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Washington State's debt collection laws are designed to protect consumers from abusive practices while ensuring fair debt recovery for businesses. The Washington Collection Agency Act (RCW 19.16) sets strict rules for licensing, prohibited practices, and compliance requirements for collection agencies and debt buyers. Here’s what you need to know:
For debt buyers and sellers, compliance with these laws is critical. Always verify licensing and ensure complete documentation, including proof of debt ownership and adherence to communication guidelines.
The Washington Collection Agency Act (RCW 19.16) serves as the key state regulation overseeing debt collection practices in Washington. It applies to third-party collection agencies, debt buyers, and original creditors operating under fictitious names. The Act is designed to shield consumers from unfair, deceptive, or harassing behaviors while ensuring that agencies are properly licensed and bonded.
Under the Act, the term "collection agency" has a broad definition that includes debt buyers - entities that acquire delinquent or charged-off debts for collection purposes. These buyers may either collect the debt themselves or outsource the task to third parties or attorneys. However, certain groups are exempt from the Act's requirements, such as original creditors collecting under their own names, lawyers, banks, credit unions, real estate brokers, and billing services that only send statements without engaging in further collection efforts.
"No person shall act, assume to act, or advertise as a collection agency or out-of-state collection agency... without first having applied for and obtained a license from the director." – RCW 19.16.110
Unlicensed activity carries severe penalties, including fines and potential imprisonment. Agencies are also required to file a $5,000 surety bond to ensure proper client performance. Additionally, in-state agencies must maintain a trust account in a federally insured Washington-based bank for funds collected on behalf of clients, although this requirement does not apply to debt buyers. The Act outlines detailed financial thresholds and operational requirements that agencies must meet to comply with state law.
The Act sets out clear financial and operational rules for collection agencies. To secure a license, an agency must demonstrate a minimum cash and net worth of $7,500. Without a valid license, agencies are barred from filing lawsuits in Washington courts. Debt buyers pursuing legal action must include evidence of the original debt, such as the original contract or the most recent monthly credit card statement, with their complaint.
Licensed agencies must follow strict communication limits to prevent harassment. For instance, debt collectors:
Additional rules apply to specific types of debt. For medical debt, collectors must provide an itemized statement free of charge upon request and cannot report negative information to credit bureaus until at least 180 days after receiving the debt information. For commercial claims, collection fees are capped at 35% of the claim amount.
Collectors must also provide validation details upon a debtor's written request. This includes the original creditor's name, the account number, and the date of the last payment. If they fail to provide this information, they must cease collection efforts entirely. These operational guidelines work hand-in-hand with the Act’s consumer protection measures.
The Act includes a range of safeguards to protect consumers from abusive or deceptive collection practices. For example, collectors are prohibited from:
The Act also forbids "pocket service", which involves serving a debtor with a summons and complaint before the case is officially filed and assigned a case number. Additionally, collectors cannot initiate legal action or arbitration if they know - or should know - that the debt is barred by the statute of limitations. In Washington, the statute of limitations for most written contracts, including credit card and medical debt, is six years.
Violating the Act comes with serious consequences. Collectors who break the law forfeit their right to recover any interest, service charges, or collection fees tied to the debt. Violations of medical debt provisions are classified as unfair or deceptive practices under the Washington Consumer Protection Act (RCW 19.86), which allows courts to award up to three times the actual damages, capped at $25,000.
Consumers can confirm whether a collection agency is properly licensed by visiting the Washington Department of Licensing website. Keeping a detailed log of call times and frequencies can help identify violations, such as exceeding the three-call-per-week limit or contacting debtors outside permitted hours.
Washington State In-State vs Out-of-State Collection Agency Licensing Requirements Comparison
In Washington, collection agencies must obtain a license before contacting debtors or seeking clients. These licenses are issued by the Department of Licensing (DOL) and processed as endorsements through the Department of Revenue's Business Licensing Service. Before applying, businesses are required to register with the Washington Secretary of State.
To qualify, agencies need at least $7,500 in cash (including $5,000 in a business bank account) and must maintain a net worth of $7,500. Additionally, a $5,000 surety bond is necessary to ensure the agency fulfills its client agreements.
Agencies operating within Washington or serving Washington-based clients must meet specific requirements. They are required to have a physical office in the state, managed by a resident. If the agency collects debts for third parties, it must also establish a trust account in a federally insured bank located in Washington (debt buyers are exempt from this rule). Applicants need to submit financial statements showing assets and liabilities from one of the three months prior to the application.
Licenses are typically issued or denied within three weeks of submitting all required documents through the Department of Revenue's online portal. Licenses expire annually on December 31, and renewal fees must be paid by January 1. If payment is not received by January 31, a new application is required.
Agencies must also avoid using names that could mislead or imply a government affiliation, such as "Police" or "Federal", or names too similar to existing licensees. Applications may be denied if any owner or officer has faced a judgment for fraud or embezzlement within the past five years or has filed for bankruptcy in the last two years.
Out-of-state agencies, however, follow a different set of criteria, as outlined below.
Out-of-state agencies collecting debts from Washington residents must also secure a license, but they are not required to maintain a physical office in Washington if they operate solely through interstate communication. Their trust accounts can be held in any federally insured bank.
