July 23, 2011

State Debt Collection Violations Also Violate the FDCPA

Filed under: Collections,FDCPA

Hello Paul,

I have a question about a debt collection company.  Integra Services in Nevada is trying to collect a timeshare debt from me, and I live in Texas.  The timeshare was a complete act of stupidity that only became apparent when we actually tried to use it, and none of the promises made by the sales staff amounted to anything close to something resembling the truth.

I first disputed the contract altogether citing about ten deceptive practices that were used throughout the timeshare presentation and issued a cease and desist letter.  Later, the debt was sold to the collection agency Integra. 

Now it is my understanding that under Texas law, they are required to have a surety bond to collect debt in this state.  I wrote Integra a letter requesting validation of the debt and proof of a surety bond.  They sent me the validation information, but refused to send me information on the surety bond.  I sent a second letter certified mail again requesting the surety bond information for Texas that was left out of their first letter back to me.  The company responded by saying that they didn’t need to provide a surety bond since “licensing is required by Nevada which is in good standing for their company in the state of Nevada.”  This seems like the company’s way of saying that they don’t have a surety bond. 

I offered them a settlement in the second letter which amount to the same dollar amount they were seeking from me as long as the caveat of a pay for delete was upheld for the credit reports.  They never responded to my second certfied piece of mail and have now continued to report the debt negatively to all three credit bureaus.  It has now been well past the thirty days from not only my initial letter but also the second certified letter again requesting surety bond information.  I’m just not sure what my next step should be. 

Aren’t they in violation of Texas consumer protection laws since they have never provided me with the surety bond information?  Should I file complaints with the Attorney General’s office?!  Should I send letters to the credit bureaus?  Should I send another certified letter to Integra Services in Nevada?

I am just so upset I can’t see straight.  Why would they that give no response to my pay for delete request even though it was the same amount of settlement that they had asked for initially?  Any help in this situation would be greatly appreciated.



Hello Robert,

Based on what you’ve written and the response received implying that their interpretation of Texas law is that a surety bond is not required should be like music to your ears.

Texas Finance Code § 392.101(a) reads: “A third-party debt collector or credit bureau may not engage in debt collection unless the third-party debt collector or credit bureau has obtained a surety bond issued by a surety company authorized to do business in this state as prescribed by this section.  A copy of the bond must be filed with the secretary of state.”

Additionally, violations of state debt collection law are also violations of the federal Fair Debt Collection Practices Act (FDCPA).  A recent opinion this year in Bradshaw v. Hilco Receivables, No. RDB-10-113, 2011 U.S. Dist. LEXIS 17954 (D. Md. Feb. 23, 2011) found that a debt collection firm attempting to collect debts without being properly licensed in the state is a violation of the FDCPA.  In an excerpt from the opinion:

The FDCPA prohibits the use of any “false, deceptive, or misleading representation or means in connection with [*20] the collection of any debt,” 15 U.S.C. §1692e, and provides a non-exhaustive list of conduct that violates the FDCPA, including “[t]he threat to take any action that cannot legally be taken.” 15 U.S.C. § 1692e(5). The theory underlying Plaintiffs’ claim is that because Maryland law prohibits collection agencies from conducting debt collection in the state without a license, Hilco’s noncompliance with the Maryland statute forecloses it from initiating debt collection activities, including litigation. Essentially, Plaintiffs argue that Hilco’s violation of MCALA’s licensing requirement is a per se violation of Section 1692e(5)’s prohibition on threats to take action that cannot legally be taken. There is precedent for that argument. In Gaetano v. Payco of Wisconsin, Inc., the United States District Court for the District of Connecticut concluded that unlicensed collection activity violated various provisions of the FDCPA. 774 F. Supp. 1404, 1415 (D. Conn. 1990). Similarly, other district courts faced with violations of parallel state laws that mandate licensure by collection agencies have held that violations of those laws constitute per se violations of the FDCPA. See, e.g., Sibley v. Firstcollect, Inc., 913 F. Supp. 469,471-72 (M.D. La. 1995); [*21] Russey v. Rankin, 911 F. Supp 1449, 1459 (D.N.M. 1995); Kuhn v. Account Control Tech., Inc., 865 F. Supp. 1443, 1452 (D. Nev. 1994).

I would not send any more letters.  You have their correspondence as evidence that they have been attempting to collect in violation of 392.101(a) even if they obtain a surety bond after the fact.  This coupled with the fact that there is a private right of action under the FDCPA available to consumers should be sufficient ammunition to negotiate a pay for delete.   In my opinion, a phone call with a supervisor at Integra is in order followed by confirmation that the debt is paid and a letter of deletion with or without payment – that’s up to you.  Failure to do so within thirty days is a formal complaint to their local Better Business Bureau and thirty days after that, a letter to the Texas Attorney General.  That would be the gist of the phone call.  The key would be to get someone other than an underling on the phone.

Thanks for the questions and hope this helps.


This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

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