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Indiana's debt collection laws require agencies to follow strict rules, including obtaining a license, adhering to state and federal regulations, and meeting specific documentation standards. Violations can lead to criminal charges, fines up to $10,000 per violation, and other legal consequences. Here's what you need to know:
Understanding Indiana's laws is essential for compliance and effective debt collection. Failure to follow these rules can result in costly penalties and reputational damage.
In Indiana, any individual or business entity - including firms, partnerships, LLCs, or corporations - that collects or solicits debts on behalf of others must secure a collection agency license. This rule covers third-party agencies, debt buyers, and businesses operating under fictitious names. It also applies to those offering services like letter writing, demand notices, or tools like stickers and coupon books for debt collection.
However, certain groups are exempt from this requirement. These include attorneys, banks, financial institutions (including trust departments), licensed real estate brokers, and public utilities such as electric or water companies. Businesses where debt collection isn’t their primary focus are also excluded. Moreover, judges, full-time law enforcement officers, and their deputies are strictly prohibited from holding or operating under a collection agency license.
Out-of-state collectors may avoid licensing if their activities are limited to "incidental contact" - such as collecting for nonresident creditors via interstate methods like phone, mail, or fax. That said, this exception is narrow and doesn’t typically apply to agencies or debt buyers with significant operations in Indiana.
To comply with Indiana’s licensing rules, collection agencies must follow specific registration and operational guidelines. The Nationwide Multistate Licensing System (NMLS) is used for submitting applications, renewals, and electronic surety bonds.
Applicants must provide key details, including the legal name, business address, and residential addresses of all owners, partners, or officers. Additionally, a statement confirming that all involved individuals meet the qualifications outlined in Indiana Code § 25-11-1-4 is required. These qualifications include being at least 18 years old, a U.S. citizen, and having no history of financial misconduct.
Each licensed office must file a $5,000 corporate surety bond electronically through the NMLS. Nonresident applicants are also required to appoint a resident agent or attorney for service of process as per IC 25-11-1-3.
Fees for initial and renewal applications are $100, with an extra $30 per branch office. Additional processing fees may also apply when using the NMLS. Licenses are valid until December 31 of the year they are issued, and renewal applications must be submitted by January 1 to avoid lapses.
If a surety bond is terminated, the agency has 30 days to file a replacement bond. Failure to do so results in license revocation. Agencies must also deposit collected funds into a special account weekly and maintain detailed records of all transactions.
Operating without a valid license in Indiana is classified as a Class B misdemeanor. Beyond criminal penalties, the Secretary of State can impose civil fines of up to $10,000 per violation.
The state enforces these rules aggressively. The Secretary of State has the authority to issue cease and desist orders, demand hearings, or take immediate action if it serves the public interest. After a hearing, they can order restitution, rescission, or repayment of funds, including interest at 8% annually.
In cases of unauthorized activity, the state can seek court orders to stop operations and may request the appointment of a receiver or conservator. If a license is revoked, the individual or entity cannot reapply for two years. Additionally, the Secretary of State can recover investigation-related costs in court proceedings.
Prosecuting attorneys in Indiana are required to pursue violations within their jurisdiction upon receiving complaints from the Secretary of State. These strict rules and penalties shape how agencies operate and manage their debt portfolios, as explored in the next section.
In Indiana, debt collectors operate under both state licensing laws and the federal Fair Debt Collection Practices Act (FDCPA), providing two layers of regulation. Collectors are allowed to contact debtors between 8:00 AM and 9:00 PM local time. They can send letters or make daily calls, as long as their behavior doesn’t cross into harassment.
Some legal actions include filing lawsuits for unpaid debts. If successful, this could lead to court-ordered wage garnishment or bank levies. In Indiana, lenders can even repossess vehicles without a court order if the borrower defaults on their contract terms. Within five days of initial contact, collectors must send a validation notice that outlines the debt amount and informs consumers of their right to dispute the debt.
Third-party contact is tightly regulated. Debt collectors may reach out to friends, family, or neighbors only once to obtain the debtor’s location. They cannot discuss the debt itself with these individuals. If a consumer disputes the debt in writing within 30 days of receiving the validation notice, the collector must pause all activity until the debt is verified.
While these practices are permitted, Indiana law draws a clear line against abusive or deceptive tactics.
Indiana law, alongside the FDCPA, prohibits harassment, deception, and unfair practices by debt collectors. Harassment includes using profane or obscene language, making threats of violence, or engaging in behaviors like anonymous calls or continuous ringing to annoy. Publicly posting "shame lists" of individuals who owe debts is also forbidden.
