Jan 07, 2014 Philip Burgess
Using a third-party debt collection service can often be a useful strategy for creditors looking to recover funds from outstanding consumer accounts. In many cases, businesses turn to outsourcing when collecting debts becomes too challenging or time-consuming. For many creditors, it's proven to be a beneficial practice.
However, some enterprises still choose to conduct their own collection operations for a variety of reasons. One of the main factors cited by those who hesitate to use third-party professionals is that some of the stipulations within the Fair Debt Collection Practices Act (FDCPA) only apply to outsourced companies.
For example, Post-Crescent Media recently reported that while collection agencies may not call a debtor during unusual hours - generally before 8 a.m. or after 9 p.m. - a credit card company may be able to call at any time. Also, the original creditor could continue to make calls to a borrower's workplace, despite the fact professional collection agents are required to stop calling an office if requested.
New regulations make outsourcing attractive
For some businesses, they view the restrictions placed on third-party agencies as a reason to keep recovery efforts in-house. However, many fail to realize that they are still subject to certain FDCPA and state-level regulations.
In fact, original creditors may soon face the same level of scrutiny that professionals collectors deal with on a daily basis. According to law firm Sherman & Howard, the Consumer Financial Protection Bureau (CFPB) recently issued an Advance Notice of Proposed Rulemaking Notice concerning debt collection practices. Not only will the potential regulations focus on third-party outlets, but original creditors will likely be put under the spotlight, the source noted.
"The Bureau is seeking answers to the 162 questions posed in the Notice," Sherman & Howard stated. "Many of the questions suggest that additional restraints and requirements will be imposed on consumer debt collectors, including original creditors that collect the obligations due them."
In particular, the law firm indicated that financial institutions that usually pursue their own debt collections should review the notice closely. Then, these enterprises should respond to the CFPB in a prompt manner.
With new regulations that could limit what original creditors can do when addressing accounts on the horizon, now is the time for businesses to outsource collection efforts. By working with a professional collection agency, creditors can increase their chances for recovering debts while reducing the potential for conducting unlawful practices.