By Chris Villani

Law360 (April 21, 2020, 1:46 PM EDT) -- A credit industry trade group has filed suit against Massachusetts Attorney General Maura Healey challenging her emergency regulation banning most types of debt collection during the COVID-19 pandemic, calling the move harmful to business and unconstitutional.

The suit filed by ACA International on Monday targets Healey's March 27 announcement temporarily banning debt collection methods that can require people to leave their homes or have in-person contact, such as filing new debt collection lawsuits, garnishing wages and repossessing vehicles. The regulation, which is set to expire either June 24 or when Massachusetts declares an end to the current state of emergency, also bans unsolicited debt collection calls to consumers.

ACA's complaint says the prohibitions are hurting business, noting that six classes of collectors are specifically excluded from the rules.

"ACA members are reporting that they are seeing a decline in their revenues due to the regulation, and that these declines are endangering their businesses," the complaint alleges. "By jeopardizing members in this manner, the regulation poses an imminent threat to ACA's membership levels and revenues from membership dues."

According to the suit, ACA members — which include third-party collection agencies, law firms, creditors, asset-buying or debt-buying companies, and vendor affiliates — with Massachusetts operations have reported dips in revenue of 20% to 50%.

The drop "has forced some members to lay off employees in order to reduce costs," the complaint states. "If the regulation is left in effect, those declined revenues could eventually force these members out of business."

ACA claims the regulation also violates the First Amendment rights of its members "by unlawfully banning their truthful, innocent, and even helpful commercial speech."

The suit asks a federal judge to strike down the regulation, alleging violations of both state and federal law.

"We play a vital role in helping consumers resolve outstanding obligations so that they can maintain or regain access to affordable credit and be in control of their financial future," ACA CEO Mark Neeb said in a statement. "Without an open line of communication, our members won't be able to provide the necessary consultation that will help individuals navigate their difficult situation. Now is not the time to abandon consumers and leave them in the dark about how they can better chart a path forward."

Healey's office declined to comment Tuesday.

The AG extolled the regulation when it was unveiled last month.

"The COVID-19 crisis has caused substantial medical and financial hardship for families in Massachusetts, and we want to do everything we can to protect them from further harm," she said in a statement at the time. "This emergency regulation puts additional restrictions in place to prevent debt collectors and creditors from harassing our residents."

Supplemental guidance from the office warned debt collectors that the $1,200 stimulus payments sent to many Americans were "off limits" to collectors. But in Monday's suit, ACA argued many people feel this is a good time to pay down debt amid employment uncertainty.

"ACA has learned that many consumers who may either be furloughed or working from home now have more time to deal with their delinquent accounts and in some cases may — for any number of reasons — have more money to allocate toward reduction of legally owed debt," the company said in the suit, citing conversations with its members. "Members have reported that complaints are down and compliments are up since the COVID-19 public health emergency began."

The credit group says it has had to expend substantial personnel hours trying to help members decipher regulations that they cast as confusing and riddled with exceptions. ACA members are also more than capable of handling debt collection during hard economic times and times of crisis, the suit argues.

"ACA members are well-trained, compassionate professionals who understand well how to communicate with consumers, especially those who are facing financial challenges," according to the complaint. "They are well-versed in deploying 'hardship' programs and resources to assist consumers in making arrangements that best suit their individual financial situation during an emergency."

ACA is represented by David M. Bizar and Robert J. Carty Jr. of Seyfarth Shaw LLP.

Counsel information for Healey was not available.

The case is ACA International v. Healey, case number 1:20-cv-10767, in the U.S. District Court for the District of Massachusetts.

--Editing by Marygrace Murphy.

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