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Press Launches Fresh Round of Collector Scrutiny
You may have noticed a lot of articles in the mainstream media recently on debt collection agencies. Nothing new for the accounts receivable management industry, but the focus of the pieces has changed quite a bit over the past year.
Used to be, when a newspaper ran a story about a collection agency, it was to highlight the financial ruination an ARM firm was visiting upon unwitting – and completely innocent, of course – consumers. Over the past couple of months, the trend has shifted to highlighting the financial ruination of the collection agencies themselves as recovered dollars are increasingly hard to come by. Part “News of the Weird”, part supposed karmic grave-dancing, these articles were simply pointing out that things are so bad, even collection agencies are having a rough go of it.
And it’s not like we at insideARM have been completely innocent: our ARM industry confidence survey has shown rapid deterioration in collection performance over the past three quarters, providing plenty fodder for these stories. (Shameless plug: the Q4 2008 Confidence Survey Results will be released later this week)
But over this past weekend, a new kind of story has cropped up: the consumer-focused “know your rights” story. Long a stable of the mainstream press, this new round of stories is a little more ominous, as they offer specific tips on how to chronicle collection correspondence and how to hide assets from collectors.
The genesis of the stories is pretty straightforward. The Associated Press put out a series of articles Friday on how to deal with collectors. The articles came to my attention when the AP reporter called me asking for data on credit card charge-offs. I happily referred her to our research department which supplied the numbers; the article was live online less than two hours later.
The cause for alarm in these articles is the wide circulation they enjoyed over the weekend. In newspapers and Web sites from the San Francisco Chronicle to the Washington Post, the pieces ran. This is actually not a bad thing, as an informed consumer – a fully informed consumer – can be a good person to talk to.
But the specificity of the suggestions leads some of us here to believe that the AP may have gotten wind of a larger story. Remember: the FTC is still sitting on their recommendations for FDCPA reform. The top three suggestions in their bullet-point piece “6 tips for dealing with debt collectors,”: 1) Ask the collector to verify the debt; 2) Try to work out a payment plan with the debt collector; and 3) Ask the debt collector to accept a settlement for less than you actually owe.
I guess we’ll have to see if these pieces are portending action or just a reaction to a difficult consumer environment.
Used to be, when a newspaper ran a story about a collection agency, it was to highlight the financial ruination an ARM firm was visiting upon unwitting – and completely innocent, of course – consumers. Over the past couple of months, the trend has shifted to highlighting the financial ruination of the collection agencies themselves as recovered dollars are increasingly hard to come by. Part “News of the Weird”, part supposed karmic grave-dancing, these articles were simply pointing out that things are so bad, even collection agencies are having a rough go of it.
And it’s not like we at insideARM have been completely innocent: our ARM industry confidence survey has shown rapid deterioration in collection performance over the past three quarters, providing plenty fodder for these stories. (Shameless plug: the Q4 2008 Confidence Survey Results will be released later this week)
But over this past weekend, a new kind of story has cropped up: the consumer-focused “know your rights” story. Long a stable of the mainstream press, this new round of stories is a little more ominous, as they offer specific tips on how to chronicle collection correspondence and how to hide assets from collectors.
The genesis of the stories is pretty straightforward. The Associated Press put out a series of articles Friday on how to deal with collectors. The articles came to my attention when the AP reporter called me asking for data on credit card charge-offs. I happily referred her to our research department which supplied the numbers; the article was live online less than two hours later.
The cause for alarm in these articles is the wide circulation they enjoyed over the weekend. In newspapers and Web sites from the San Francisco Chronicle to the Washington Post, the pieces ran. This is actually not a bad thing, as an informed consumer – a fully informed consumer – can be a good person to talk to.
But the specificity of the suggestions leads some of us here to believe that the AP may have gotten wind of a larger story. Remember: the FTC is still sitting on their recommendations for FDCPA reform. The top three suggestions in their bullet-point piece “6 tips for dealing with debt collectors,”: 1) Ask the collector to verify the debt; 2) Try to work out a payment plan with the debt collector; and 3) Ask the debt collector to accept a settlement for less than you actually owe.
I guess we’ll have to see if these pieces are portending action or just a reaction to a difficult consumer environment.
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Comments
Comment from Josh Swanson on February 2, 2009 at 12:54PM EST
The FDCPA is half the reason creditors are not seeing their money back. When a debt can be wiped out for a collector not saying the mini miranda? There needs to be something done to make sure these people take care of their debts, otherwise they will keep taking advantage of the system. Credit could be the rise and fall of our nation.
