How Licensing is Like Doing Your Taxes

by Matt Pridemore, Vice President

Do you remember the first time you filed your taxes? Though the paperwork might have seemed daunting at first, it was ultimately no big deal because you likely only had one job, one income, and no dependents to deal with. But as time goes on, the process gets much more complicated as you add houses, dependents, charitable donations, and the like. You start to realize that you might be shortchanging yourself by missing out on write-offs, or worse yet, you might be getting in trouble for missing details somewhere along the way. So, like millions of Americans do, you find a qualified accounting professional to outsource your taxes to.

Getting your agency licensed may have been similarly simple at the start, but then became much more complicated and harder to keep up with as you grew. Many agencies do not realize that they can outsource their licensing the same way they outsource their taxes, and save their organization endless time, money, and hassle.

Organizations that outsource certain corporate functions that have historically been handled in-house (i.e. collections, licensing, IT, customer service, etc.) do so for a number of reasons. Here are a few of the more common reasons:

• Reduction of labor costs - An outsourced provider with the right volume, operating efficiencies and cost structure should be able to perform the particular operating function at a much lower cost than the organization would be able to do using their own resources.
• Focus on core business functions - Internal resources can focus more directly on an organizations core competency and reduce the distractions of operating functions that do not generate revenue.
• Operational Expertise/Knowledge - Provides an organization with operational best practice and a wider experience and knowledge base that would be difficult or time-consuming to develop in-house.
• Scalability - An outsourced provider should be prepared to manage a temporary or permanent increase or decrease in production levels.
• Reduce Liability - An approach to risk management for some types of risks is to partner with an outsource provider who is better able to provide a service that helps mitigate the associated risks.

As you are aware, each state has the right to enact its own set of collection laws and requirements. As such, most jurisdictions have very different statutory regulations and application requirements. Not to mention the fact that we are not operating in a static regulatory environment - both the regulations and application requirements are always changing. The overall cost savings that outsourcing can provide combined with the overall assurance that you are compliant in this ever changing regulatory environment makes outsourcing a compelling option if you are licensed in more than just a few states. Here are a few questions to ask when selecting a licensing provider:

Is collection agency licensing the firm/individual's core competency?
Collection agency licensing is different than most other corporate registration. In addition, the states are continually changing statutory regulations and application requirements. Just because the firm/individual has done some collection agency licensing or does other types of corporate licensing does not mean it will translate to your collection agency licensing project.

How long has the firm/individual been providing collection agency licensing services?
Relationships with the various state regulators are important and can only be developed over time. Furthermore, no two licensing projects are alike and sometimes lessons are learned through mistakes made. You do not want the firm/individual that you are using learning lessons at your expense. Even small mistakes can significantly extend the time in which it takes to get licensed.

Does the firm/individual guarantee their service?
While no one can guarantee whether or not a state will grant your organization the required debt collection license, they can guarantee that all license renewals and annual reports are filed on a timely basis. Make sure that if the individual/firm that you are selecting fails to meet a license renewal deadline and you have provided all necessary materials on a timely basis, then they will pay any late fees or penalties that are incurred.

Cornerstone Support has established a reputation as the premier licensing service provider to the collection industry. We understand the particular nuances of licensing all types of collection agencies and are professionally staffed and trained to get your agency licensed faster than anyone else in the industry. We realize that your time is best spent on the moneymaking ventures of your business. In allowing us to take care of your licensing, you can be assured that you are compliant in every state without the stress of managing every detail.

New North Dakota Licensing Requirements

A piece of new legislation has just been signed by North Dakota Governor Jack Dalrymple (R) on April 19, 2011. H.B. 1080 makes several significant changes to the licensing, bonding, and branch requirements in North Dakota. This bill will go into effect on August 1, 2011.

This bill removes the exemption previously available to out-of-state debt collectors, thus requiring that out-of-state agencies attempting to collect debt in North Dakota have a collection agency license.

Section 7 of the bill requires a surety bond of $20,000 to be maintained, and that bond must be in a form prescribed by the commissioner. The commissioner may require the filing of a new bond if an action is commenced on the current bond, and immediately upon recovery of any action on the bond, the licensee must file a new bond.

Section 8 requires a minimum net worth of $25,000 to be continuously maintained by every licensee. When reviewing the net worth, the state department will be looking for tangible net worth.

