Investigation reveals troubling problems with Minnesota’s debt collector licensing process

The results of a Minneapolis Star Tribune investigation suggests that Minnesota’s procedure for registering debt collectors is broken. Under Minnesota law, individual debt collectors are required to register with the state and obtain a license. And if a person has been convicted of “fraud or any felony,” they are supposed to be prohibited from obtaining a license and working as a debt collector. The reasoning behind this law is fairly obvious: debt collectors have easy access to hundreds, or even thousands, of social security numbers and bank and credit card account numbers, which makes stealing someone’s identity a pretty tempting, and easy, thing to do.

But the Star Tribune’s investigation revealed that since 2005, the state has registered 111 people as debt collectors that should have been barred because of prior fraud or felony offenses. The Star Trib also found that approximately 75% of people that applied for a debt collection license lied about their criminal background. Although many of these people’s crimes would not have barred them from working in collections, it’s still very troubling that the state’s failure to conduct routine background checks before issuing a license is encouraging chronic lying on the license applications. Perhaps even more troubling is the fact that many collection agencies don’t conduct criminal background checks before hiring, apparently because they incorrectly believe that the state is doing it for them.

The story details a number of anecdotes about collectors being licensed that had previously been convicted of widespread financial fraud and violent crimes such as assault, battery, and even rape. It should be no surprise when these convicted felons, after getting jobs in collections, resort to harassing and abusing debtors.

So what is the solution here? Allocating more state money and resources for comprehensive background checks is an unrealistic option with the massive state budget deficit. One suggestion, made by state Senator Ron Latz, DFL-St. Louis Park, is to allow consumers to file state lawsuits and seek damages when collection firms hire criminals who harass them. “The only language that corporations speak is financial,” Latz said. “Either they pay for their negligence, or nothing changes.”

Criminals land jobs as debt collectors | Star Tribune | December 14, 2010