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Bill Collection Business Drowning in Laws
In September 2009, Niagara Credit Solutions, Inc. (Niagara) appeared in the 11th U.S. Circuit Court of Appeals. It was arguing a point of law concerning the Fair Debt Collection Practices Act (FDCPA).
When leaving a message on first making contact with a debtor, it was Niagara's practice not to identify itself or reveal why it was calling. Its people would simply leave an "800" number and ask for a return call.
Collection Agency Tried to Fight
Niagara argued that to identify itself in a message as a collection services company, and to reveal that it was chasing a debt, would breach one of the FDCPA's most important provisions, that of respecting a debtor's privacy by not revealing the debt to third parties. The company pointed out that it had no way of knowing whether any given message might be left on a shared answering machine or service that would be accessed by a third party: a roommate or colleague, say.
Of course, the FDCPA does require collection companies to disclose in all communications with a debtor who is calling and why. But it gives no guidance about which of its provisions should be given priority when they conflict with each other.
Wildean Wit: Not Funny to Collection Companies
Of course, few things in this world bring as much joy as a judge who thinks he's funny. And lawyers have been queuing up to admire (not to say fawn over) the opinion delivered by one of those who heard the Niagara case.
His Honor said: "In an oft-repeated statement from the Vietnam War, an unidentified American military officer reputedly said that 'we had to destroy the village to save it'. That oxymoronic explanation may be apocryphal, but the debt collection agency in this case offers up much the same logic."
Bill Collection Company Not to Blame
Well, yes. Very clever. But it wasn't the bill collection company that caused the problem.
It was those who drafted the original legislation, and included two contradictory provisions.
And they would have been... er, lawyers.
Collection Companies Face More of the Same
The trouble is, those lawyers are busier than they ever have been. Ever since the start of the credit crunch, they've been drafting legislation that has only one aim: to tilt the playing field away from the collection services industry, and in favor of the consumer.
As the Associated Press pointed out last week, just recently, state legislatures have enacted anti-bill collection laws in Arkansas, Colorado, Idaho, Maryland, New York, and North Dakota. In fact, not content with the state's efforts, New York City actually came up with its own act.
Meanwhile, Massachusetts and New Jersey are among others with similar legislation in the pipeline.
Some Details on Collection Agency Regulations
Taking New York state's Consumer Credit Fairness Act as a random example, may give an idea of the sorts of issues that bill collection companies may face under new legislation. The act says that:
- The old statute of limitations on personal debt is halved: from six years down to three years
- Collection companies must provide each debtor with a whole list of information about each claim: from the last four digits of the original account number, and the amount and date of the last payment, to a detailed itemization of the sums claimed
- Bill collection companies must provide every debtor with a written Debtor's Bill of Rights, which clearly lays out all the protections that are available to consumers under the law
- All third-party collection companies operating in the state must obtain a license from the Department of State
- Consumers have a private right of legal action to seek damages from any bill collection company that violates debt collection law
- Collection companies seeking to collect from the surviving family of a deceased debtor must tell the family members that they don't have to pay
Collection Services: A Question of Survival?
All too many collection companies are already struggling to survive under the combined weight of more work, and lower liquidation rates. These sorts of new laws may well send the more vulnerable out of business.
But who cares--as long as judges still get to deliver their funny remarks.
Sources
- Law.com, 11th Circuit: Don't Break the Law to Comply with It
- New York State Assembly
- Nyc.gov, Debt Collection Guide
- San Francisco Examiner, Financial misery prompts states to pass new protections against aggressive debt collectors
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