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An order issued to one of the nation's largest debt buyers last month by Maryland officials to stop all collection activities in the state has raised concerns with at least one veteran of the collections and debt buying industry.
Banning a company from doing business in a state conceivably could cripple a business, and Stacey Schacter, president of Atlanta-based receivables management company Vion Holdings LLC, says the industry should be concerned that other states might follow Maryland's lead and mete out similar punishment.
"States have a legitimate interest to protect. However, draconian actions do not benefit the consumers of their state," Schacter tells Collections & Credit Risk. "As states act precipitously, without considering the downstream effects, the very consumers they seek to protect are being hurt."
Maryland's Department of Labor, Licensing and Regulation last month alleged that Encore and its subsidiaries violated federal and state laws by refusing to validate bad debts when challenged (CCR Newsline, Sept. 18). Subsidiary Midland Credit also had its license to collect in the state suspended by the Commissioner of Financial Regulation.
Since then, Encore Capital reached an interim settlement agreement with Maryland officials. The arrangement allows the company and its subsidiaries to resume collection activities in the state as long as they comply with state and federal laws, and adhere to terms of the interim agreement. The agreement does not constitute an admission of wrongdoing by Encore Capital.
Officials for ACA International, an association representing collection agencies, declined to comment on the particular matter involving Encore Capital and the state of Maryland.
However, ACA spokesperson John Nemo tells Collections & Credit Risk that, "ACA remains vigilant in developing working relationships with regulators to understand their concerns and work toward focusing on reasonable solutions that will continue to improve the relationship between the credit and collection industry and consumers."
Schacter says the account receivables management industry is one of the heaviest regulated industries in the country with more rules affecting it than federally chartered banks.
"Other states have already seen the impact of hastily drafted legislation that appeals cosmetically to the populace, but which is misplaced. What is really happening is that those who regularly pay their bills must now subsidize at a higher rate those who are unable. This unfairly taxes people and can also have the effect of reducing purchasing power," Schacter says.
"We do need regulation to protect the public, but this regulation requires balance and it is this balance that seems to have tilted in favor of the those with bad debt and against paying consumers and retailers," he adds.
The industry must be united in combating unfair state initiatives by becoming active in calling legislators and contributing to industry organizations, according to Schacter.
"This is no longer someone else's problem. This is not an Encore problem. This is an industry problem," he says. "If we don't repair the breach in our legislative levy we will be facing a flood that we may never recover from. Our companies and those we employ are at risk and we must act now."
