Additional Authors: Katherine Hsu
On June 16, 2023, Nevada Governor Joe Lombardo approved Senate Bill 276, completing its “spring cleaning” to clarify and modernize its existing Collection Agencies Act. We previously discussed the proposed changes to Nevada’s Collection Agencies Act in our April edition of Licensing Link. In this article, we summarize the changes enacted by the final version of Senate Bill 276. For most purposes, the law takes effect October 1, 2023, although the law is effective immediately for the limited purpose of enabling regulators to adopt regulations and perform administrative tasks to prepare to carry out the provisions of the new law.
The Nevada Collection Agencies Act licenses and regulates the activities of “collection agencies,” which currently are broadly defined as any person “engaging, directly or indirectly, and as a primary or a secondary object business or pursuit, in the collection of or in soliciting or obtaining in any manner the payment of a claim owed or due or asserted to be owed or due to another.” Prior to the enactment of Senate Bill 276, the Nevada Collection Agencies Act did not include many of the typical exemptions seen in other state collection agency laws or the federal Fair Debt Collection Practices Act (“FDCPA”) for original creditors, persons servicing debts from origination or prior to default, or licensed mortgage servicers when servicing mortgage loans. Senate Bill 276 codifies an expanded list of exemptions from the collection agency licensing requirement. These new exemptions should reduce regulatory burdens for loan servicers and other companies collecting payments on consumer obligations in Nevada. The Collection Agencies Act will now include exemptions for:
- Mortgage servicers that are licensed under the Nevada Mortgage Services Act, if the servicer obtained servicing of the loan prior to default;
- Original creditors collecting a debt in their own name;
- Persons collecting a debt that they originated and then sold; and
- Persons that are excluded from the definition of a “debt collector” under the FDCPA, including any person collecting or attempting to collect a debt that was originated by the person, was not in default at the time it was obtained, or was obtained by the person as a secured party in a commercial credit transaction involving the creditor.
Senate Bill 276 also clarifies various jurisdictional prerequisites for when a person acts as a collection agency in Nevada. Under the new law, a person acts as a collection agency in Nevada if (i) the person is located in Nevada and seeks to collect a debt, regardless of where the debtor resides; (ii) the person is located in another state and seeks to collect a debt from a debtor who resides in Nevada, or (iii) the person is located in another state and is seeking to collect a debt on behalf of a person or entity that resides in Nevada.
Senate Bill 276 also clarifies that a “collection agency” includes debt buyers, which are defined as a person who “is regularly engaged in the business of purchasing claims that have been charged off for the purpose of collecting such claims, including, without limitation, by personally collecting claims, hiring a third party to collect claims or hiring an attorney to engage in litigation for the purpose of collecting claims.” Debt buyers will now be required to obtain a license in Nevada, unless they are otherwise exempt.
Finally, Senate Bill 276 amends the Collection Agencies Act to permit employees of licensed collection agencies to work from a remote location upon meeting certain conditions. The remote location must:
- Be capable of providing the same degree of oversight and monitoring of the collection agent as if the collection agent was working in the principal place of business or a branch office of the collection agency;
- Be fully connected to the technological systems, including, without limitation, any computer system, of the office at the principal place of business or a branch office of the collection agency;
- Allow the collection agency to: (1) record calls made to and from the remote location; and (2) monitor calls to and from the remote location in real time;
- Be a private location where confidentiality can be maintained; and
- Have the equipment necessary for the collection agent to perform his or her work safely and effectively.
Collection agencies that permit employees to work remotely must also adopt an information security plan that satisfies requirements set forth in Senate Bill 276, must maintain records of individuals that work remotely, and must require the individual working remotely to connect to the IT systems of the collection agency’s principal place of business or branch office using unique credentials. In addition, a licensed collection agency must have its principal place of business within the United States in order for its employees to be permitted to work remotely. Collection agencies that permit individuals to work remotely are also prohibited from any of the following:
- Representing to any person that the collection agent is working independently of the collection agency;
- Using the remote location from which a collection agent is working and any related address, telephone number or facsimile number in advertising for the collection agency;
- Requiring or inviting a debtor to come to a remote location from which a collection agent is working for the purpose of collection activities; or
- Holding out a remote location from which a collection agent is working in such a manner that a debtor is likely to believe that the remote location is the principal place of business or a branch office of the collection agency, including, without limitation, by receiving mail at the remote location, storing records at the remote location or stating to a debtor or customer that the collection agent is working from the remote location.
Finally, the new law eliminates the requirement for branch offices of collection agencies to obtain a separate branch license.
Companies servicing or acquiring debts in Nevada should note the enactment of Senate Bill 276 and evaluate whether they should obtain a collection agency license—or surrender an existing license—under the new version of the Collection Agencies Act.
Associate Joy Tsai and Summer Associate Katherine Hsu contributed to this article.