"The licensing fee for an out-of-state collection agency shall not exceed fifty percent of the licensing fee for a collection agency." – RCW 19.16.140
These agencies may benefit from reciprocity agreements. For instance, if their home state does not charge licensing fees to Washington-based agencies, they may qualify for a fee waiver. Similarly, the $5,000 surety bond requirement can be waived if they provide proof of an active bond in compliance with their home state's bonding rules.
| Requirement | In-State Agency | Out-of-State Agency |
|---|---|---|
| Physical Office | Required in Washington | Not required if operating via interstate communication |
| Resident Manager | Required | Not required |
| Trust Account | Required (WA-based bank) | Required (federally insured bank) |
| Surety Bond | $5,000 | $5,000 (waiver possible via reciprocity) |
| Licensing Fee | Full fee | Maximum 50% of in-state fee (waiver possible) |
| Debt Buyer Trust Account | Exempt | Exempt |
Agencies with multiple locations in Washington must obtain a separate Branch Office Certificate for each site. These certificates must be prominently displayed at their respective locations and expire on December 31, alongside the main license. Any changes to the agency's trade name or business location must be reported in writing to the Director of Licensing to keep records up to date.
Washington law imposes strict rules to prevent abusive debt collection practices, as outlined in RCW 19.16.250. Violating these rules can have serious consequences for collection agencies, including losing the right to recover interest, service charges, attorney fees, and collection costs on a claim. Additionally, such violations are deemed unfair or deceptive under the Washington Consumer Protection Act, which can lead to civil lawsuits. Agencies found guilty may face liability for actual damages, treble damages, and attorney fees.
Debt collection agencies must adhere to strict guidelines to avoid harassment or abuse. For example, they are prohibited from intentionally blocking their phone numbers from appearing on a debtor's caller ID. The use of offensive language, threats of violence, force, or criminal prosecution is also strictly forbidden.
Transparency is a key requirement for debt collection agencies to prevent fraudulent practices. Agencies must use their licensed name and avoid any behavior or materials that could imply a connection to government or law enforcement. For example, they cannot wear uniforms, display badges, or use language that suggests official authority.
Certain deceptive practices are explicitly banned. These include using forms that mimic judicial processes, government documents, or emergency messages. "Pocket service" - serving a debtor with a summons and complaint that hasn’t been filed with the court and assigned a case number - is also prohibited. Agencies are further restricted from claiming unauthorized fees, such as attorney or investigation fees, unless legally permitted. They are also barred from initiating legal action on debts that are past the statute of limitations.
Specific rules apply to medical debt. Agencies cannot report negative information to credit bureaus or pursue collection efforts while a charity care application is under review.
Trading debt portfolios in Washington comes with a set of strict licensing and documentation requirements. Both buyers and sellers need to verify credentials and maintain accurate records to meet the state's legal standards. These guidelines outline the steps necessary to ensure transactions on Debexpert align with Washington's regulatory framework.
Washington law enforces rigorous licensing rules for collection agencies. Before engaging with debtors or clients, entities must hold a valid collection agency license, as specified under RCW 19.16.160. This regulation also requires collection agencies to share their license number with clients before initiating any activity.
When trading on Debexpert, always request your partner’s Washington State collection agency license number. Confirm that the business name listed on the platform matches the name on their license. Using any name other than the one registered on the license is prohibited. Additionally, verify whether the license reflects the partner's proper in-state or out-of-state status, based on their business operations.
It’s important to note that Washington law forbids assisting or facilitating unlicensed individuals or entities in operating as a collection agency. Even if you hold a valid license, trading with an unlicensed partner could lead to legal consequences. Once the licensing details are verified, you can proceed to utilize Debexpert’s analytics tools for further compliance checks.
Debexpert offers analytics tools designed to ensure debt portfolios comply with Washington’s regulations. Under RCW 19.16.260, debt buyers must maintain a complete chain of ownership - from the original creditor to the current holder - to pursue legal action. The platform’s analytics can help confirm this chain is intact.
The tools also assist in identifying risks tied to the statute of limitations. Washington law prohibits pursuing claims that are known to be time-barred, so it’s essential to review portfolio data for the date of last payment on each account. For medical and hospital debts, Debexpert can flag accounts requiring additional disclosures under RCW 19.16.250(28-29), such as charity care notices.
Ensure that the portfolio includes all required data fields for compliance in Washington. This includes the original account number, an itemized breakdown of charges, and the original creditor’s name at the time of charge-off. These details are crucial for meeting the state’s legal standards.
Washington State has some of the toughest debt collection laws in the United States, and knowing these rules is essential for anyone operating in this market. Both collection agencies and debt buyers must have valid licenses to take legal action in Washington courts.
On top of the licensing requirements, the penalties for breaking these laws are steep. Violating the prohibited practice regulations under RCW 19.16.250 or 19.16.260 means collectors lose the right to recover any interest, service charges, attorneys' fees, collection costs, or delinquency charges. These measures are in place to protect consumers from harassment, fraud, and misleading practices.
For debt buyers and sellers using Debexpert, staying compliant begins with proper checks. Always verify that your trading partners are licensed in Washington State and ensure all documentation is complete, including an unbroken chain of ownership from the original creditor. The platform's analytics tools can help pinpoint risks, such as accounts nearing the statute of limitations or those requiring specific disclosures, like for medical debts. Compliance also involves clear communication practices - collection agencies must update credit reporting agencies within 45 days once a claim is satisfied. These steps help promote transparency and uphold ethical standards throughout the debt trading process.
You can check if a collector is properly licensed by visiting the Washington State Department of Licensing website. In Washington, collection agencies are required to have a valid license to operate. On the department’s website, you can search for licensed agencies or review licensing records to confirm the status of a specific collector or agency.
If a debt collector refuses to validate your debt, you have the right to request written verification and can halt communication until they comply. Their failure to provide proper validation might violate Washington State law. Make sure to document all your requests carefully and familiarize yourself with your rights under state regulations to safeguard yourself.
In Washington State, debt buyers are prohibited from suing you unless they can provide solid evidence of the original debt. This proof must include either a copy of the original contract or written documentation of the debt that includes your signature. For credit card debts where no signed agreement exists, they must provide a recent account statement showing your transactions. These rules are clearly defined under state law.
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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