A company that shut down its business in Massachusetts following an investigation by that state into its debt-recovery practices has opened up shop in Rhode Island.

Norfolk Financial Corp., which buys other companies' bad debts, estimated that Norfolk will do about $500,000 in business this year, including $50,000 in Rhode Island, according to a company filing in January with the Rhode Island secretary of state's office. Norfolk has an office at 2130 Mendon Rd., Cumberland.

Norfolk's owner, Daniel W. Goldstone, of Boston, is being investigated by the Massachusetts attorney general's office for debt-recovery practices.

Last Friday was the deadline for Norfolk, along with more than 600 other firms, to apply for a Massachusetts debt-collection license, said Massachusetts' Division of Banking's general counsel, Joseph A. Leonard Jr. Norfolk did not apply for a license, he said.

Leonard confirmed yesterday that the Massachusetts attorney general's office is investigating Norfolk. A call to the Massachusetts attorney general's office was not returned yesterday.

Unlike Massachusetts, Rhode Island has no licensing requirement or other state statutes governing companies that buy or collect bad debts.

Rhode Island's business regulators said that they were unaware of Norfolk's operation until notified by a reporter yesterday.

"It is outside of my regulatory [purview]," said Rhode Island's director of business regulation, A. Michael Marques. "I wouldn't be concerned unless it becomes a problem."

The agency is unaware of any consumer complaints filed in Rhode Island against Norfolk, Marques said.

Norfolk buys bad debt or credit from other companies. "By selling your company's bad debts," the company's Web site states, "you can immediately receive a fair percentage of money owed to you, without spending company resources on debt collection."

John J. O'Connor, a Boston lawyer who acts as the processing agent for Norfolk, said in an e-mail yesterday that "Norfolk moved its offices to Cumberland R.I. for a number of reasons, including to comply with new Massachusetts licensing requirements, and because of R.I.'s vibrant business climate and geographical convenience."

"Norfolk expects to comply fully with all R.I. standards and regulations that apply to its business," he wrote, "just as it always has in Massachusetts."

Norfolk is a small company and has no current plans to expand, O'Connor said.

Massachusetts requires that agencies that make a business of buying debt be licensed by the state, said Leonard.

The state license subjects the debt-collection agencies to examinations by the division, as well as regulatory action if they violate state law, including suspension or revocation of their license.

Rhode Island is one of only a small number of states in the country -- and the only one in New England -- without a state statute governing debt-buying or collection practices, according to the National Consumer Law Center.

"The fact of matter is, Rhode Island doesn't have a lot of laws on lending practices generally," said Ardie Hollifield, of the Center for Responsible Lending in Washington. With the exception of a predatory-lending law enacted earlier this year, Hollifield said, "Rhode Island seems to be a little behind."

Federal laws also govern the purchase, sale and collection of bad debts. However, court cases have determined that the federal law only applies when the debt being purchased is already in default, said Leonard.

"So if you're collecting your own debt before it goes into default," Leonard said, "it's still not covered" by the federal law.

Massachusetts rewrote its state law in 2004, and made it broad enough to encompass newer types of debt purchase and collection, he said.

Licensing debt collectors at the state level subjects them to examinations by the division, Leonard said, and allows state regulators to take action if they violate the law, including suspending or even revoking their licenses.

"If someone thinks they're going to come into Rhode Island and abuse our citizens with practices not allowed in another state, they're going to make a big mistake," Marques, Rhode Island's top business regulator, said yesterday. "[But] we're not going to regulate everybody who's here just because people think they're bad."

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