Deceptive tactics are off-limits. Collectors cannot impersonate attorneys, government officials, or credit bureau representatives. They are also barred from misrepresenting the amount, nature, or legal status of a debt or threatening legal action they don’t intend to pursue. As explained by the Indiana Consumer Law Group:
"Wage garnishment cannot happen until there is a judgment, so if the debt collector has not yet sued you and obtained a judgment then they are not going to be able to garnish your wages next week."
Unfair practices are equally restricted. Collectors cannot charge unauthorized fees or interest, deposit post-dated checks more than five days early without notice, or require consumers to pay for collect calls or telegrams. Under the Indiana Collection Agency Act, agencies must deposit client funds into a local depository weekly and remit collected funds to their clients within 60 days.
Breaking these rules has serious consequences.
Indiana uses multiple enforcement mechanisms to uphold its debt collection laws. The Secretary of State can issue cease-and-desist orders, revoke licenses, and request court injunctions against agencies that fail to comply. Violating Indiana Code Chapter 25-11 is classified as a Class B misdemeanor.
Financial penalties are steep. The Secretary of State can levy fines of up to $10,000 per violation of state laws. Under the FDCPA, consumers can sue for actual damages and receive up to $1,000 in statutory damages. Additionally, a $5,000 surety bond provides protection for consumers in cases of wrongful fund handling.
Consumers can report violations to agencies like the Indiana Secretary of State, the Indiana Attorney General, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). The Secretary of State may also require restitution or disgorgement, including interest at an annual rate of 8%, for violations. These measures not only protect consumers but also influence how debt portfolios are priced and assessed for risk.
Indiana Debt Collection: Statute of Limitations by Debt Type
Indiana sets firm deadlines for creditors and debt collectors to file lawsuits over unpaid debts, and these deadlines vary depending on the type of debt. For example, credit card debt, non-contract medical bills, promissory notes, and written payment agreements (made after August 31, 1982) all have a 6-year statute of limitations.
This time clock starts ticking either from the last payment made or the moment the account became delinquent. For instance, if the last payment on a debt was made on March 15, 2020, the creditor has until March 15, 2026, to file a lawsuit. On the other hand, debts like car loans or contracts involving the sale of goods fall under the Uniform Commercial Code and have a shorter 4-year limitation period. Medical debt tied to a written contract has a longer 10-year limit, while deposit accounts have a much shorter 2-year statute of limitations.
Once the statute of limitations expires, creditors lose the legal right to sue for the debt. However, the debt itself doesn’t disappear. As the Indiana Consumer Lawyer Blog points out:
"Debt collectors are prohibited by the Fair Debt Collection Practices Act from filing lawsuits that are barred by the statute of limitation, threatening to file such a lawsuit or even giving the impression in a letter or telephone call that the debt is legally enforceable!"
Debtors should tread carefully when dealing with old debts. Even a small payment or written acknowledgment of the debt can reset the statute of limitations, essentially starting the clock over. Additionally, delinquent debts stay on credit reports for 7 years, regardless of whether the statute of limitations has expired.
These time limits have a direct impact on how debt portfolios are valued and traded in the market.
The statute of limitations plays a critical role in the buying and selling of debt portfolios. Debt buyers prioritize accounts that are still enforceable since time-barred debts cannot lead to legal judgments. Portfolios containing older debts nearing or past the 6-year mark are typically sold at a steep discount - often for pennies on the dollar - because legal actions like wage garnishment or bank levies are no longer options.
Debt buyers need to carefully verify the date of the last payment on each account to avoid purchasing unenforceable claims. Sellers, on the other hand, should provide clear and accurate information about account timelines to ensure fair pricing and reduce risk. While collectors can still use non-legal methods like phone calls or letters to recover time-barred debt, they must avoid implying that the debt is legally enforceable, as this would violate the Fair Debt Collection Practices Act (FDCPA).
One factor that enhances the value of certain debts is the enforceability of money judgments, which remain valid for 20 years in Indiana. This long enforcement period incentivizes debt buyers to focus on accounts that are still within their 6-year legal window. However, Indiana Code § 24-5-15.5 imposes strict documentation requirements for debt buyers. In initial lawsuits, they must provide specific evidence, such as the original contract, and failure to comply is considered a deceptive act. Maintaining proper documentation and a clear chain of title is therefore essential for ensuring compliance and maximizing the value of debt portfolios.
