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New laws putting stress on debt collectors

Feb 04, 2013 Philip Burgess

New laws putting stress on debt collectors

In today's turbulent economic conditions, debt collections have become complex and widespread as a result of more outstanding loans and credit than ever before. With fluctuations in economic health comes more difficult debt collection procedures, and federal and state agencies continue to create more stringent guidelines to regulate the industry more thoroughly.

This includes the Federal Trade Commission (FTC), Consumer Financial Protection Bureau (CFPB) and myriad state agencies that seek to protect consumers from abusive and fraudulent debt collection practices. While more experienced debt collection organizations are most often in line with laws and do not become abusive, the actions of a few have led to more aggressive enforcement for the betterment of businesses and consumers.

Companies and professionals carrying out debt collection processes need to regularly assess their policies and practices and ensure all activity is in line with both long-standing and new legislation. Failure to meet these requirements can lead to a variety of issues, including fines, hurt reputations and the loss of outstanding debts following legal proceedings.

Tips for 2013


InsideARM recently released a new episode of The Debt Collection Drill podcast in which experts suggested several tips to avoid penalties in the new year. The biggest news of 2012 was that the CFPB would be overseeing a broader range of debt collection agencies in 2013, including those with annual revenues of $10 million or more. This direct supervision could cause issues, while the source explained that preparation is key for all professionals in the industry.

According to the news provider, compensation of debt collection firms has been an increasing issue, especially as the costs associated with meeting compliance requirements increase. The CFPB is expected to look at a variety of expenditures when evaluating compliance with laws and how the debt collection agency should be compensated, and this includes customer experience.

Regulation E, which relates to electronic fund transfers, will come with a variety of new compliance requirements for debt collection agencies. This process is becoming increasingly popular as electronic payments become a preferred transaction method among businesses, collectors and consumers. The source explained that collectors will still need to get a written statement from clients to approve electronic transfers for each payment, even if the individual or business wants to set up several payments in advance.

InsideARM said that there a several steps collectors need to take to get permission to receive emails as written consent from individuals they are seeking to acquire debts from. Audio recordings can still be used for credit cards, but debit card or check payments will need to be accompanied by this written permission. 

The news provider asserted that the CFPB will be overseeing this rule, and that collectors need to train all employees in the new laws. For example, the experts suggested executives and managers at these agencies should always ensure their employees know to ask if a payment card is debit or credit, as the regulations pertaining to each are much different.

One of the safest ways to maintain compliance with the written document requirement under Regulation E is to call the consumer or business once a month to get approval and a recorded vocal disclosure.

Hiring professionals for maximum efficiency
Legislation will likely continue to become more stringent in the coming years, as more debt collection agencies sprout up, resulting from heightened demand. More enforcement entities will continue to gain authority over debt collection agencies, further stressing the industry as a whole.

Businesses that do not feel entirely comfortable with the laws associated with debt collections should consider employing the help of a firm that specializes in the practices, as this will help maintain compliance and ensure timely acquisitions of outstanding debts.