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Tennessee has strict debt collection laws that require agencies, debt buyers, and lenders to meet specific licensing, compliance, and operational standards. Violating these laws can lead to criminal charges, fines, and license revocation. Key points include:
Recent updates, including the 2026 Tennessee Debt Resolution Services Act, emphasize compliance and reinforce existing rules. Staying informed and adhering to these regulations is essential for operating legally and avoiding penalties.
Tennessee Debt Collection Requirements: Licensing Fees, Bonds, and Statute of Limitations
Tennessee's debt collection rules combine state-specific laws with federal guidelines, creating a framework that aligns with the Fair Debt Collection Practices Act (FDCPA) while adding its own requirements. These laws, outlined in TCA § 62-20-101 et seq., aim to protect consumers and regulate businesses operating in the debt collection space.
Tennessee offers strong protections for consumers, particularly when it comes to wage garnishments and shielding certain income sources from collection efforts. Income like Social Security benefits, disability payments, veteran's benefits, and child support is fully protected from bank levies under TCA § 26-2-103 and § 26-2-111. Debtors who face levies can reference these statutes to ensure their rights are upheld.
Additionally, Tennessee sets limits on fees collectors can charge. For example, collectors are allowed to recover up to $9.00 for processing insufficient fund (NSF) checks. Charging more than this violates state rules and could result in penalties, including license suspension or revocation.
These legal safeguards work in tandem with Tennessee’s licensing requirements, which are designed to ensure accountability among debt collectors.
Tennessee enforces strict licensing rules for any business involved in debt collection. Managed through the Tennessee Department of Commerce & Insurance's CORE portal, these regulations require any entity collecting or purchasing delinquent accounts for compensation to hold a valid license - unless they qualify for an exemption. As of 2024, this includes debt buyers actively involved in collection efforts.
To obtain a license, businesses must submit current financial statements prepared by a certified accountant and establish a fiduciary trust account for client funds, in compliance with TCA 62-20-114.
| Number of Employees | Required Surety Bond Amount |
|---|---|
| 1–4 Employees | $15,000 |
| 5–9 Employees | $20,000 |
| 10+ Employees | $25,000 |
Each licensed location must have a Location Manager who has passed the state exam and meets experience requirements. Licenses expire annually, with a 60-day grace period for renewal. If not renewed in time, the business must reapply as a new licensee.
Debt buyers are exempt from licensing if they outsource collection activities to a licensed agency or attorney. However, they must obtain a license if they directly engage in collection efforts.
Tennessee law clearly outlines what debt collectors cannot do. According to the state's Collection Service Board rules:
"A debt collector or collection service may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt".
Prohibited actions include falsely implying government affiliation, misrepresenting the debt's legal status or amount, pretending to be an attorney, threatening arrest or wage garnishment without legal grounds, using documents that mimic court orders, or employing fictitious names to mislead debtors.
Violations of the Tennessee Collection Service Act are classified as Class C misdemeanors. Beyond criminal penalties, the Tennessee Collection Service Board can suspend, revoke, or deny license renewals for infractions like fraud, failure to maintain a trust account, or noncompliance with collection laws. Consumers who encounter illegal practices can file a sworn written complaint with the Board. Licensed collectors are also required to keep accurate records of all collections for at least three years.
Tennessee's strict regulatory framework is further defined by statutes of limitations, which set deadlines for filing lawsuits over unpaid debts. While these laws don't erase the debt itself, they prevent creditors from using the court system to enforce payment after the deadline has passed.
In Tennessee, most consumer debts - such as credit card balances, medical bills, and written or oral contracts - fall under a six-year statute of limitations, as outlined in TCA § 28-3-109. Credit card debt, classified as "open accounts" by Tennessee courts, also follows this six-year rule. The clock typically starts ticking from the date of the last payment or the original contract date.
