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Collection Agencies: Respond to Legislative Threats Now
With the Federal Trade Commission (FTC) running workshops entitled Protecting Consumers in Debt Collection Litigation and Arbitration, and the U.S. Congress holding hearings about what it calls "arbitration abuse" in bill collection processes, there is a real, and present danger of new, and savage regulation hindering collection agencies.
And yet, the industry seems incapable of mounting any effective fight back.
Bill Collection Blues
From a public relations point of view, the last few weeks have been truly dreadful for collection agencies.
Forget about individual horror stories, such as the New Jersey case, which hit headlines coast-to-coast after an outing on network television. Two more worrying stories have emerged just during the week when this article was written.
Collection Agencies in Court
First, was a report from WebRecon LLC, a firm based in Grand Rapids, Michigan. This claims that, during the period August 1 to August 15 of this year, 278 collection agencies were named in civil lawsuits brought under the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), or the Telephone Consumer Protection Act (TCPA).
And this wasn't an exceptional period. According to the company, 5,652 FDCPA, FCRA or TCPA lawsuits have been filed against collection agencies in the U.S so far in 2009.
Attorneys General are Revolting
Meanwhile, the National Association of Attorneys General last week unveiled its Top 10 List of Consumer Complaints for 2008. And guess who occupied the coveted number one slot? Yep, it was bill collection.
By the way, that top spot was announced during the 2009 annual conference of the North American Collection Agency Regulatory Association.
Ohio is a good example of how consumer complaints concerning collection agencies have been ratcheting up. In 2006, the state received 1,699 such complaints. So far (up until August 31) in 2009, it had received 2,067 complaints. If they continue to come in at the same rate, there will be 3,100 on file by the end of the year, which is depressingly close to a doubling in three years.
Ohio Bill Collection Under Fire
Ohio Attorney General, Richard Cordray, commented: "Ohioans' tolerance of illegal debt collection tactics along with credit and home loan scams has reached its limit… A line must be drawn to keep debt collection from crossing over into harassment. Consumers have the right to be treated with respect and dignity. Overly aggressive tactics, such as making threats and repeated phone calls, are not allowed. Ohioans have enough financial worries without the added stress of harassing collection practices."
Collection Agencies Are Not Immune From Tough Times
People in the bill collection business know exactly what's going on. Collection agencies are being swamped by additional work that's been created by the recession. But those same tough economic times make it much harder to make successful collections.
The math is easy. More work equals more overheads. Fewer successful collections equal lower revenues. Together they add up to squeezed profits--and squeezed commissions, and bonuses for individual collectors.
Bill Collection Managers and Blind Eyes
In these circumstances, it's understandable that a few of those individual collectors sometimes stray over the line. The bill collection industry may sympathize with those who cross the line. But it can't condone or tolerate them.
Of course, it's tempting to turn a blind eye to a star collector's questionable tactics when the month-end figures are looming--and looking increasingly bad.
But that's just storing up trouble.
Even those collection agencies that avoid civil suits or the unwelcome attention of an attorney general can look forward to a new era of unprecedentedly tough, consumer-friendly regulation.
And anyone who thinks that it can't get any harder than it is now to make a buck in this business may be in for a shock.
Collection Agencies: Time to Fight Back
The collection agency industry already has plenty of trade bodies. But they're often pulling in different directions, and none of them seems very effective at campaigning.
True, the Association of Credit and Collection Professionals (ACA) issued this press release in response to the attorneys general's figures. But as the Orlando Sentinel commented with withering sarcasm: "Wow, that sort of bold action will send the 'bad actors' scurrying for cover."
If there was ever a time for the bill collection industry to get its act together, it's now.
Sources
US Congress (PDF)
North American Collection Agency Regulatory Association
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