A Minnesota appeals court has affirmed a lower court’s ruling that seeks to define debt collection in the state and the circumstances under which an entity must be licensed to collect in Minnesota. The decision reinforces a broad interpretation of what activity constitutes debt collection and when out-of-state companies fall under Minnesota’s licensing requirements.
The background: The case arose after a Utah-based company contracted with several Minnesota vehicle rental businesses to pursue recovery on rental-vehicle damage claims. Under its agreements, the company received assignments of damage claims, contacted consumers, and attempted to recover money owed. In at least one instance, a consumer who rented a car in Duluth received a collection letter stating, “We are attempting to collect a debt.”
- After the consumer’s attorney notified the Minnesota Department of Commerce about potential unlicensed activity, the Department determined the company had been collecting debts in Minnesota without a license and issued a cease-and-desist order. An administrative law judge later recommended upholding the order.
- The company appealed, arguing it was not a collection agency, was not operating in Minnesota, and that Minnesota’s statutes were unconstitutionally vague as applied to its business.
The ruling: The Appeals Court rejected all of the defendant’s arguments and upheld the agency’s authority. The court emphasized that Minnesota’s collection agency statutes apply broadly. It held that rental-vehicle damage claims fall under the category of “any…other indebtedness,” noting that “using the word ‘any’ demonstrates an intent to be inclusive, not restrictive.”
- The decision also highlighted how the company’s own contracts undercut its arguments. The agreements required the company to collect money for its rental-car clients, hold recovered funds in a trust account, remit proceeds (less a fee), and return uncollected claims upon termination. These terms, the court wrote, made clear that the company was engaged in collection “for others,” even if the claims were assigned.
- One notable passage from the ruling stated: “An entity that seeks to receive payment on any pecuniary obligation for others…is engaged in the collection of ‘any…other indebtedness’ and thus is a ‘collection agency’ under Minnesota law, regardless of whether such indebtedness is liquidated.”
- The court further held that a company conducting collection activities tied to Minnesota transactions or Minnesota businesses is operating “in Minnesota” and must therefore be licensed, even when the consumer resides elsewhere.
- Finally, the court dismissed the constitutional vagueness argument, noting the statutes are clear and that the company “cannot reasonably assert that it is unaware of the risk that its conduct is subject to Minnesota’s collection agency statutes.”
