Nov 03, 2013 Philip Burgess
Debt collection agencies can often find the regulatory landscape confusing and dangerous. Because financial laws have changed rapidly over the last few years, many collection firms have trouble keeping up with the adaptations to state and federal policies. In fact, developments in other sectors can have an impact on debt collection operations.
This dynamic was highlighted in New York City recently, as the city's Department of Consumer Affairs (DCA) filed a complaint against a collection company that has been collecting on accounts related to outstanding short term loans. The Wall Street Journal reported that the DCA is looking to ban the collector in question from operating within the state.
This development comes on the heels of recent attempts by New York state regulators to eliminate online lending practices. The source noted that the New York Department of Financial Services Superintendent Benjamin Lawsky sent letters to as many as 35 online short term loan providers, directing them to stop extending credit to New York residents.
Although the actions taken by Lawsky have been the subject of intense legal battles due to claims that he overstepped his jurisdiction by limiting the sovereignty of Native American tribes that operated many of the online outlets, DCA officials appear to be unfazed by the ongoing litigation.
Complex landscape requires legal support
According to insideARM, Lawsky also sent letters to debt collectors informing the various organizations of his actions. He stated that debt relief agents should not collect on accounts associated with short term loans that are deemed illegal in the New York.
Whether or not Lawsky has the jurisdiction to limit Native lending, collection executives should take note of the development. New laws are being created as state and federal agencies look to provide greater consumer protection to Americans in the wake of the Great Recession.
It's important for companies in the industry to stay on top of the latest rulings by financial regulators, because it may impact what outstanding accounts they can pursue. This process can be complex, requiring legal consul, but it's necessary to ensure compliance. Failure to pay attention to regulatory shifts can land collectors in longterm legal battles. Even if they come out of court challenges on top, businesses will likely have to pay significant amounts of money for legal fees. Also, the involvement in such events can erode a firm's reputation among the public, regardless of the outcome.