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Death Nail in RCK
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R North
Carolina has determined that RCK is a regulated collection agency
activity, subject to licensing, consumer protection rules, and required
FDCPA Miranda requirements. We believe other states may soon follow suit. North
Carolina Department of Insurance, the state department with the task of
regulating consumer protection and collection licensing in North Carolina,
has taken the position that an RCK transaction is a collection event in
North Carolina, subject to state licensing. Nancy
C. Renn, Governmental Accounts Auditor for the Commissioner of Insurance
notes in her March 1 opinion, “. . . electronic check represent[ment]
program would bring [RCK] within the definition of a collection agency and
does not appear to satisfy any of the exceptions set out in N.C.G.S.
58-70-15.” She goes on to say “. . . electronic check representment
program requires a collection agency permit under N.C.G.S. 58-70-1.” A
long-standing view under UCC rules has made the paper representment of a
dishonored check through the banking system a banking
transaction that is not subject to collection agency rules or licensing.
The change in the method of collecting RCK items from the paper system to
the ACH system, as well as the collection of service fees, helps to define
this approach as clearly collections not banking. Further
clarification will be required to determine if the Originating Depository
Financial Institution (ODFI), which is the accountable sponsor of private
party RCK transactions, will be subject to federal and state statutory
consumer damage claims for failing to meet Fair Debt Collection Practices
legislation, but it seems likely.
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