While the North Dakota Department of Banking and Financial Institutions has required/requested written notification of all branch locations for quite some time, an application was only necessary for those branch offices physically located in the state of North Dakota. This is no longer the case. The new law changes the definition of a "branch office" to mean a physical location where collection activity is carried out. This does not include a virtual office - a remote location from which employees can work under the full control and monitoring of the collection agency through telecommunications and computer links. As such, all locations will be required to file a branch licensing application with the North Dakota Department of Banking and Financial Institutions going forward. Please note that a representative of the North Dakota Department of Banking and Financial Institutions has informed Cornerstone that the simplest way to implement the branch licensing for both their Licensees and the Department would be to do so during the 2012 renewal period for current licensees. However, any new application filed after August 1, 2011 would be subject to the branch application and fee amount.

The state anticipates enforcing a $50 branch fee but this has not yet been confirmed.

To see the bill in its entirety, go to http://www.legis.nd.gov/assembly/62-2011/documents/11-8083-04000.pdf.

Should you have any questions or issues concerning this matter or should you wish to engage Cornerstone Support's assistance in obtaining specific state licenses or registrations, contact a Cornerstone Support licensing consultant today at 770-587-4595 or e-mail us at info@cornerstonesupport.com.


THIS INFORMATION IS NOT INTENDED TO BE, NOR IS IT LEGAL ADVICE. IT IS INTENDED FOR INFORMATION PURPOSES ONLY. WE MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR RELIABILITY OF THIS INFORMATION. WE ARE NOT ATTORNEYS.YOU MUST RETAIN YOUR OWN ATTORNEY TO RECEIVE LEGAL ADVICE. WHILE CORNERSTONE STRIVES TO PROVIDE THE MOST CURRENT AND ACCURATE STATE LICENSING INFORMATION, THE RESPONSIBILITY FOR ANY DECISION RELATED TO STATE LICENSING OR AGENCY COMPLIANCE IS SOLELY YOURS.

Intimidated by the Licensing Process?

by Matt Pridemore, Vice President

Each state has the right to enact its own set of collection laws and requirements. For agencies seeking nationwide compliance, this creates a gauntlet of regulations that is not only confusing, but can prove costly if misunderstood or neglected. The complexity of licensing requirements varies significantly from state to state. But broken down at a macro level, an agency must perform certain tasks in order to be licensed in any given state.

• Assign a Registered Agent/Agent of Record - A registered agent is responsible for receiving important legal and tax documents including: notice of litigation (service of process), franchise tax forms and annual report forms. Entities are required to maintain a registered agent in every state in which they obtain a Certificate of Authority.

• Obtain a Certificate of Authority - A certificate of authority is obtained at the Secretary of State level and qualifies you to do business. A certificate of authority is a prerequisite to obtaining a debt collection license.

• Obtain a Collection Agency Bond - Certain states require that agencies obtain a collection agency bond as part of the licensing process. The collection agency bond is designed primarily to protect the creditor. Collection Agencies typically collect monies on a third party basis and are paid a contingent fee based on the monies actually collected. The collection agency bonds can be "called" in the event the agency collects client monies but fails to remit the appropriate funds. Please note that most underwriters will not write bonds for offshore entities without posting some level of collateral. A collection agency bond is a prerequisite to obtaining a debt collection license.

• Obtain a Debt Collection License - Once you have obtained a certificate of authority and a collection agency bond you are ready to apply for a debt collection license in a given state. The information requested in the debt collection license applications vary significantly from state to state but all require some level of corporate information, financial information and personal information on owners and officers of the entity seeking licensure.
  
• Set up Physical Office/Resident Manager - Certain states require that the collection agency seeking licensure in their sate maintain a physical office in their state. The office is setup and maintained for the purpose of debtors who choose to walk-in payments. It is also the physical location the state will use to conduct audits or investigations. The person designated by the agency to serve as the principal contact for the state licensing division in a state that requires a physical office is referred to as the "Resident Manager". Please note that there are individuals located in all of these states who meet the requirements necessary to represent your agency for a fee much less than the cost of physically setting up an office in that state.

• Obtain Branch Location License - Certain states require that all locations from which debtors are communicated with maintain a separate branch license. The branch license can be as involved as the original debt collection license or as uncomplicated as a letter notifying the appropriate jurisdiction of the branch location. Any communication with a debtor from an unlicensed branch location is unlicensed collection activity - carrying all of the same consequences of unlicensed collection activity both to the agency and the creditors that they represent.

