Recent news stories and statements released by the federal government indicate that the debt collection industry is under fire for a variety of reasons. However, by following the guidelines listed in the Fair Debt Collection Practices Act (FDCPA), as well as aligning internal policies with industry-recognized best practices, agencies can fight against the stigma facing the sector and avoid legal ramifications.
New legislation continues to be considered by the federal government and several state agencies, much of which pertain to the use of new communications channels such as social media. As a result, debt collection agencies often benefit from taking the most cautious approach to these tools, as adherence to the FDCPA, which was passed in 1970, can be complicated by new technology.
Still, debt collection agencies can avoid all of the potential issues associated with non-compliant practices by keeping up with the discussions going on in Washington, and aligning policies with standing legislation. Any firms that do not feel entirely comfortable with the rules in place should consider using a third-party supplier of the services to avoid tarnished reputations and incurred financial losses.
Backlash to recent report
The Federal Trade Commission's latest consumer complaint report for 2012 revealed an increase in issues related to the collection process, though some in the industry believe that the findings did not accurately portray what was happening behind the scenes. The agency logged just under 200,000 unverified complaints related to collection activities, representing 10 percent of all issues fielded by the FTC.
However, the Association of Collection and Credit Professionals recently released a statement regarding the FTC's report, purporting that the Federal Trade Commission Sentinel Network depicted the debt collection industry in an inaccurate light. The ACA asserted that research analyzing FTC data revealed that 20 percent of complaints go to unknown agencies, and also presented evidence that businesses were misidentified and duplicate issues were reported.
"We take consumer complaints seriously and agree on the importance of protecting consumers against businesses that engage in deceptive, unfair or abusive practices," explained ACA CEO Pat Morris. "However, the FTC's report disregards that the rate of growth in the number of complaints seems to be slowing compared to previous years and leaves out important facts on the substance of complaints against the third-party debt collection industry."
The ACA posited that the third-party debt collection industry is crucial to all state economies, as well as the national financial situation, as recovery of outstanding loans is necessary for many businesses.
"It's wrong to assume that just because these contacts to the FTC are tallied that the raw data equates to actual bad behavior by third-party debt collectors," Morris asserted. "Debt collectors want to work with consumers to resolve complaints. According to the Better Business Bureau, when given a chance debt collectors work closely with consumers to resolve 83 percent of the complaints they received – a number that is significantly higher than other industries."
Proactive defense always best
Though a debate will likely rage on regarding the FTC report, debt collection agencies can avoid issues altogether by simply maintaining strong practices, and going above and beyond the call of duty for exceptional customer service. Failure to do so can result in serious issues, as The Buffalo News recently reported that two collection agencies were shut down in the city, and each has to pay $10,000 in restitution and penalties.
The source explained that an investigation proved the companies had made false statements regarding relationships with judges and lawyers. This was in direct violation of the FDCPA, which dictates that all communications between collectors and clients should be accurate and delivered in a fashion that is not abusive or harassing.