Minnesota Appeals Court Affirms Broad Application Of Debt Collection Licensing Requirements

Minnesota’s Court of Appeals has held that the state’s collection agency licensing statutes apply very broadly, so many out‑of‑state companies collecting on Minnesota-related claims must now be licensed as collection agencies (or debt buyers) in Minnesota.

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What the court decided

• The court affirmed a cease‑and‑desist order against a Utah company that was trying to collect rental‑car damage claims owed to Minnesota vehicle rental businesses without holding a Minnesota collection agency license.​

• The court held that when an entity undertakes to collect payment on behalf of others, including via claim assignments, it is engaged in debt collection “for others” and falls within Minnesota’s collection agency licensing statutes.​

Scope of “debt” and “collection agency”

• The court read the statutory phrase “any … other indebtedness” in Minn. Stat. ch. 332 to include essentially any type of financial obligation, not just traditional consumer loans or unpaid accounts.​

• The company’s activities—sending collection letters, receiving consumer payments into a trust account, and remitting proceeds to its business clients—showed it was operating as a collection agency under Minnesota law.​

Territorial reach and out‑of‑state agencies

• The court rejected the argument that the company was not “doing business in Minnesota” simply because it was physically located in Utah, emphasizing that contracting with Minnesota businesses and collecting on Minnesota‑originated transactions triggers Minnesota licensing requirements.​

• The opinion confirms that collection activity tied to Minnesota businesses or transactions can require a Minnesota license even when the consumers are located elsewhere and the collector is out of state.​

Rejected defenses

• The court rejected arguments that the entity was merely enforcing its own assigned claims (not collecting “for others”) and therefore outside the collection‑agency definition.​

• It also rejected a vagueness challenge, finding the collection‑agency statutes sufficiently clear in defining who must be licensed and what conduct is covered.​

Practical compliance implications

• Non‑Minnesota companies that collect on debts arising from Minnesota transactions or on behalf of Minnesota creditors should evaluate whether they need a Minnesota collection agency or debt‑buyer license under Minn. Stat. §§ 332.31–.44.​

• While a 2024 reform allows the Commerce Commissioner in limited circumstances to waive licensing for some nonresident agencies with reciprocal agreements, entities remain subject to Minnesota collection‑practice rules and should review their licensing and registration posture carefully.​