Comment from MJohnston on February 2, 2009 at 12:57PM EST
Patrick, can you provide any links to the stories mentioned?
"The genesis of the stories is pretty straightforward. The Associated Press put out a series of articles Friday on how to deal with collectors."
Appreciate it!
Comment from Patrick Lunsford on February 2, 2009 at 1:04PM EST
To MJohnston:
Sorry about that, definitely an oversight on my part.
Here is the long article: http://www.google.com/hostednews/ap/article/ALeqM5jwA7SvhZedHmJzrziXsRAAejllJAD961N2880
Here are the shorter, bulleted pieces: http://www.google.com/hostednews/ap/article/ALeqM5j2zy32AR5I0z0a5LTgkAInk1YWcwD961N5NG1
http://www.google.com/hostednews/ap/article/ALeqM5gIhs-TvCz89D4UVzGmgQLmA7l5HQD961N3S01
Comment from GGT on February 2, 2009 at 1:08PM EST
I am not the least bit surprised. I have been warning of this for over a year and have been met with laughter, irreverence, and dismissal. What bothers me the most is the "fine, we'll just sue 'em" response I often get when I broach this subject. As consumers become more "educated on their rights", judges (who are elected by these "educated consumers") will become increasingly receptive to their arguments in court. With the political and judicial climate increasingly turning against our industry, it is past time for us to collectively get our heads out of the sand and devise a strategy to confront these new realities. For those of you who are still in denial, here's a gem from Michigan today:
http://www.freep.com/article/20090202/NEWS02/90202029/Evans+says+county+will+not+enforce+foreclosure+sales
The Sheriff in the largest county of the state has declared that he is no longer honoring foreclosure requests. Think about this people - this is SECURED DEBT. We aren't talking charged off credit card accounts or bad checks from 2 years ago, but huge secured debts. If anyone has any delusions about what the future holds for the next several years, it is time to wake up.
Comment from MJohnston on February 2, 2009 at 2:09PM EST
Patrick, Thank You.
Comment from MJohnston on February 2, 2009 at 2:12PM EST
"The FDCPA is half the reason creditors are not seeing their money back. When a debt can be wiped out for a collector not saying the mini miranda? There needs to be something done to make sure these people take care of their debts, otherwise they will keep taking advantage of the system. Credit could be the rise and fall of our nation."
You are right on the money Josh! It certainly doesnt help when 2 or more courts address the same issue and rule completely opposite...leaving the agencies out there to make strategic business decisions, which, no matter the direction they go, will likely cause them to be sued and lose.
Comment from chris@golivesms.com on February 2, 2009 at 3:04PM EST
I think that the confusion surrounding the FDCPA rules just needs to be cleared up. Surprisingly enough, text messaging when used correctly is not only legal, but much less threatening and is getting surprising results. Kinder and gentler will win out.
Comment from Steve on February 3, 2009 at 8:15AM EST
I think it is time for some of these executivesin the agencies to stop going to conferences and start to send some of their collectors. The impact of some of these decisions when interacting with consumers is more a matter of an informed collector vs. an informed consumer.
Comment from MJ on February 3, 2009 at 12:03PM EST
Come on, folks. This isn't new. If you've been in the ARM industry for any time you know this is a cyclical reaction to a poor economy. The ARM industry will always be the bad guy in the public's eyes, and "kinder & gentler" won't change that. We talk to people who don't want to speak with us; it's inherently negative. Those agencies that are smart, legal and apply sound analytics to their strategies & processes will survive with minimal pain. Those agencies that allow illegal or border-line tactics and think spinning their inventory 15x per day on a dialer will get them through a recession are the ones that should be concerned. It's the latter that will be the target of upset consumers, consumer advocates and politicians looking to satisfy their constituents. A bad economy is like a hungry lion. When the lion starts to chase a herd of animals, the dumb & weak get eaten while the smart & strong live to see another day.
Comment from Anonymous on February 3, 2009 at 12:35AM EST
If it's not broken don't fix it the Collection Industry is a major business,hey anytime you can buy low and gain 100% you are in the right business.
Comment from Anonymous on February 10, 2009 at 2:14PM EST
But the specificity of the suggestions leads some of us here to believe that the AP may have gotten wind of a larger story.
Very perceptive. And very much on target.