A new study indicates that careful evaluation of the current regulatory environment is necessary to ensure that the debt collection and debt buying industries are allowed to fulfill their role in the U.S. economy.

The study, conducted by Dr. Todd Zywicki of the Mercatus Center at George Mason University, also found that as the Consumer Financial Protection Bureau considers new debt collection regulations, it must take into account the intended and unintended consequences of any regulations before they are adopted.

Highlights of Dr. Zywicki’s data-driven study include: 

  • Consumer debt collection already is a highly regulated industry at the federal and state levels and has been since the 1970s. 

  • Bad regulations can injure consumers and the economy. 

  • Riskier borrowers tend to be most harmed by restrictions on collection practices. Additional regulations often force lower income users to turn to higher-risk products such as payday lending and auto title loans. 

  • Small businesses should not be disproportionately burdened by unnecessary regulatory compliance costs. Regulators should not promote unnecessary consolidation within the debt collection industry. 

  • Regulations should be based on careful cost-benefit analysis and consider changing consumer lifestyles and communication technologies.

DBA International, the nonprofit trade association representing the purchased receivables secondary market, commended the Mercatus Center and George Mason University for conducting the study, which is titled, "Law and Economics of Consumer Debt Collection and its Regulation."

"Th is industry has historically had a lack of data- driven information and analysis available,"  said DBA International Board President Kaye Dreifuerst . " Effective regulation necessitates understanding the role of debt collection in the consumer credit cycle and correctly identifying the purported market failure to be corrected. Proposed regulations need to be evaluated to ensure the benefits of the regulations exceed the cost to consumers."

DBA Executive Director Jan Stieger added, "Effective standards and rules governing debt collection are essential to the efficient operation of the consumer credit economy. DBA has addressed many of the concerns raised by consumers and the regulatory community by adopting an industry-leading national certification program."

The certification program is designed to make sure DBA members engage in responsible consumer protections by adopting uniform industry standards and best practices that create greater transparency for consumers.   

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