States That Require Debt Collection Licenses: What You Need to Know

Debt collectors operate under strict rules. These rules differ from state to state.

Understanding licensing requirements protects you from illegal collection tactics. Unlicensed collectors may be breaking the law.

You have rights when dealing with debt collectors. Knowing your state’s requirements helps you fight back.

Federal and State Laws Regulate Debt Collection

Debt collection is heavily regulated at the federal level. States add their own rules on top of federal law.

Each state decides whether collectors need professional licenses. Most states require licensing to operate legally.

You should know your state’s specific requirements. These laws exist to protect you from predatory practices.

These 14 States Don’t Require Debt Collection Licenses

Only a handful of states allow debt collection without licensing. Here’s the complete list:

• Georgia
• Kansas
• Kentucky
• Michigan
• Missouri
• Montana
• New Hampshire
• New York
• Ohio
• Oklahoma
• Pennsylvania
• South Dakota
• Vermont
• Virginia

New York has a special exception. The state doesn’t require statewide licensing.

However, major cities like New York City, Buffalo, and Yonkers require local licenses. Always check your specific city’s requirements.

Most States Require Professional Licensing

The remaining 36 states require debt collectors to hold valid licenses. Operating without proper licensing carries serious consequences.

State requirements change over time. California recently added licensing requirements starting January 1, 2022.

Mississippi enacted similar requirements on July 1, 2022. More states may follow this trend.

Staying current with your state’s laws protects your interests. When collectors break these rules, you gain leverage.

If you’re facing a lawsuit from a potentially unlicensed collector, our partner Solo can help you respond properly.

Common Exemptions to Licensing Requirements

Even states with strict licensing have certain exemptions. Understanding these exceptions helps you identify legitimate collectors.

Out-of-State Agency Exemptions

Some states exempt collectors without physical offices in the state. The exemption often depends on the collection method used.

Commercial Debt Exemptions

Business-to-business debt collection sometimes gets special treatment. Many states exempt commercial debt from licensing requirements.

Third-Party Debt Buyer Exemptions

Collectors who purchase debt outright may get exemptions. These rules vary significantly by state.

Attorney and Law Firm Exemptions

Collection attorneys often have different rules. Some states exempt law firms licensed to practice there.

Always Request a Collector’s License Number

You have the right to verify a collector’s credentials. Ask for their professional license number immediately.

Legitimate collectors provide this information without hesitation. They understand you’re protecting yourself.

Fake collectors react differently to this request. They become defensive or avoid answering completely.

A refusal to provide licensing information is a major red flag. The collector may be operating illegally or running a scam.

Fight Back Against Unlicensed Collectors

Knowledge gives you power when dealing with debt collection. Learn the warning signs of debt collection scams.

Report illegal collection activity to the Consumer Financial Protection Bureau. Your complaint helps stop predatory practices.

Taking action protects both you and other consumers. Don’t let unlicensed collectors intimidate you.

If you’re being sued over a debt, our partner Solo helps you prepare a proper legal response. Fighting back starts with knowing your rights.

You can win against unlicensed collectors in court. The right response strategy makes all the difference.