Jun 27, 2013 Phil Burgess
Legislation related to the debt collection industry continues to become more stringent and widespread, as lawmakers look to discover methods of decreasing the number of complaints coming in related to abuses. However, some experts have noted that the sector has become saturated by new entrants and fraudulent operations because of the record level of debts held by American businesses and consumers following the Great Recession.
Many complaints fielded by agencies like the Federal Trade Commission and Consumer Financial Protection Bureau end up being tied to criminals posing as debt collectors or newer, less-seasoned firms. Experienced debt collectors can break this stigma by adhering to the Fair Debt Collection Practices Act, as well as focusing on outstanding customer service.
Though it wouldn't be clear from reading the news every day, debt collectors do try to build brand images and many are successful in this pursuit. Firms in this sector should ensure that they are keeping abreast with the proliferation and passage of new laws, and always try to stay a step ahead of regulations to maximize customer experience and, subsequently, profit margins.
A new movement in New York
Thomson Reuters News and Insight recently reported that firms secured more than $230 million through the purchasing of consumer debts in New York two years ago, though many failed to adequately complete paperwork. This led to massive losses for the associated organizations, as debt collectors that cannot prove that they own the debt following the purchase from the original lender will not be able to acquire that money.
According to the news provider, officials in New York as well as the New Economy Project, a nonprofit organization, are pushing to create reforms that will make automatic signing of legal documents illegal in the state. This might actually help debt collection firms avoid incurred losses following the improper purchase of debts and creation of shoddy paperwork.
The source explained that New York's judicial system has been clogged by an increasing number of debt collection-related lawsuits, while advocates believe that many can be avoided through better legal document management protocols. Chain of title and custody of debts can be difficult to track when firms do not fully understand the laws, such as the Fair Credit Reporting Act, as well as the FDCPA.
"Debt collection lawsuits ... wreak havoc across New York State, depriving hundreds of thousands of New Yorkers of due process and subjecting them to collection of debts that in all likelihood could never be legally proven," the state's lawmakers explained, according to the source.
Thomson Reuters News and Insight added that the new bill, titled the Consumer Credit Fairness Act, will decrease the existing statute of limitations from six years to three years. Statements from original creditors and a variety of other new paperwork would be required to file a suit if this new law is passed in New York.
Finally, the source added that the bill was approved by the State Assembly in April, and has moved to the state Senate, while the decision is expected to be made by the end of this year's legislative session, which ends this month.
Don't wait for the law
Debt collectors can improve their own processes by ensuring that all documents associated with each existing debt are managed properly and securely. When each account is handled in a uniform fashion from the time of purchase to when the debt is secured, debt collectors can avoid hefty legal fees and potentially hurt reputations.
Firms in this industry can use more advanced technology to efficiently manage paperwork associated with accounts, such as cloud computing.