AP Details Growth of State ARM Regulation and Consumer Woes
Get ready to see an article on the debt collection industry in your local newspaper today.
The Associated Press sent an article out over its wires Thursday afternoon that was innocuously titled, "States raise limits on creditors as debtors squirm." But the main focus of the article is the growing trend of individual states passing laws targeting the accounts receivable management industry that supersede the Fair Debt Collection Practices Act (FDCPA).
The AP article notes that several states or local government entities have already proposed or passed laws stricter than the FDCPA, with most focusing on debt purchasing. More states are expected to follow suit.
The list of states – North Carolina, Idaho, Colorado, New York, Arkansas, Maryland, New Jersey and Massachusetts, along with New York City – is not new to the ARM industry. Many of the changes have been detailed in debt collection media, including insideARM: “ARM Industry Discusses Collection Law Changes in North Carolina,” Sept. 2; “NYC Collection Law Could Signal Problems for the ARM Industry,” April 17; “NJ Bill Would Require Collectors to Send Copies of FDCPA to Debtors,” April 20; “Massachusetts Toughens Rules for Small Claims Collection Lawsuits,” Aug. 12. We’ve even covered some that the AP missed: “Oregon Passes Bill Allowing State AG to Sue Debt Collection Agencies,” April 6.
But that’s hardly the point. What the AP notes, and what professionals in the ARM industry already know, is that the regulatory and legislative tide on nearly every level of government is turning against debt collectors, as if it hadn’t already. And presenting the same basic journalistic formula isn’t helping matters.
In its article, the AP makes heavy use of the “poor consumer” anecdote, giving three paragraphs of space to the story of a North Carolina woman that prompted her states’ tough new measures. The article gives one single sentence to an ACA spokesperson for the ARM industry perspective...near the bottom of the story.
I will say that we were personally pleased with one aspect of the article: the AP cites a survey conducted by Kaulkin Ginsberg, our sister company. In actuality, the survey cited is the insideARM Quarterly Confidence Survey. So thanks, AP. But other than that, we feel that reporting on these new laws should focus on the unintended consequences and additional burdens on jobs that the rules will present.
Care to Comment?
(Please read our comments policy first.)
Related Resources
News
Analysis
Publications
Research
Comments
Comment from LARRY WEIL on October 15, 2009 at 11:05AM EST
Patrick,
We already know that the articles are one sided. When is Kaulkin going to start to "flex" their muscle a little and tell our side???
Comment from larry weil on October 15, 2009 at 11:08AM EST
The article also failes to mention as most do, that there are a significant number of debtors who have the means and ability to pay but are content with getting on the bandwagon of negativity towards Collection agencies etc as a way to get out of paying!!
We come across more of the above than you can imagine.
Comment from Patrick Lunsford on October 15, 2009 at 11:11AM EST
To LARRY WEIL:
We're really, really trying. We reach out to these reporters all the time, and we often get interviews. But the stuff they use from us is so minimal, it has little impact.
Same thing for the ACA. They did quote them in the article, but it was a very small quote at the bottom. I'm sure the conversation was a little more extensive than what was reflected in the final copy.
Comment from Debtpro on October 15, 2009 at 11:24AM EST
With such new regulation, it will only add to the consumers’ believing that they are in an empowered position, which pulls them further from the reality of the debt that they really owe. It has always been the case that a small percentage of a large pool can make a big splash, and it is going to be more interesting to see how collectors will fair the new ripples in the water. Best of luck on both sides I say, as such pool play will help those consumers who are being unjustly harassed, and may help collectors to spend more time on collecting legit debt.
Comment from DONALD DALY on October 15, 2009 at 12:02PM EST
The consumer IS in an empowered position, and the actions of SOME organizations and collectors have put them there! Many years in this industry has taught me that the only way to stop the continual onslaught of new regulations and negative press is to stop believing that because a consumer owes a debt they are fair game for any kind of tactics with the only bottom line being a speedy recovery. When the A/R industry promotes their A/R activity to clients and consumers as a way to resolve debt in a controlled fashion, much like the credit marketers sold the concept of borrowing, the consumer, the press and the legislators would have nothing to shoot at.
Comment from Anonymous on October 15, 2009 at 7:36PM EST
Donald, this that the debtors are in the majority against the debt collectors is enough to have the legislators shoot at the debt collectors and blow things out of proportion - because at the end of the day it is the votes that count and that is all the legislatures are interested in.
Comment from bobp on October 16, 2009 at 10:41AM EST
As an industry, the only way we can stop the encroachment of state and local governments is to unify behind a plan of strong federal laws and national registration. Just like the banks (where there are both national and state charters), it should be possible for a collection agency to chose between a national license, operating under federal regulations, or a local license and local regulation.
Comment from Scott S on October 16, 2009 at 11:03AM EST
This is all the more reason that as members of the ARM industry we need to get behind the ACA's initiative to partner with the feds to create a self-regulatory body with authority to effectively police our own industry. Nobody has more to gain from ridding the industry of the "rogue collectors and agencies" than we do as a whole. Rozanne Anderson and her team at ACA work tirelessly to try to get our side of the story out there, but let's face it..."Most Debt Collectors Operate Within the Law" as a headline is not going to sell as many stories as "Another Debt Collector Arrested for Abusive Practices". The current system certainly is not curtailing the "collect at any cost" mentality of the small percentage that make the rest of us look bad - and enacting new legislation at the state level will only add to the workload carried by already overburdened regulatory bodies in various states charged with enforcement of the new laws.
Comment from Anonymous on October 16, 2009 at 3:52PM EST
I posted a variation of this commentary yesterday regarding an article discussing Miller v. Upton, Cohen & Slamowitz.
It applies to this article as well.
There is a very common thread to responses to articles like this by ARM industry members. Blame the the debtor, the judge, the regulator.
Until there is a shift by many members of the ARM industry from blaming others to recognizing there are problems which need to be addressed and then taking steps to fix them, industry members should expect new regulatory changes like those found in NYC, North Carolina, Mass, etc. to not only continue but accelerate across the country.
In the last six months a letter went out asking industry members to donate money to assist the associations in lobbying state and federal legislators to slow down the pace. While there has been some successes, the pace of regulatory changes continues. This is a not a reflection of the capabilities of the associations lobbying efforts. Rather, it is a reflection of the hole the industry has placed itself.
There is a responsiblity by the owner of debt to perform their own due diligence before bringing legal/collection action against a debtor. This should include being able to demonstrate they have the right debtor, the right amount to collect (balances, interest, interest rate, attorney fees, etc.), and have the contractual and legal authority to collect the debt.
Check out the complaint filed by the FTC against Bear Stearns EMC/Mortgage last year. This very "due diligence" requirement was the very first issue addressed in the complaint. The FTC's Peggy Twohig said at the DBA convention earlier this year it was the most important regulatory action taken by the FTC last year toward the industry. And, first and foremost among the issues was the data integrity/account integrity issues resulting from the lack of due diligence.
Adequately address these three issues - proof of debt, proof of debtor, and proof of ownership, before initiating litigation or collection - and many of the problems state attorney generals, the FTC, and state and federal courts have with the industry go away. Further, it will strengthen the industry's position when sending a collection letter, making a collection call, or seeking a judgement, it should reduce the overall cost of collection, and support portfolio valuations.