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What States Require Licensing for Debt Collectors? A Lawyer’s Perspective

Dealing with debt collectors can be a real headache, am I right? As a lawyer, I’ve seen firsthand how aggressive and shady some of these guys can be. But did you know that many states actually require debt collectors to have a professional license to operate legally? It’s true – and if they don’t have that license, you may have grounds to fight back.In this article, I’ll break down which states require licensing for debt collectors, what that licensing process entails, and how it can potentially help protect consumers like yourself from unfair or abusive collection practices. I‘ll also discuss some common defenses and legal strategies when dealing with unlicensed debt collectors.So let’s dive right in, shall we?

The Basics of Debt Collection Licensing

Before we get into the nitty-gritty of state laws, let’s cover some of the basics around debt collection licensing. Most states require third-party debt collectors – companies hired by creditors to collect outstanding debts – to obtain a license from the state before operating. The licensing requirements vary, but generally involve:

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  • Submitting an application and fee
  • Passing a background check
  • Posting a surety bond to protect against violations
  • Maintaining a physical office location in the state
  • Renewing the license annually or biennially

The idea behind licensing is to weed out shady, unqualified debt collectors and hold companies to certain standards of conduct. It gives the state oversight and the ability to revoke licenses for serious violations.Of course, not all debt collectors need a license. Many states exempt original creditors collecting on their own debts, attorneys engaged in litigation, and certain types of debts like mortgages or student loans. But in general, if a third-party company is trying to collect a consumer debt from you, they likely need a state license to do so legally.

Which States Require Debt Collection Licensing?

So which states actually require this professional licensing for debt collectors? According to this overview from Cornerstone Support, as of 2023 there are 37 states that mandate licensing:

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon

The remaining 13 states – Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming – do not currently require professional licensing for debt collectors operating within their borders.However, it‘s important to note that these laws can change rapidly. For example, California only began requiring debt collector licensing in 2022, after previously being one of the non-licensing states. So it’s always wise to double check your specific state’s laws.

Why Licensing Matters for Consumers

You might be wondering – okay, but why does this licensing stuff actually matter for me as a consumer? Here are a few key reasons:

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It Weeds Out Bad Actors

The licensing process, with its background checks and bonding requirements, makes it harder for fly-by-night, unscrupulous debt collectors to operate. Companies have to play by certain rules and face consequences for violations.

It Gives You Recourse

If a debt collector is operating without a proper license in a state that requires one, that can potentially give you grounds to dispute the debt, get the case dismissed, or pursue other legal remedies. We‘ll discuss some of those strategies in a bit.

It Promotes Transparency

Licensed debt collectors have to maintain a physical office location and submit to state audits. This transparency makes it harder for them to employ the shady tactics – like constant harassment, false threats, etc. – that unlicensed operators might try.At the end of the day, debt collection licensing is designed to protect consumers by setting standards and giving you more power to fight back against abusive practices. Of course, it‘s not a perfect system – even licensed agencies can sometimes overstep – but it’s an important layer of consumer protection.

Dealing with Unlicensed Debt Collectors

Okay, so let’s say you live in a state that requires licensing and you suspect (or know) that the debt collector contacting you is unlicensed. What can you do? Here are some potential options and defenses to discuss with an attorney:

Demand Proof of Licensing

First thing‘s first – demand that the debt collector provide proof that they are properly licensed in your state to collect the debt. If they can’t, or if they try to claim they’re exempt when they aren‘t, you may have a solid defense right there.

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Cease Communication

Under the Fair Debt Collection Practices Act (FDCPA), you have the right to demand that an unlicensed debt collector cease all further communication with you. Send them a letter invoking this right, and if they continue contacting you, they’ve violated federal law which can strengthen your case.

File a Complaint

Most states have a regulatory body that oversees debt collection licensing and takes complaints about violations. File an official complaint against the unlicensed collector – this creates a documented paper trail.

 Seek Damages

Depending on your state’s laws, you may be able to pursue actual and statutory damages against an unlicensed debt collector for violations. Some states even allow you to recover attorney’s fees if you prevail.

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Get the Case Dismissed

In some situations, a debt collector‘s failure to be properly licensed can potentially provide grounds to get the entire case against you dismissed. This is a powerful legal remedy to discuss with your lawyer.The key thing is, do not simply ignore an unlicensed debt collector. Respond strategically under the guidance of an experienced consumer law attorney. The licensing violation may give you significant leverage.

Other Defenses Against Debt Collectors

While licensing is a big issue, it’s certainly not the only potential defense you may have against an unscrupulous or abusive debt collector. A few other common defenses include:

  • The debt is time-barred by the statute of limitations
  • You are a victim of identity theft and don’t actually owe the debt
  • The amount being collected is inaccurate or inflated
  • The debt collector violated the FDCPA in their communications
  • The debt was already paid or discharged in bankruptcy

An experienced consumer lawyer can evaluate all the facts of your situation and determine if any of these defenses – or others under state and federal law – could apply. Don’t just roll over and pay an illegitimate debt.

 When to Consult a Lawyer

I know, I know – lawyers can be expensive and dealing with debt is stressful enough without adding legal fees into the mix. But here’s the thing: trying to take on an aggressive debt collector all alone is really risky. You could easily make a mistake that undermines your case and leaves you on the hook.At the very least, I’d recommend scheduling an initial consultation with a consumer law attorney in your area. Many offer free or low-cost initial consults where they can evaluate your situation and let you know if you have a viable case against the debt collector. They can also explain all your rights and options in plain English.If you do have a strong case – especially one involving an unlicensed debt collector – a lawyer may be able to take it on a contingency basis where you don’t pay anything upfront. The legal fees would come out of any settlement or award at the end.The bottom line is, don‘t try to wade through this alone against seasoned debt collectors who know all the tricks. Having a professional advocate on your side can make all the difference.

How to Find a Qualified Debt Collection Lawyer

Okay, you‘re convinced – it’s time to at least explore getting a lawyer involved in your debt collection situation. But how do you find a qualified attorney? Here are some tips:

  • Ask friends or family if they have any referrals – word-of-mouth is huge
  • Check online reviews on sites like, and
  • See if any local attorneys have experience specifically with the FDCPA and debt collection laws
  • Look for consumer law firms that take cases on contingency
  • See if any legal clinics or nonprofits in your area provide low-cost assistance
  • During consultations, ask questions to gauge the lawyer’s experience level

Don’t just hire the first attorney you talk to. Do your research, get second opinions, and find someone you feel comfortable with and can trust. This is too important to just settle.

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