Navigating the regulatory landscape is tough. Legislation can be trendy, quietly beginning in one state then suddenly making its way into statehouses across the country as the media picks up on the public sentiments that first fueled the legislation.
Stories about collectors that misuse personal information to contact debtors or relentlessly harass debtors feed the public’s negative perception of the industry. Even if the abuses are only conducted by a handful of culprits, legislators take note. When the outcry gets loud enough, legislators will act to prevent further abuses.
“Even isolated cases of collector abuse lead to anecdotes that can lead to legislation harmful to collectors,” says William Lund, superintendent at Maine Bureau of Consumer Credit Protection “We are seeing some extreme cases of telephone abuse in certain areas, such as by payday loan debt buyers, and the public tends to lump all collectors together.”
Lund spoke about regulations facing debt collectors during a panel Monday at the 15th annual National Collections & Credit Risk Conference in Miami. He told the audience that many consumers who are wrongly contacted by collection agencies are frustrated.
Better educating consumers about their rights under the Fair Debt Collection Practices Act (FDCPA) could help ease that frustration.
“The collection industry needs to use public service announcements on television, radio and the Internet to teach consumers about their rights under the FDCPA, as well as their responsibility to pay their debts when able,” says Rozanne Andersen, an attorney with the law firm of Morrison Fenske & Sund P.A. Andersen moderated the panel discussion at the conference.
Collection agencies also are often unaware of consumers’ rights outlined by the FDCPA, adds Laura Udis, administrator for Colorado Fair Debt Collection Practices Act, who also participated on the panel.
“Even though the FDCPA provides consumers with the right to cease communication and refuse to pay a debt, and obligates collection agencies to comply if a consumer exercises those rights in writing, nothing in the FDCPA requires a collection agency to notify consumers of those rights,” Udis says.
Creditors and debt buyers often require collection agencies to return delinquent accounts after a predetermined period or when a consumer requests proof that a debt is owed. But when the debt is reassigned, the new agency working it usually will contact the debtor again, even if the debtor has requested that collection efforts cease.
“When consumers have to exercise their rights to cease collections efforts again it leaves them extremely annoyed,” says Udis.
Colorado's version of the FDCPA requires initial written communication from a collection agency to a debtor to disclose the consumer’s right to request that a collection agency cease communication, as well as the consequences the agency faces for not adhering to the request, according to Udis.
Maine is another state that actively enforces its own FDCPA. The Federal Trade Commission, which administers the federal FDCPA, recognized Maine’s authority when it granted the state an exemption from the federal laws.
“We work closely with the FTC and we believe they appreciate vigorous state enforcement, since state regulators can quickly investigate and resolve consumer complaints,” says Lund.
Maine is actively working to curtail abuses by out-of-state-collections firms that threaten consumers with legal action. In one case, state regulators investigated several California and Florida collection agencies for sending letters to Maine residents threatening lawsuits.
Upon being contacted by state regulators, the attorneys listed as affiliates of the agencies in question said they played no active role in the case evaluation or collection process.
“One was not even aware his name was listed on the collection firm’s letterhead,” says Lund.
Going forward, collection agencies should consider investing more in technology, such as improving integration between automated calling and skip tracing systems.
Skip tracing systems typically return the names, addresses and phone numbers of all consumers with a name similar to that of the debtor. In many cases, a consumer’s request to be removed from the calling list because they are not the debtor is entered into the software operating the auto dialer, but not the skip tracing system - meaning future skip traces on the debtor in question will return names of consumers who requested not to be called.
“Continued telephone calls to the wrong consumer is the cause of our most frequent discipline against collection agencies and it seems to be caused in part by (skip tracing and automated calling) technology,” says Udis.
Finally, collection agencies and debt buyers need to take steps to identify and weed out agents who continually and intentionally abuse consumer rights under the FDCPA.
“This is the age of the consumer,” says Andersen. “The industry has to come out of denial about its negative image in the eyes of the public, lawmakers and regulators, focus on compliance with the law and establish processes by which consumer complaints can be resolved fairly, quickly and at little or no cost to the consumer. The longer the industry does not take the rise in consumer complaints seriously, the greater the risk of it being legislated out of business.”
