Apr 08, 2013 Philip Burgess
Debt collection activity has spiked in recent years, especially because of the increasing volumes of outstanding student and business loans. As a result, the federal government has implemented new regulations and a variety of additional oversight entities to ensure the legal collection of all debts and to fight against abusive practices of disreputable agencies.
Reports in late 2012 indicated that the volume of outstanding student loans has approached the $1 trillion mark, with many lenders having difficulty collecting these debts. Regardless of what type a collection agency is trying to seek out, executives of these firms need to ensure that policies are aligned with the Fair Debt Collection Practices Act, and that employees are adequately trained to follow these guidelines. Failure to do so could lead to a variety of serious issues, including lofty fines.
The commission question
InsideARM recently purported that the decision made by President Obama to not allow debt collection agencies to receive commissions for jobs related to student loans might not be the right answer. President Obama's intent was to decrease what many believed to be a high volume of abusive debt collectors intimidating recent college graduates.
However, the source explained that this new legislation was likely ill-advised, as the growing student debt problem is not created by debt collection agencies, especially not those that adhere to best practices and avoid any types of abusive actions. According to the news provider, this might be the latest decision in what has become a long string of actions taken to vilify the debt collection industry, despite the fact that many agencies go above and beyond the call of duty to improve customer experiences.
InsideARM asserted that instead of targeting the debt collection industry with what might have been an arbitrary move, the federal government should work to improve the financial literacy of students and help them avoid falling into crippling debt.
Debt collection agencies can avoid fines, sanctions and lost face by taking a customer-centric approach to policy making.
Avoiding financial losses
The Palm Beach Post recently explained that many debt collection agencies are increasing efforts to obtain outstanding loans across the nation, while original creditors might be going too far in some practices. According to the news provider, violations can cost up to $1,000 for each instance, while many collectors will end up paying $4,500 for the entirety of legal fees and fines.
Debt collections agencies should consider refining policies and training protocols to ensure that these types of financial incursions do not affect their businesses.