Feb 14, 2013 Philip Burgess
The debt collection industry has been especially active in recent years, as consumers and businesses continue to hold a high volume of outstanding loans. The actions of a small number of debt collectors, some of which are believed to be abusive and illegal, have also led to more stringent regulations and enforcement from state and federal entities.
Debt collection agencies should take the time to look over internal policies and protocols to ensure alignment with federal and state laws, as well as industry-recognized best practices. Though the Fair Debt Collection Practices Act (FDCPA) was created more than 30 years ago, new adjustments to the enforcement of this law put outdated policies at risk of leading to penalties.
FTC releases new study
The Federal Trade Commission (FTC) recently announced the completion and availability of a new report regarding the debt buying industry. The study sought to discover how the debt collection industry could be streamlined for more efficient, effective and consumer-friendly activities, while it found that agencies might be able to improve the customer-experience through better data.
The report looked at a variety of different types of debts, and found that the debt buying process, while profitable when conducted properly, might be putting agencies at a disadvantage. Collection agencies had extreme difficultly verifying money owed when a consumer or business disputed the request, with half of the more than one million accounts failing to win the battle.
The 500,000 debts that were either impossible to verify or that the agency did not attempt to substantiate might have been the result of a lack of information collected during the debt buying process. According to the FTC, while most debt buyers obtained information from creditors related to the debtors personal information, Social Security numbers and outstanding balance, many lacked in critical data such as the time the credit was created and if the consumer had ever disputed the case.
The commission added that further research is necessary to determine a plan of action regarding these issues, as only 75 percent of the collections industry was surveyed in this study.
Ensuring smooth collections
Collection agencies need to be especially vigilant when purchasing debts from creditors, specifically when it comes to acquiring critical data regarding the account. When a collection agency cannot verify a debt that they bought, the consumer or business can often prove that they are not at fault and the outstanding money could be lost.