Consumer Finance Insights
May 19, 2020

Federal Court Enjoins Enforcement of Massachusetts Attorney General’s COVID-19 Debt Collection Regulation

On May 6, 2020, the U.S. District Court for the District of Massachusetts, in ACA International v. Healey, Case No. 1:20-cv-10767-RGS, enjoined Massachusetts Attorney General Maura Healey (AG Healey) from enforcing provisions of the emergency regulation, 940 CMR 35.00, et seq. (Regulation), prohibiting debt collection calls and initiating lawsuits during the COVID-19 pandemic.

As LenderLaw Watch previously reported, AG Healey was one of a number of state officials and regulators who took steps to decrease the economic burdens, stemming from the COVID-19 pandemic, on consumers in their states, including by placing additional restrictions on certain debt collection practices.  Shortly thereafter, in April 2020, ACA International (ACA), a membership organization comprised of debt-collection agencies, sought to invalidate the Regulation by filing a complaint for declaratory and injunctive relief on the basis that AG Healey exceeded her authority in promulgating the Regulation, and violated several constitutional provisions and state laws, including the First Amendment.

In May 2020, Judge Richard G. Stearns (Judge Stearns), of the U.S. District Court for the District of Massachusetts, issued the order enjoining AG Healey from enforcing the Regulation (Order).  Judge Stearns concluded that the Regulation went too far and violates the First Amendment rights of debt collection agencies, without adding meaningful protections for consumers.  Judge Stearns’ Order prohibits AG Healey from enforcing the entirety of the portion of the Regulation, which bans telephonic communications initiated by certain debt collectors in connection with the payment of a debt (940 CRM 35.04).  The Order also enjoins AG Healey from enforcing the portion of the Regulation that bars debt collectors from initiating debt collection lawsuits in state and federal courts during the pendency of the COVID-19 emergency (940 CMR 35.03).

Specifically, with respect to the Regulation’s prohibition against debt collection calls, the Court concluded that AG Healey’s “flat ban” on debt collection calls was an impermissible restriction on commercial speech.  Further, the District Court found that consumers are already protected by a “plethora” of existing federal and state regulations, including the Massachusetts Consumer Protection Law, G.L. c. 93A, the Federal Trade Commission Act (FTC Act) the Federal Debt Collection Practices Act (FDCPA) the Telephone Consumer Protection Act (TCPA), and the AG’s existing debt collection regulations.  Notably, Judge Stearns stated: “[w]hile I laud the Attorney General’s desire to protect citizens of Massachusetts during a time of financial and emotional stress created by the COVID-19 pandemic, I do not believe the Regulation adds anything to their protections that the existing comprehensive scheme of law and regulation already affords to debtors, other than an unconstitutional ban on one form of communication.”

Regarding the Regulation’s moratorium on initiating debt collection lawsuits, the Court held that AG Healey could not lawfully enact a regulation that restricted debt collectors’ access to the courts.  The Court was not persuaded by the argument that the Regulation was only temporary.  In fact, the Court was “most uncomfortable” with this argument, noting that “constitutional rights do not take a holiday simply because governing authorities declare an emergency.”  Judge Stearns stated that “the interest a debtor may have in the Regulation may not weigh as heavily as the threat of extinction faced by smaller collection agencies who have effectively been put out of business.”

In enjoining AG Healey from enforcing the Regulation, the District of Massachusetts’ Order effectively lifts the emergency restrictions and permits debt collectors to resume business in Massachusetts, subject to previously existing state and federal consumer protection laws and regulations.  However, an appeal by AG Healey is possible.  It also remains to be seen whether other organizations, such as the ACA, will challenge similar regulations enacted in other states in response to the COVID-19 crisis based on this decision.

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