- Log Out
- •
- Member Center
- •
- Help
- •
- About Us
- •
- Contact
Understanding the Shift Toward Consumers in the ARM Legal Landscape
ARM leaders would be well-advised to understand the current legal and regulatory environments governing the industry. There have been major changes recently and even larger ones may be to come.
Members of the accounts receivable management industry are increasingly finding themselves under attack from state attorneys general and civil lawsuits brought by consumers alleging violations of the Fair Debt Collections Practices Act (FDCPA). ARM leaders have always been well-advised to understand the legal and regulatory environments applicable to the industry, but that need is even more important today.
Individual Lawsuits on the Rise
In most cases, the enforcement actions taken by authorities are a direct result of consumer complaints against collection agencies. Likewise, individual civil and class action lawsuits brought against debt collectors are driven by consumer complaints, the record of which is used in legal proceedings. Over the past several years, a cottage industry has sprung up dedicated to helping consumers "deal with aggressive collectors."
Organizations like the National Association of Consumer Advocates (NACA) provide consumers with direct links to hundreds of lawyers’ websites, some of which provide calculated advice for consumers contacted by collection agencies. Some of these online resources urge consumers who speak with collection agents (“even if [they] want to pay the debt”) not to verify information, discuss the debt, or return collection calls. Also, many online groups teach consumers how to spot minor technical violations of the FDCPA. Lawsuits citing technical violations are often easier for consumer attorneys to win settlements than complicated cases of prolonged abuse which the FDCPA was enacted to curtail.
Furthermore, opportunistic consumers who, in efforts to dodge their financial obligations to creditors, have educated themselves on representative FDCPA violations, for example, and will use specific catchphrases to bait debt collectors into committing infractions of the law.
The result of this trend is an ever-increasing tally of civil lawsuits claiming violations of the FDCPA. By some estimates, lawsuits claiming violations of the FDCPA brought by consumers against collection agencies could be up as much as 30 percent in 2009 compared to 2008.
Many collection agencies view consumer litigation as a cost of doing business and elect to settle cases quickly rather than bearing the expense of defending claims are often difficult to dispel. But more and more are beginning to fight the charges as technical and frivolous claims become more commonplace.
Understanding debtors in these contexts expands ARM companies’ ability to gauge the nature of legal challenges as well as the motivations behind them in order to mount an appropriate response. As a result of the U.S. economic situation, litigation-related expenses will continue to increase in coming years. Like other approaches for success in a highly regulated industry, ARM companies must continually evaluate their litigation exposure, assess the value of settling versus contesting legal challenges, and invest wisely in their businesses to minimize the financial and non-financial risks of consumer lawsuits.
Legislative and Regulatory Environment
The U.S. regulatory landscape is undeniably challenging for ARM companies to navigate, particularly in times of larger economic instability. The collection industry must conform to myriad state and Federal laws in order to successfully conduct business.
The Democratic majority in both houses of Congress is unlikely to approve any pro-ARM industry legislation anytime soon, leaning instead toward consumer-driven measures, some of which should grant further enforcement authority to federal agencies like the FTC or the new Consumer Financial Protection Agency (CFPA) that will regulate a range of financial products as well assume the responsibility to enforce the FDCPA, the Fair Credit Reporting Act (FCRA) and the Gramm-Leach-Bliley Act (GLBA).
Care to Comment?
(Please read our comments policy first.)
Related Resources
News
Analysis
Publications
Research
Comments
Comment from ping on December 16, 2009 at 8:56PM EST
Yes, I distinctly agree the last paragraph.
In short, "know and obey the regulations ( laws ) and you be more successful"
Comment from LARRY WEIL on December 18, 2009 at 8:17AM EST
We have decided to fight these cases as we can no longer afford to settle but no matter what we do they keep coming and the complaints keep coming!! My collectors are walking on eggshells!!! It is not even safe to ask for a payment.
What happened to paying your bill is the decent and honorable thing to do???
Comment from Anonymous on December 18, 2009 at 11:59AM EST
The Democratic majority in both houses of Congress appears to be anti-ARM....2010 elections are NOT far off.
Comment from Anonymous on December 18, 2009 at 12:05PM EST
To all of my collection commrads out there - remember collections still is a numbers game. Collectors become intense when the economy tightens, less payments, longer payouts, etc. The idean is to reach more consumers and cast a bigger net. It becomes far to easy to be more aggressive. As managers be aware and let the steam out of the pot more often on your collection floors. It becomes critical to monitor and manage by walking around when times are tuff. Even the best collectors can be tempted to walk the line as management we need to be sure they tow the line. Good Luck to everyone it isn't an easy road out there.
Comment from Anonymous on December 18, 2009 at 12:10PM EST
It is no longer possible to determine what is right and what is wrong. We do not have clear guidelines and we are in limbo with the determination of a judge who is attempting to interpret something that was written over 30 years ago and decipher what was meant. Frivolous lawsuits have run ramped, it is impossible to run a business when the government oversight will not even make an opinion. Then the government puts it back on us, the FTC makes claims the complaints are the highest in any industry but fail to also inform the public the type of complaints they are getting, everything is just lumped into one area. We have become a weak society that is not accountable for any action. There are agencies that attempt to do the right thing and still get sued all the time for things that did not happen, but we are forced to defend things that did not happen. Hey government how about we defend these and you actually charge the people who lie about what happened and charge them with perjury. There is no backlash to consumers who just abuse the system. Attorneys take these claims because they are not good at real law, how about practicing real law rather than extortion.