This process can be extremely time-consuming and complex. No two licensing projects are exactly the same but a good benchmark is to allow 120 to 180 days to be fully licensed.

Call us at (770) 587-4595 or email to info@cornerstonesupport.com to discuss the details of your business and see how Cornerstone can support your overall compliance strategy.

Texas Finance Code

Cornerstone Support has established a reputation over time as the premier licensing service provider to the collection industry. The nature of the services that we provide and the volume of organizations we serve has uniquely positioned Cornerstone in the ARM Industry. While we are not a law firm and do not provide legal advice, we find ourselves at the forefront of legislative changes and/or enforcement trends related to state licensing - even at times licensing outside our core competency of debt collection licensing.

In that capacity, it has come to our attention that several chapters of the Texas Finance Code have language that would require licensing or registration for buyers of certain regulated asset classes. The following link to the Texas Credit Laws should help in determining what registration might be required for your debt buying operation. While no statutory code should be overlooked, please pay particular attention to the following chapters:

Chapter 342 - Consumer Loans
Chapter 345 - Retail Installment Sales
Chapter 348 - Motor Vehicle Installment Sales

Should you have any questions or issues concerning this matter or should you wish to engage Cornerstone Support's assistance in obtaining specific state licenses or registrations, contact a Cornerstone Support licensing consultant today at 770-587-4595 or e-mail us at info@cornerstonesupport.com.

THIS INFORMATION IS NOT INTENDED TO BE, NOR IS IT LEGAL ADVICE. IT IS INTENDED FOR INFORMATION PURPOSES ONLY. WE MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR RELIABILITY OF THIS INFORMATION. WE ARE NOT ATTORNEYS. YOU MUST RETAIN YOUR OWN ATTORNEY TO RECEIVE LEGAL ADVICE. WHILE CORNERSTONE STRIVES TO PROVIDE THE MOST CURRENT AND ACCURATE STATE LICENSING INFORMATION, THE RESPONSIBILITY FOR ANY DECISION RELATED TO STATE LICENSING OR AGENCY COMPLIANCE IS SOLELY YOURS.

Significant Licensing Changes in 2010

The collection industry is not a static legislative environment. 2010 was a year of many changes that had an impact on many agencies in California and around the country. Here at Cornerstone Support we have been keeping up with these changes and alerting our clients and followers of these changes. We have compiled some of these changes from the past year below so that you can be sure that your business is in good-standing in the states that you’re active in.

Nevada License Annual Report Update

There is a requirement modification to the 2010 Nevada Collection Agency Annual Report to Commissioner. Nevada is now required to enforce NAC 649.081, which requires each collection agency and foreign collection agency to provide to the Commissioner of Financial Institutions a report of its financial standing which must be prepared by a licensed certified public accountant [CPA] who is in good standing in the state where the report is prepared. The CPA must be independent of the agency.

Colorado HB10-1222

Colorado HB10-1222 passed both chambers of the state legislature and was signed on April 30, 2010 by Governor Bill Ritter. Effective July 1, 2010, the new law states that your company will be required to include BOTH the address and phone number of your in-state office on all written communication to Colorado consumers.

We are carefully monitoring any additional rules that the Collection Agency Board may implement. It is likely that this change will result in an increase in call received and walk-in payments accepted by your local Colorado manager.

Maryland Collection Agency Licenses

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 have a Maryland Collection Agency License.

Supervised Loan Licenses for Debt Buyers

A Supervised Loan License is now required for any business that engages in making supervised loans or taking assignment of and directly or indirectly, including through the use of servicing contracts or otherwise, undertaking collection of payments from or enforcement of rights against debtors arising from supervised loans from consumers in Kansas, Oklahoma, South Carolina, or Wyoming.

Considered a Supervised Loan if APR exceeds:
Kansas - 12%
Oklahoma - 10%
South Carolina - 12%
Wyoming - 10%

West Virginia Regulated Consumer Loan License - Debt Buyers

A Regulated Consumer Loan License is required for any business that engages in making a regulated consumer loan or taking assignment of and undertaking direct collection of payments from or enforcement of rights against consumers arising from regulated consumer loans.

