ACA Defends Self-Regulatory Proposal for Debt Collection Industry

Association leaders at ACA International’s Fall Forum last week used the final day of the meeting to further explain their idea to propose a self-regulatory structure for the accounts receivable management industry.

Much of ACA’s membership was wondering why the group had pulled back a draft proposal to give the industry the power to self-police (“ACA International Board Halts Plans for Self Regulation in Collection Industry,” Nov. 5).

Rozanne Anderson, executive vice president and general counsel for ACA International, said Friday that the proposal, which was expected to be submitted but never formally was, had been pulled back largely to thoroughly vet it across the organization. Also, the proposal itself wouldn’t be heard until full markup of legislation to create the Consumer Financial Protection Agency (CFPA), a proposal that is expected to be introduced before the Thanksgiving break by Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.

ACA International had hoped that it could convince lawmakers that the debt collection industry needed to be “carved out” of many of the requirements of CFPA, like auto companies and several others types of consumer credit organizations. The organization wanted to propose self-regulation as an alternative to government rules under the CFPA.

But at the close of a meeting between Frank and ACA International in early October, he indicated there would be no carve out for the collection and asset purchasing industry and he would consider introducing proposed language creating a self-regulatory structure for the collection and asset purchasing industry as a floor amendment.

According to a letter from ACA president Karolyn Rubin to membership, the draft amendments are presently under review by the group’s legislative council and therefore a final draft had not been submitted to Frank’s attention.

The plan would have included industry-operated state licensing and registration for agencies and collectors, and called for an industry education program run by ACA International.

“Self regulation is by definition a voluntary initiative or program created by a trade group or private industry to control its members or itself. It is NOT a regulatory scheme driven by, run, mandated or operated by a governmental entity,” Rubin explained in her letter. “The two motions passed by the board in July specifically contemplated self regulation initiated, created, designed and funded by the association or the industry at large and did not address regulation or legislation passed into law by either the federal government or state governmental bodies.”

In July, ACA board members gave its executive committee the power to study and, if feasible, draw up a plan for a self-regulatory structure, complete with a nationwide debt collector registry and dispute resolution program. The idea itself came about after ACA board members learned of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the SAFE Act), which requires all mortgage loan originators, regardless of the type of entity they are employed by, to be either state-licensed or federally-registered. All mortgage loan originators must be licensed or registered through the expanded Nationwide Mortgage Licensing System and Registry. Under the SAFE Act, all states must implement a mortgage loan originator licensing process that meets certain minimum standards and must license loan originators through the Nationwide Mortgage Licensing System (NMLS). NMLS is owned and operated by the State Regulatory Registry LLC (SRR), a wholly owned subsidiary of the Conference of State Bank Supervisors.

The idea was to pattern something somewhat after SAFE with the idea that it would hold off the government from imposing its own rules, with the philosophy that self-regulation would be better than government regulation.

The most recent draft of ACA’s proposal, for Secure and Fair Enforcement for Debt Collection of 2009, says:

“In order to increase uniformity, reduce regulatory burden, enhance consumer protection, and improve the debt collection industry, the sates, through the North American Collection Agency Regulatory Association and the Conference of State Bank Supervisors, are hereby encouraged to establish a Nationwide Debt Collector Licensing
System and Registry for the debt collection industry.”

According to ACA International, the proposal, as currently drafted, is designed to:

• Provide uniform license applications and reporting requirements for companies operating as State-licensed debt collectors.
• Provide uniform registration applications and reporting requirements for individual State-registered debt collectors.
• Provide a comprehensive licensing, registration and supervisory database.
• Aggregate and improve the flow of information to and between regulators.
• Provide increased accountability and tracking of debt collectors.
• Streamline the licensing and registration process and reduces the regulatory burden.
• Enhance consumer protections and supports improvement of the debt collection industry.
• Provide consumers with easily accessible information, offered at no charge, utilizing electronic media, including the Internet, regarding the employment history of, and publicly adjudicated disciplinary and enforcement actions against, debt collectors.
• Facilitate responsible behavior in the debt collection industry and provide comprehensive training and examination requirements related to debt collection.
• Facilitate the collection, disbursement and resolution of consumer complaints on behalf of state and federal debt collection regulators through a uniform, nationwide system of adjudication