who file a collection lawsuit in Massachusetts must comply with Rule 8.1 of the state's Rules of Civil Procedure:

  • Submit an affidavit listing the debt's specific details, including the original creditor's name, the current owner's name; the date of the most recent payment; and the debt's chain of ownership from the original creditor to the new owner.
  • Submit an affidavit accompanied by copies of documents proving the existence, amount, terms, and conditions of the debt, as well as any other relevant documentation.
  • Confirm the defendant's contact information before filing a lawsuit (so that they receive all of the details related to the debt and legal notice), and
  • Confirm that the period covered by the statute of limitations has not ended.

Neglecting debt collection methods can have serious repercussions

Massachusetts debt collection law permits a debt collector to file suit if a debtor refuses to pay after repeated attempts at debt collection. If you receive the summons and complaint, you have 20 days to respond. It is essential to respond quickly because this time frame includes weekdays, weekends, and holidays.

If the 20th day, the deadline, falls on a weekend or holiday, you have until the next court business day to file your documents. A default judgment can be entered against the debtor if they don't file an answer by the deadline. Following this, the debt collector may use the following additional collection methods:

Wage garnishment

This allows an employer to divert a portion of the debtor's earnings to the creditor. Under federal law, the maximum permissible contribution is 25% of your disposable income. On the other hand, the debtor can challenge the garnishment of their earnings by asking for a hearing and filing a claim of exemption with the court. If the debtor does not waive their right to a hearing, the creditor cannot take action until the hearing is completed.

Wage garnishment, known as income execution in Massachusetts, is governed by the state's consumer protection laws. The first eighty-five percent of your after-tax salary from a job is yours to keep, provided that it is greater than 50 times the applicable weekly federal or state minimum wage. The Massachusetts minimum wage is $14.25 per hour (2022), compared to the federal minimum of $7.25, so using the state's wage protects $712.50 per week.

You can deduct the cost of utilities like home heating, housing, transportation, and more if you have proof that the money is being saved for a specific purpose. Expenses like alimony, child support, maintenance, criminal fines, and taxes are not included in this.

Lien on property

When a debt collector places a lien on a debtor's property, the creditor can collect on the debt owed by selling or refinancing the debtor's personal property. If the debtor does not intend to sell the property, the creditor may execute the lien by having a sheriff seize the property and hold a public sale.

If the debt collector chooses this route, check that they adhere to the statutes regarding judgment liens in Massachusetts. A common practice among debt collectors is to ignore certain requirements, which ultimately renders the lien null and void.

Debtors should also insist that creditors produce documentation detailing how the creditor acquired the debt. Debt buyers often buy bad debts from creditors because the creditors have trouble proving ownership of the debts.

Bottom line

To protect your rights, you must become familiar with Massachusetts's debt collection laws to protect your rights. Having debt can be overwhelming, and getting rid of debt can be even more difficult. Therefore, knowing your rights is essential when it comes to debt collection.

The debt collection tactics collectors use can be triggering, so it is best to be prepared for them beforehand. You can seek the help of an attorney who can help you understand the rules and regulations in your state. They can also help you get through the process of debt collection.

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