A Regulated Consumer Loan is defined in West Virginia as a consumer loan, including a loan made pursuant to a revolving loan account, in which the rate of the loan finance charge exceeds 18% per year, except where the loan qualifies for federal law preemption from state interest rate limitations, including federal law bank parity provisions, or where the lender is specifically permitted by state law to make the loan at the rate without a requirement the lender hold a regulated consumer lender license.

Because debt buyers take assignment of the loan they are required to obtain this license if they purchase West Virginia "regulated consumer loans."

Wisconsin Consumer Credit Transaction Licenses - Collection Agencies and Debt Buyers

A Consumer Credit Transaction License is required for any business that engages in making or soliciting consumer credit transactions or directly collects payments from or enforcement of rights against customers arising from such transactions, wherever made.

A Consumer Credit Transaction is defined in Wisconsin as a consumer transaction between a merchant and a customer in which real or personal property, services or money is acquired on credit and the customer's obligation is payable in installments or for which credit a finance charge is or may be imposed, whether such transaction is pursuant to an open-end credit plan or is a transaction involving other than open-end credit. The term includes consumer credit sales, consumer loans, consumer leases and transactions pursuant to open-end credit plans.


Cornerstone Support is uniquely positioned in the collection industry. Our relationships with each of the 50 states make us among the first to know about regulatory changes that affect you. Each month, we send out our Companion Newsletter, which features the latest developments in the state regulatory environment, along with helpful feature articles relevant to collectors, debt buyers, and attorneys nationwide. If you would like to receive our Companion Newsletter, simply sign up at www.cornerstonesupport.com to be put on our mailing list. And if you have any questions about the states mentioned here or any others, give one of our licensing consultants a call at 770-587-4595 or e-mail us at info@cornerstonesupport.com.

New Mississippi Requirement for LLCs

IMPORTANT NEW FILING REQUIREMENT

LIMITED LIABILITY COMPANIES

MUST FILE ANNUAL REPORTS STARTING IN 2011

Pursuant to Section 79-29-215 Miss. Code Ann. (1972), all limited liability companies operating in Mississippi will be required to file an Annual Report with the Secretary of State beginning in 2011.

What are the deadlines for filing my LLC’s 2010 Annual Report?

The new LLC Annual Reporting Forms will be available to the public on Monday, Jan. 3, 2011, on the Secretary of State’s web site at www.sos.ms.gov. The deadline for completing the report is April 15, 2011.

How will I access my LLC’s information?

Each LLC should use their Mississippi business identification number to access their information. Your company’s business ID number can be found on your company’s webpage on the Secretary of State’s website.

What is the cost to file the Annual Report?

For Mississippi LLCs, there is no cost for online filing. The process for completing the form online will involve filling out the necessary information and hitting “submit.” As an alternative, the form may be printed out, completed, and mailed in to the Secretary of State’s office at P.O. Box 136, Jackson, MS 39205.

There is a $250 annual fee for out-of-state or ‘foreign’ LLCs. There is no online filing allowed for these LLCs. Foreign LLCs must complete the form online, print it out and submit it with their $250 annual fee to the Secretary of State’s office at P.O. Box 1020, Jackson, MS 39215-1020.

What information will be required on the Annual Report?

A sample LLC Annual Report can be found here: http://www.sos.ms.gov/links/business/LLC%20Info/Sample%20LLC%20AR%20with%20watermark.pdf

What if I do not have computer or internet access?

For those without computer or internet access, a paper copy of the LLC Annual Report form may be completed and mailed to the Secretary of State’s office by the deadline of April 15, 2011. You may have a blank copy of the form mailed or faxed to you by calling (601) 359-1633.

Massachusetts Branch Licensing Change

Contrary to statutory language (209 CMR §18.07(1)), it has been the longstanding position of the Massachusetts Division of Banks that collection agencies with a presence in the state of Massachusetts are not required to license out-of-state branch locations. Although there has been no official statement changing this position, recent conversations with leadership within the Massachusetts Division of Banks have shown that there is no longer consensus on this position.



In that regard, it is our position that effective immediately all locations from which Massachusetts debtors are contacted must hold a valid license with the Massachusetts Division of Banks. For questions or issues related to this change contact Cornerstone Support at (770) 587-4595 or email us at info@cornerstonesupport.com.