Indiana requires debt buyers to obtain a collection agency license through the Secretary of State, Securities Division. This process is managed via the Nationwide Multistate Licensing System (NMLS), and buyers must secure a $5,000 corporate surety bond for each office operating in the state. Failure to comply with these licensing requirements can result in penalties, as outlined in earlier sections.
When filing lawsuits, debt buyers are subject to strict documentation rules. They must include either a charge-off statement or the most recent monthly statement for revolving credit accounts, along with a complete chain of title. This chain must provide a chronological list of all prior owners, starting with the original creditor, and include the dates of each transfer and the bill of sale proving the assignment. If these requirements aren't met, it constitutes a deceptive act under Indiana law, which could lead to case dismissals and civil penalties.
Debt buyers must ensure sellers provide a comprehensive ownership history to maintain enforceability. Out-of-state buyers may qualify for reciprocal licensing if their home state has similar regulations and offers the same privileges to Indiana agencies.
With licensing and documentation requirements addressed, buyers should also evaluate how Indiana's specific debt recovery environment impacts pricing and risk.
Indiana’s 6-year statute of limitations for credit cards, medical debt, and written contracts provides a predictable window for collections, influencing how aged debt is priced. Portfolios with accounts nearing or exceeding this limitation may lose enforceability, reducing their value.
Buyers must also consider Indiana's recovery caps when estimating returns. Wage garnishment is restricted to the lesser of 25% of disposable income or the amount exceeding 30 times the federal minimum wage. Additionally, the state protects $17,600 in residential equity and $350 in cash or deposit accounts from levy.
Judgments in Indiana remain enforceable for up to 20 years, offering a lengthy timeframe for recovery efforts. Buyers should also account for the $5,000 bond per office and licensing fees when determining acquisition costs. Medical debt portfolios present unique opportunities due to Indiana's "Necessaries Doctrine", which allows for the secondary liability of a spouse, potentially broadening recovery options.
Debt trading platforms simplify compliance and portfolio valuation for Indiana-specific portfolios. Platforms like Debexpert streamline the process of buying and selling debt while helping participants adhere to the state's regulatory requirements. Sellers can securely share required documentation, such as chain of title and charge-off statements, using end-to-end encryption.
Buyers benefit from analytics tools that assess account age, verify statute of limitations, and evaluate documentation quality before making bids. Real-time chat features enable direct communication between buyers and sellers, helping clarify licensing status, confirm NMLS registration, and address compliance-related questions during due diligence. Sellers can also target licensed buyers already registered in the NMLS system, minimizing risks associated with selling to unlicensed entities.
Auction formats - including English, Dutch, sealed-bid, and hybrid options - allow sellers to price portfolios based on factors such as remaining statute of limitations, documentation completeness, and bonding costs. Real-time tracking of buyer activity helps sellers gauge demand for Indiana portfolios and adjust reserve prices to reflect market interest.
Indiana’s debt collection laws require strict adherence for anyone involved in the state’s debt portfolio market. Debt buyers, including those working with third-party agencies, must secure a license through the Secretary of State and register via the NMLS. Additionally, they need to obtain a $5,000 surety bond for each office. This requirement was reinforced in the May 2024 case Rock Creek Capital LLC v. Tibbett, where the Court of Appeals ruled that a debt buyer is considered a "debt collector" under Indiana law, even if they do not collect debts directly.
Key compliance measures include observing the 6-year statute of limitations on consumer debts and maintaining a complete documentation chain, which is critical for enforceability. Domestic judgments, on the other hand, can typically be enforced for up to 20 years. These limitations significantly influence portfolio valuation and trading strategies. Filing lawsuits without proper documentation, such as a complete chain of title or charge-off statements, is deemed a deceptive act under Indiana law, carrying risks of case dismissals and civil penalties of up to $10,000 per violation.
Operating without the required license can lead to misdemeanor charges, civil penalties, and potential FDCPA counterclaims, which may allow consumers to recover statutory damages of up to $1,000 plus actual damages. The risks tied to non-compliance - both financial and legal - far exceed the costs associated with proper licensing, bonding, and documentation.
Indiana usually mandates that debt buyers obtain a license if they operate a physical location within the state or actively engage in collection activities there. On the other hand, debt buyers based outside of Indiana, who lack a physical presence and outsource their collection efforts, are typically not required to be licensed.
In Indiana, the clock on the statute of limitations for a debt can reset under certain conditions. If you make a partial payment on the debt or acknowledge it in writing, you might restart the timeframe. This gives creditors the opportunity to resume legal collection efforts.
A debt buyer in Indiana is required to provide specific documentation to validate their claim. This includes:
These requirements are in place to ensure transparency and accountability in debt collection cases.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
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