On July 28, the Illinois Appellate Court, Third District, reversed a trial court’s judgment and held that an entity that purchases defaulted mortgage notes and pursues judicial foreclosure actions must be licensed as a collection agency under the Illinois Collection Agency Act (ICAA). The plaintiff initiated this case by filing a verified complaint under a provision of the ICAA that allows any person to sue in the state’s name to enjoin unlicensed collection activity. The complaint alleged that the defendant financial services firm operated as an unlicensed collection agency by purchasing defaulted mortgage notes and filing or substituting into foreclosure proceedings in multiple Illinois counties. The trial court granted the defendant’s motion to dismiss, finding that the defendant was not subject to the ICAA’s registration requirements.

On appeal, the court reversed the trial court’s judgment and remanded for further proceedings. The appellate court examined the plain language of the ICAA, which defines a “collection agency” as any person who “regularly … engages in the collection of a debt,” and the statute specifies that a person acts as a collection agency when it buys “accounts, bills, or other debt.” The court noted that the defendant had stated in its application to transact business in Illinois that its proposed purpose was “debt collection and debt purchasing.” The court found unpersuasive the defendant’s argument that the federal FDCPA’s more narrow definition of “debt collector” should apply, as the Illinois statute’s language is distinct and unambiguous, and noted that the defendant failed to claim any exemption under the law, including an available exemption for loan and finance companies. While the court acknowledged that the legislature may not have contemplated the purchase of mortgage debt and enforcement through judicial foreclosure when drafting the law, it concluded that the plain language of the statute supported its holding.