Collection Services Have Real and Urgent Need to Fight More Regulation

 

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Collection Services Have Real and Urgent Need to Fight More Regulation

Hot Air in Windy City

Last week, the Federal Trade Commission (FTC) held a two-day workshop in Chicago. The event's title, Protecting Consumers in Debt Collection, Litigation and Arbitration: A Roundtable Discussion, tells collection services professionals all they need to know about it.

Thanks to the Fair Debt Collections Practices Act, the United States already provides consumers with some of the best protections anywhere in the world against abuses by collection agencies.

In fact, some argue that collection services already have to fight to recover debts with one hand tied behind their backs.

Collection Agencies Contend with Hostile Congress

It is not just the FTC that is seeking ways to tie collection services' other hand. Congress too is getting in on the act.

Last month, the U.S. House of Representatives Domestic Policy Subcommittee of the Committee on Oversight and Government Reform reviewed what it called "arbitration abuse".

The first paragraph of its majority staff report summed up where most of the committee was coming from:

"Virtually all NAF [National Arbitration Forum] "consumer arbitrations" are in fact debt collection actions brought by creditors or assignees of creditors, not by the consumers themselves, and almost all consumer arbitrations are decided in the creditor's favor."

Collection Services Face Real Danger of Reform

The subcommittee's majority staff report reached predictable conclusions, pretty much all of which harmed the interests of collection agencies. It says:

"Mass-production collection of consumer debts through arbitration is not "arbitration." It is debt collection made simpler, for the benefit of the creditor and to the detriment of consumers… The arbitration system, as it is currently operated by NAF, does not provide protection for those consumers. The system is ripe for abuse, and it has been abused by the largest administrator of "consumer arbitrations.""

Collection Agencies on the Back Foot

It would be bad enough if it were only arbitration that was likely to be overhauled. But collection agencies face a much wider assault.

The following extracts from the agenda of the Chicago talk-fest reflect the political agenda of many consumer advocates:

• Initiating Suits: Default Judgments and Service of Process Should there be changes in the law or industry practice with respect to service of process or default judgments?


• Timing: Statute of Limitations Issues Should collectors be required to disclose affirmatively to consumers that they have no legal obligation to pay a debt that is beyond the statute of limitations? Should there be other changes in the law or industry practice with respect to collecting on debt that is beyond the statute of limitations?


• Prima Facie Collection Case and Evidentiary Burdens Should there be changes in the law or industry practice to require debt collectors to submit greater evidence of indebtedness?


• Garnishment Should there be changes in the law or industry practice with respect to debt collectors freezing and garnishing bank accounts containing exempt federal benefits?


• Initiating Proceedings and Consumer Participation Rates Should there be changes in the law or industry practices with respect to notifying consumers about arbitration?


• Choice of Provider, Choice of Location, and Role of Consumer Choice Should there be changes in the law or industry practice regarding the degree of consumer choice about arbitration disputes, such as whether, when, or where to arbitrate, which organization is the arbitration provider, or which individual arbitrator will adjudicate the proceeding?


• Arbitration Provider Procedures Should there be changes in the law or industry practice with respect to these procedures?


• Bias and Perceptions of Bias Should there be changes in the law or industry practice with respect to arbitration conduct to address real or perceived bias?


• Transparency of Results; Role of Precedent Should arbitration decisions have precedential effects on future arbitrations? Should there be changes in the law or industry practice to require the systematic reporting of data about consumer arbitration, as is done in California?


• Enforcing Awards; Contesting Awards Should there be changes in the law or industry practice with respect to collectors' ability to convert arbitration decisions into judgments or consumers' ability to contest such decisions?

Collection Services: A Call to Action

Most professionals in collection agencies are busier now than they ever have been. They are trying to grow their businesses while at the same time having to manage hugely increased workloads. They can hardly be blamed for not finding the time to lobby against greater regulation.

But regulatory reform threatens to undermine the entire collection services business model. And that threat is serious, real, and immediate. Consider lobbying now!

Sources
Federal Trade Commission
US Congress (PDF)

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