For installment loans, like auto or personal loans with fixed monthly payments, the six-year period begins individually for each missed payment.
| Debt Type | Statute of Limitations | Tennessee Code Section |
|---|---|---|
| Credit Card / Open Accounts | 6 years | TCA § 28-3-109 |
| Medical Debt | 6 years | TCA § 28-3-109 |
| Written Contracts | 6 years | TCA § 28-3-109 |
| Oral / Spoken Contracts | 6 years | TCA § 28-3-109 |
| Promissory Notes | 6 years | TCA § 47-3-118 |
| Court Judgments | 10 years (Renewable) | TCA § 28-3-110 |
Court judgments are treated differently. They remain enforceable for 10 years and can be renewed for another 10 years under Rule 69.04 of the Tennessee Rules of Civil Procedure. These deadlines shape how creditors and debt collectors handle litigation and collection efforts.
When a debt becomes time-barred, creditors lose the ability to file lawsuits to collect it. However, this doesn't mean lawsuits automatically disappear. As Rothschild & Ausbrooks, PLLC explains:
"If the statute expires and they sue, you can raise it as a defense in court. However, making a partial payment or acknowledging the debt can restart the clock".
Debtors must actively respond to lawsuits and assert the statute of limitations as a defense to have the case dismissed. Ignoring a court summons could result in a default judgment - even for debt that's legally uncollectible.
Filing lawsuits on expired debts violates the Fair Debt Collection Practices Act (FDCPA). According to Mark Cappel:
"Most courts find it is a violation of the FDCPA for a collection agent to pursue a debt collection lawsuit against a consumer after the statute of limitation expired".
To comply with the FDCPA, creditors and debt buyers should confirm the timeline of the last payment before pursuing legal action. While collectors can still contact consumers about time-barred debts through calls or letters, they cannot threaten legal action they are no longer entitled to take.
It's important to note that making a partial payment, acknowledging the debt, or agreeing to a new payment plan can reset the six-year statute of limitations. Before engaging with collectors about old debts, verify the timeline to avoid unintentionally reviving their legal rights to collect.
When acquiring debt portfolios in Tennessee, it’s crucial to verify whether the accounts are in default. According to Tennessee Attorney General Opinion No. 97-131, accounts that are not in default may not require a license for purchase. However, acquiring defaulted debt for collection purposes triggers stringent licensing requirements under the Tennessee Collection Service Act.
Every debt acquisition should be documented with a written agreement. This agreement must include details like the effective date of the assignment, the amount paid for the debt, any plans to consolidate accounts for litigation, and confirmation that the original creditor-debtor contracts allow debt assignments. These requirements are outlined in TCA § 62-20-127.
Additionally, it’s essential to maintain a separate fiduciary or trust account with enough funds to handle client disbursements. The Tennessee Collection Service Board audits these accounts during financial reviews, so regular reconciliations are a must. Furthermore, annual financial statements prepared by a licensed CPA or public accountant must be submitted with license renewal applications.
To stay compliant, keep thorough records of all debt acquisition transactions for at least three years. This includes assignment agreements, payment records, and any communications with debtors. Also, ensure that both your collection service license and location manager license are prominently displayed.
Technology can play a key role in simplifying these compliance processes.
Modern technology can significantly streamline compliance efforts. Automated tools can securely manage documentation from the acquisition stage, ensuring alignment with recordkeeping requirements.
For instance, platforms like Debexpert offer secure file-sharing capabilities, keeping assignment agreements and supporting documents protected. Its portfolio analytics tools help debt buyers evaluate accounts before purchase, including verifying the debt’s age to comply with Tennessee's six-year statute of limitations. Real-time communication features also assist buyers in confirming licensing statuses and reviewing financial statements efficiently.
Debexpert also supports transparency with its auction features, offering formats like English, Dutch, Sealed-bid, and Hybrid auctions. These tools ensure fair pricing while maintaining proper documentation throughout the process. Buyers receive notifications tailored to their preferred debt types, and the platform tracks bidding activity and portfolio transfers with timestamps and recorded payment amounts. This approach ensures compliance with the documentation standards set forth in TCA § 62-20-127.