Comment from DB_Admin on December 18, 2009 at 12:50PM EST
Minor violation? Technical violation?
What do they have in common?
VIOLATION.
As Lunsford says, those that understand the regulatory and legal environment and have comprehensive approaches to system-wide compliance will have the advantage.
They will have fewer violations of any sort.
Fewer violations means reduced cost incurred in legal and regulatory defense.
You can be the masters of your own world.
Comment from Anonymous on December 18, 2009 at 1:19PM EST
Responsible training and dumb luck are required to stay out of the news. The laws we in the ARM industry are faced with are so unclear and open ended that it seems as if they were written with future law suits in mind. It could just be ignorance on the part of the elected officials who pass the legislation and/or creative planning for profit on the part the authors of same. Stay below the radar, do more listening than talking maybe we can get the enforcers to look in another direction.
Comment from KiloDeltaNovember on December 18, 2009 at 2:29PM EST
As we rapidly approach the horizon what becomes visible is more big government, more regulations, stricter enforcement, and all doled out to our industry without clear and decisive interpretation of EXISTING statutes. Prepare for further frustration throughout 2010.
Comment from sd1950 on December 18, 2009 at 2:37PM EST
These are the type of things that happen when liberals get power. We must rid congress of liberals both Democrats and Republicans. I am very involved in the political process and I can assure you all that this is going to get much worse. We are in extremely dangerous times and we all need to become fully aware of what is going on in America today
Comment from Randy on December 18, 2009 at 6:05PM EST
I have worked in a collection agency. I currently operate a agency from my home office. There are some questions I would like to ask. Whoever wants to give me some advice that in the business please feel free to do so. randy@csnassociate.com
Comment from Sam Small on December 20, 2009 at 2:41PM EST
"DB_Admin" said: "Minor violation? Technical violation? What do they have in common? VIOLATION. As Lunsford says, those that understand the regulatory and legal environment and have comprehensive approaches to system-wide compliance will have the advantage. They will have fewer violations of any sort."
I ask, why FEWER violations, why not NO violations at all? Seems that in today's environment it's impossible.
Comment from Anonymous on December 20, 2009 at 2:44PM EST
"sd1950" wrote:
"These are the type of things that happen when liberals get power. We must rid congress of liberals both Democrats and Republicans. I am very involved in the political process and I can assure you all that this is going to get much worse. We are in extremely dangerous times and we all need to become fully aware of what is going on in America today"
Do your remember communist USSR?
Comment from The Avenger on January 17, 2010 at 7:01PM EST
Interesting, although I have a few disagreements.
First, I don't know how anybody got the idea that technical cases generate bigger settlements than prolonged cases of abuse. This is exactly backwards. Prolonged and/or severe abuse cases, especially on tape, will settle way sooner for way more than technical issues. Especially if the defense lawyer has any sense whatsoever--many don't.
And, you don't need endless consulting and training to comply with fair debt collection law. It's pretty simple--don't lie, cheat, steal, swear, abuse, or harass. Hardly anybody calls me up and complains "they didn't write we-are-a-debt-collector in their letter" but I sure hear about it when collectors are calling five times a day, collecting nonexistent debt, raiding checking accounts, ratting people out to their family and neighbors, and so on. Everybody knows this behavior is wrong and illegal.
Everybody includes Republicans. Here in NC, the legislature's vote to crack down on debt buyers was almost unanimous. It's not a partisan politics thing--it's a right and wrong thing.
Yes, even in America, wrong behavior WILL catch up to you. Example: Axiant/Mann Bracken. (and where are all the comments demanding that THOSE deadbeats pay THEIR bills?)
Comment from Anonymous on January 26, 2010 at 12:41PM EST
Minor violation...is that anything like "sort of pregnant"??
Comment from DrJack on February 8, 2010 at 2:36AM EST
As a debtor with a number of accounts ranging from medical to consumer, I have plenty of experience working with various collection agencies. As a rule, the collection agencies that get paid first are the ones with representatives who are polite, understanding, non-confrontational, and stick with FDCPA guidelines. Usually after sending a DNC/Settlement offer letter, I will get one phone call from the agency originating after the date of receipt of my letter, but I don't don't file a suit because this infraction is most likely due to error or a delay in notation on the account. IMHO, the only reason to take a collection agency to court is for repeated and blatant disregard of the FDCPA. As of yet, I have not seen that. So, from a debtor, if you want some tips on getting paid, make an online presence for the debtor to go to. Make it an option to submit a settlement option online. Northland Group has a system dedicated to this and I must tell you, it's a breath of fresh air. Nobody wants to talk to a collection agent, and the internet makes a great forum for people to approach you and make that settlement offer or payment arrangement. So many collection agencies have a website just to sell your own product but nothing to aid the debtor. Some offer a place to make a payment like NCO Financial, but nothing in the way of making an offer or payment arrangement. I've read many articles on this site in regards to improving technology in tracking down debtors, but what really needs to happen as well is to make it easier for the debtor to "speak" with your agency without fear of reaching someone a tad on the insensitive side.
-JR