Last week, a federal judge blocked the enforcement of Massachusetts regulations that temporarily restrict debt collection practices during COVID-19. According to the judge, the regulations violate the First Amendment rights of collection agencies without adding useful protections for consumers.
Massachusetts Attorney General Maura Healey issued the emergency regulations (which Foley Hoag summarized here) on March 27, 2020. The regulations prohibit creditors from confronting a debtor in person, or initiating or threatening new collections lawsuits, garnishments, seizure, or attachments of wages or property for payment of a debt, and repossessing any vehicle. Certain creditors, particularly third-party collections agencies, are also prohibited from initiating any phone calls to the debtor's personal telephone.
On April 21, 2020, ACA International Inc. (ACA), a trade group representing collection agencies and creditors, filed a lawsuit challenging the regulations on constitutional grounds. According to ACA, by prohibiting collection agencies from initiating communications with individuals, but allowing other types of collection calls such as those from first-party creditors, the state is infringing on the First Amendment. Among other types of relief, ACA requested a temporary restraining order and preliminary injunction preventing the regulations from being enforced.
This past Wednesday, U.S. District Judge Richard G. Stearns granted ACA's temporary restraining order. Judge Stearns agreed with ACA that the regulations restricted commercial speech, and found that Attorney General Healey had not sufficiently justified why they were necessary. Judge Stearns pointed out that Massachusetts already has stringent debt collection regulations, and the emergency regulations only add minor additional protections. For instance, Judge Stearns wrote, the regulations do "not pretend to offer relief from the debt itself. . The best that can be said [] 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." Judge Stearns also found that the ban may hurt essential businesses like hospitals and utility companies "who depend on collection agencies to remain solvent."
Weighing the constitutional and market costs against the regulations' minor additional consumer protections, Judge Stearns found that ACA's arguments carried the day. Importantly, although ACA requested both a temporary restraining order and preliminary injunction, Judge Stearns granted the temporary restraining order only. Under the federal rules, temporary restraining orders expire after 14 days unless extended.
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