Massachusetts Ban on Certain Debt Collection Practices Blocked on First Amendment Grounds

May 07, 2020

An injunction blocking enforcement of an emergency prohibition on debt collection phone calls and lawsuits during the coronavirus (COVID-19) crisis was granted on May 6, 2020 on grounds that it violates the First Amendment rights of collection agencies without adding meaningful protections for consumers.

The request by trade group ACA International Inc. (ACA) for a temporary restraining order and preliminary injunction was granted by US District Judge Richard G. Stearns, who ruled that under state and federal law, there are already robust debt collection safeguards in place and that the emergency rule only served to single out certain types of collection practices and prohibited permissible commercial free speech and the constitutional guarantee of access to the courts.

As discussed in our previous LawFlash, the Massachusetts Office of the Attorney General issued an emergency rule on April 1 to prevent unfair and deceptive collection practices during the COVID-19 crisis. The rule temporarily prohibited some debt collectors from, among other things, calling debtors or initiating lawsuits to collect debts. Violations could result in treble damages.

ACA, which claimed that the rule resulted in its loss of significant clients and revenue in Massachusetts, sued on grounds that the rule violated its First Amendment rights to free speech and to petition the government. Judge Stearns agreed. With respect to the phone calls, he categorized them as commercial speech entitled to constitutional protection, and noted that a state has no constitutional power to suppress truthful, non-misleading commercial messages. He noted that the US Supreme Court has described the constitutional right of access to the courts as among the most “precious of liberties.”

Judge Stearns held that the ban provided no additional meaningful protections to debtors, beyond the “existing comprehensive scheme of law.” According to Judge Stearns "[t]he best that can be said for the regulation is that it decreases incrementally the number of times that a phone might ring in a debtor's home with a wanted or unwanted call from one species of debt collector-although in this day and age of cell phones and caller ID the option of simply not answering the phone or placing it in silent mode is a viable alternative for consumers."

Judge Stearns also expressed concern with the impact the rule may have on smaller collection agencies and essential businesses operating during the pandemic, stating that “[o]f
perhaps greater concern is the impact the regulation may have on hospitals and utilities who depend on collection agencies to remain solvent," Judge Stearns wrote, adding that "a capitalist society has a vested interest in the efficient functioning of the credit market which depends in no small degree on the ability to collect debts."

For additional information on this ruling, as well as guidance from the Massachusetts Attorney General concerning COVID-19, please review the Resources During COVID-19 guide.

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If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Laurie A. Cerveny
David C. Boch