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Silver v. Woolf

November 15, 1982

HERBERT T. SILVER D/B/A ALLIED BOND AND COLLECTION AGENCY, PLAINTIFF-APPELLANT,
v.
BRIAN J. WOOLF, IN HIS CAPACITY AS ACTING BANKING COMMISSIONER OF THE STATE OF CONNECTICUT, DEFENDANT-APPELLEE.



Appeal from a grant of summary judgment by the United States District Court for the District of Connecticut, (M. Joseph Blumenfeld, Judge, holding that Connecticut may require an interstate debt collection agency to obtain a license as a condition of collecting debts from residents of Connecticut by phone or by mail. Conn. Gen. Stat. Ann. §§ 42-127-42-133a (West Supp. 1982). Affirmed.

Author: Winter

Before LUMBARD, CARDAMONE and WINTER, Circuit Judges.

WINTER, Circuit Judge:

Allied Bond and Collection Agency ("Allied") brought this action against the Banking Commissioner of Connecticut in the District Court for the District of Connecticut, Blumenfeld, Judge, seeking declaratory and injunctive relief against the enforcement of Conn. Gen. Stat. Ann. §§ 42-127-42-133a (West Supp. 1982). Allied claimed that this legislation, which requires the licensing of, and otherwise regulates, interstate debt collection agencies is unconstitutional. Judge Blumenfeld granted summary judgment for the Commissioner. We affirm.

BACKGROUND

Allied is a consumer collection agency located in Pennsylvania. It claims to collect debts on behalf of its clients from debtors located in all 50 states and in several United States territories and foreign countries. Allied has no offices, employees, or property in Connecticut and seeks to collect outstanding debts from Connecticut and debtors solely through mail and telephone communications. From 1978 through 1981, Allied had approximately 14,580 accounts in Connecticut on which it collected some $576,415.

Until 1981, Allied's clients included several major oil companies, notably Atlantic Richfield Oil Company (ARCO), Mobil Oil Corporation and Shell Oil Company. In recent years, six Connecticut residents have complained to the Banking Commissioner about Allied's collection activities. Four of the complaints received concerned Mobil, ARCO, and Shell. The Banking Commissioner contacted these companies and informed them that Conn. Gen. Stat. Ann. § 42-131a (b) prohibited creditors from engaging the services of a collection agency which had not obtained a license in Connecticut. That section states in part:

No creditor shall retain, hire, or engage the services . . . of any person who engages in the business of a consumer collection agency and who is not licensed to act as such by the commissioner, if such creditor has actual knowledge that such person is not licensed . . .

As a result, the three oil companies ceased to engage Allied with respect to debtors located in Connecticut, thereby reducing Allied's volume of Connecticut accounts by more than 50 percent.

On September 14, 1981, the Commissioner issued a Notice of Hearing ordering Allied to appear and to show cause why it should not be ordered to cease and desist from continuing its business without obtaining a license pursuant to Conn. Gen. Stat. Ann. § 42-127a(a), which reads:

No person shall act within this state as a consumer collection agency, unless such person holds a license . . . from the commissioner . . . A consumer collection agency is acting within this state if it . . . (2) has its place of business located outside this state and collects from consumer debtors who reside within this state for creditors whose place of business is located within this state; or (3) has its place of business located outside this state and regularly collects from consumer debtors who reside within this state for creditors whose place of business is located outside this state.

Allied, which does not contest its status as a "consumer collection agency," raised a constitutional challenge to the licensing requirement at the administrative hearing but the hearing examiner declined to consider it. Thereafter, Allied filed this action in the district court seeking a declaration that section 42-127a(a) was unconstitutional on its face and as applied and an injunction against the enforcement of section 42-127a(a) and section 42-131a(b), to the extent the latter might be enforced against Allied's clients. The district court granted the Commissioner's motion for summary judgment and dismissed Allied's complaint. This appeal followed.We affirm.

Discussion

The regulatory scheme of the Connecticut consumer debt collection statute is not complex. Section 42-127a(a) prohibits any person from acting as a consumer collection agency within the state without having first obtained a license from the Banking Commissioner. In order to obtain a license, the debt collection agency must submit a written application, accompanied by a sworn financial statement, aggregate fees of $250, and evidence that the applicant is "of good moral character and financially responsible." Conn. Gen. Stat. Ann. § 42-127a. The Commissioner is empowered to examine a collection agency's books and records in aid of the licensing determination or the enforcement of other aspects of the statutory scheme. An applicant must also post a bond of $5,000 to ensure ...


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