Sep 17, 2013 Philip Burgess
The debt collection industry has a significant impact on the national economy. The sector employs many Americans and contributes a sizable amount of revenue to the national GDP. Also, debt collectors are known for supporting businesses, as they help them recover outstanding debts, allowing them to stabilize their budgets and avoid potential cash flow issues.
Despite the useful nature of debt collection practices, detailed federal and state laws place significant regulations on the activity. For this reason, it can be difficult for businesses to conduct collection operations on their own. As a result, many choose to employ a third-party collection service that understands applicable laws.
It's been a useful strategy for many corporate leaders to adopt, and the practice may pick up even more steam due to more intense collection monitoring and scrutiny that appears to be on the horizon.
Debt collection under the spotlight
The Consumer Financial Protection Bureau (CFPB) was recently established to promote the rights of American consumers. The young organization has made it clear that increasing regulatory procedures against debt collectors is one of its top priorities.
For example, insideARM recently reported that the CFPB joined the Federal Trade Commission (FTC) in supporting an amicus brief that involves a potential breach of Fair Debt Collection Practices Act (FDCPA) regulations. The suit contends that a consumer was contacted about a debt without full disclosure being made regarding the fact the statute of limitations expired on the account.
Although no legal action was threatened the plaintiff still decided to take legal action because the time-barred status of the debt was not recognized. This highlights one of the common mistakes that can be made when pursuing debts. Even though the collector in this case most likely acted in a respectful manner, a simple oversight may have resulted in the aggressive legal action.
Across the country, cases like this are becoming more common. The CFPB is actively clamping down on even the slightest violations made in debt collection efforts. In fact, Bloomberg reported that the organization has started drafting additional federal rules for collectors to follow, which will only make the field more challenging to navigate.
For this reason, inexperienced companies that have avoided outsourcing their collection practices should consider using the services of a third party. Such enterprises employ reputable professionals who understand federal and state laws specific to the industry. Using these services can mitigate the chances of a lawsuit being filed.