Maryland Licensing Requirement and Deadline

On May 5, 2010, the Maryland Office of the Commissioner of Financial Regulation issued an Advisory Notice stating that "a Consumer Debt Purchaser that collects consumer claims through civil litigation is a 'collection agency' under Maryland law, and required to be licensed as such." The Advisory is in response to a June 2007 letter, in which certain consumer debt buyers claimed confusion as to whether they were required to be licensed as a collection agency when collecting claims through civil litigation.

Under the clarified conditions, Consumer Debt Purchasers are required to apply for a Maryland Collection Agency License on or before August 31, 2010 to avoid action.

Call Cornerstone Support at 770-587-4595 to discuss any questions or concerns with one of our licensing experts.

Myths and Misconceptions of Bonding and Insurance

by Matt Pridemore, Vice President

Collection Advisor published an article in the January/February 2010 edition entitled “New $350,000 Credit Line Required for Bonds Holds Agency Hostage.” The author implies that there has been a radical shift in the underwriting requirements for collection agency bonds. Agencies will now be required to post collateral in the form of a line/letter of credit to guarantee the required state license bonds. He goes on to state that "if you can find a surety company that will write your bond without a letter of credit, you will have done well."

The article specifically addresses the writer’s experience or knowledge of the ACA’s bond program, and while I cannot speak to the actions of the ACA, I can speak with authority to the current state of underwriting as it relates to collection agency bonds. I write thousands of collection agency bonds for hundreds of collection agencies through multiple highly rated surety companies. In my experience there have been no significant changes in underwriting requirements and, more importantly, no noticeable change in the appetite of the surety companies to write these bonds.

The trick is to select a vendor that not only understands this industry and specializes in collection agency bonds, but also has access to and regularly uses multiple surety companies. The right broker in most circumstances should have enough leverage with the surety company to avoid a situation that would require the “mad scrambles” referenced in the Collection Advisor article. But that is not enough; they should also have access to other surety companies including high risk providers so that they can fully market your account and provide you with all of your available options. While posting collateral with your current provider is an option in some situations, it is usually not the only option and rarely the best option.

Sadly, this story rings true with other commercial insurance products as well – especially E&O insurance. I receive hundreds of phone calls and emails from agency owners who are facing significant price or coverage issues with their E&O policy, and they’re looking for options.

Price Issues:
It is not uncommon for agency owners to face a situation where either their insurance policies are not renewed, or the renewal premiums make the coverage unaffordable and their current broker is unable or unwilling to provide them with options. If your broker is simply submitting a renewal application to your current carrier, demand that they do more. Introducing competition into your annual renewal process will provide you the assurance that you are paying a fair market price/premium for your particular policy needs. If your current broker is still unable or unwilling to market your account to multiple insurance providers, find someone who can and will.

Coverage Issues:
Unfortunately, it is equally common for agency owners to select a vendor who is willing to market their account to multiple insurance providers, but who lacks the experience necessary to understand the risks specific to the collection industry. In my experience, collection agencies many times rely on the experience of their insurance broker/agent and do not always read the policy to understand what specifically is covered or excluded. I have seen a number of policy forms which specifically exclude FDCPA, TCPA or FCRA violations.

It is easy to service an account when everything is going well. You need to be certain that you have partnered with a vendor that can take care of you when the times get tough and you need alternatives. In my opinion, that is when your business is truly earned.

Cornerstone Support is the premier licensing and insurance provider to the collection industry. If you have any questions regarding state licensing or insurance, please email info@cornerstonesupport.com or call (770) 587-4595.