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Approaching impending debt collection reforms

Feb 16, 2013 Philip Burgess

Approaching impending debt collection reforms

Debt collection agencies have come under increased scrutiny from consumer advocacy groups and the federal government in recent years, as activity has intensified in light of the massive volume of outstanding loans currently held by businesses and individuals across the nation. Agencies need to take the time to look at their internal policies and ensure that they are in line with long-standing and newer legislation to avoid devastating penalties, such as fines and sanctions.

As communications technology continues to proliferate at a rapid pace, debt collectors are beginning to tread in uncharted waters, including social media and mobile devices. Legislation and guidance has not yet reached a point in which practices can be comfortably carried out without backlash, so collectors need to be especially careful when partaking in such strategies.

Reforms on the way


The Huffington Post recently reported that the federal government, as well as state entities, need to step up and provide more pertinent and timely regulations to deter abusive debt collection practices. While the mistakes of a few have created an increased stigma facing the industry at large, lawmakers need to be the first line of defense against shoddy collection activity.

The source explained that the debt-buying sector has increased in profitability throughout the years following the Great Recession, and as a result complaints of abusive practices have also intensified. Because the Fair Debt Collection Practices Act (FDCPA) was passed so long ago, many experts fear that it is no longer pertinent today.

According to the news provider, a recent Federal Trade Commission (FTC) study revealed that out of an average 1 million disputed debts by consumers and businesses each year, only half have been verified by the involved collection agency. This is a serious issue facing the industry at large, as not being able to verify a debt could lead to significant losses for the agency.

The Huffington Post noted that the latest research has led the FTC and the recently formed Consumer Financial Protection Bureau (CFPB) to consider a variety of new legislation, as well as more stringent enforcement policies. While these are expected to impact the industry, debt collection agencies can ensure safe and consumer-friendly practices by being more proactive in the policy-making process.

The news provider suggested several new laws that should be considered by the federal government, including the prohibition of automated signing in the debt buying process. Additionally, the source recommended that debts should have a firm sell-by date, perhaps cutting off the ability to sell the outstanding loans seven years after creation.

The Huffington Post added that agencies should have to give consumers more information regarding the debts, including data related to origination, interest rates, fees and a variety of other classifications.

Maintaining strong relations with consumers
Professionals in this industry need to shore up defenses against abusive practices by going the extra mile when establishing protocols and enforcing policies. While the stigma currently facing the debt collection industry is severe, there is no reason that agencies cannot build strong professional and interpersonal relationships with debtors.

First, collection agencies should always follow the best practices and other guidance as established in the FDCPA, as well as guidelines from the FTC and CFPB. The FTC offers a variety of literature related to proper debt collection practices on its website, including helpful questions and answers and forums.

For example, the commission explains clearly what can be considered abusive practices and harassment, including threats and obscene language.  False statements, unfair activities and incorrect information regarding debts and repayment are also strictly prohibited.

By being proactive in the policy-making process, debt collectors can work against the grain and break the stigma facing the industry today.