The Tennessee Debt Resolution Services Act, which became effective on January 1, 2026, introduces new guidelines for debt buyers and collection agencies, emphasizing the importance of compliance with updated standards. While this act builds on existing protocols, it doesn't alter the established limitations already in place.
Tennessee law continues to require mandatory registration for most third-party debt collectors and debt buyers. The term "collection service" remains broadly defined, covering entities that purchase accounts for collection purposes - unless those accounts were not in default at the time of purchase. Additionally, actions like making a partial payment or acknowledging a debt can still reset the statute of limitations timeline. These updates reinforce the need for strict adherence to the state's regulatory framework.
Staying informed is key for debt professionals, who should regularly check the Tennessee Collection Service Board website for any updates. The Board's mission highlights its focus on public protection:
"to protect the public health, safety and welfare through the regulation of collection agencies".
Maintaining financial transparency is a critical part of compliance. License renewals require financial statements prepared by an active Certified Public Accountant (CPA) or Public Accountant (PA). As before, licensees must keep audit-ready financial records and maintain separate fiduciary accounts. Trust account management is especially important - licensees are required to ensure these accounts have adequate funds to meet client obligations, verified through bank statements or independent accounting reports.
Tennessee law also offers a "cure" provision under TN Code § 62-20-105. This allows entities that operated without a license to correct their status by submitting an application, and the Board cannot deny the application solely based on prior unlicensed activity.
For debt buyers involved in litigation, Tennessee's venue rules remain unchanged. Legal actions must be filed in the county where the debtor signed the agreement, resides, or where the consolidated accounts originated. When consolidating accounts, individual accounts cannot exceed $200, and the total amount in a single case cannot surpass $500. Additionally, all litigation must be handled by an attorney licensed to practice in Tennessee.
Following Tennessee's regulations is essential for staying compliant and running a successful debt collection operation. Every collection agency operating in the state must hold a valid license issued by the Tennessee Collection Service Board and meet bonding and fee requirements as outlined by law.
Familiarity with the statutory and licensing rules isn't just a legal necessity - it also helps shape effective and compliant collection strategies. Attempting to collect time-barred debt can lead to violations of the FDCPA and result in penalties.
To stay ahead, agencies should regularly check the Tennessee Collection Service Board's website for updates and ensure their financial records are audit-ready, prepared by licensed CPAs or Public Accountants. Tennessee's cure provision under TN Code § 62-20-105 offers a way to correct licensing issues, demonstrating a commitment to maintaining regulatory compliance. Agencies are also required to prominently display their collection service and location manager licenses and use only their registered business name in all communications.
For debt buyers and lenders, leveraging technology can streamline compliance efforts and improve portfolio management. Conducting thorough due diligence - such as verifying that all collection partners have valid Tennessee licenses - is critical, as lenders are legally accountable for this verification. Staying on top of financial reporting, bonding requirements, and prohibited practices ensures continued compliance and operational success.
If you're looking to buy debt in Tennessee, you don't need a Tennessee license - as long as you work with a licensed collection agency to handle the collections process. The Sixth Circuit has clarified that hiring a licensed agency to collect on your behalf means you're exempt from the state's licensing requirements.
Under Tennessee law, certain actions can reset the 6-year statute of limitations on a debt. For example, making a new payment or providing a formal acknowledgment of the debt can restart the clock. This means creditors would have a fresh timeline to legally pursue collection efforts.
In Tennessee, wage garnishment is capped at 25% of disposable weekly earnings or the amount exceeding 30 times the federal minimum hourly wage, depending on which is lower. On top of that, up to $2,500 in a debtor's deposit account is automatically protected from garnishment, seizure, or attachment. These safeguards ensure debtors retain access to a portion of their funds.
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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