Proposal Could Minimize Role of Debt Buyers in ACA International

A proposed change to ACA International bylaws would see the accounts receivable management association formally dissolve its debt buying unit and return its focus to third party contingency debt collection agencies.

At its upcoming annual meeting, the ACA Board of Directors will be voting on a proposal sponsored by the New England Collectors Association (NECA), a state unit of ACA. The proposal includes two major strategic changes within ACA:

1. Rebranding ACA as an association dedicated, almost exclusively, to third party debt collectors. This would mean dissolving ACA’s Asset Buyers Division (ABD) and reclassifying current ABD members as “creditors.” NECA also proposes to overtly rebrand ACA as “The Association of Collection Agencies.”

2. The new ACA would support, and in some cases propose, separate legislation and regulations for debt buyers on the federal and state level. The shift would not only separate collection agencies from debt buyers, but also debt buyers from original creditors, effectively creating three distinctly regulated groups: collection agencies, original creditors, and “new creditors,” or debt buyers.

ACA informed its membership of the proposal in an email Wednesday The bylaw amendments will first be considered in a vote at the Board of Directors meeting on July 13. If approved, the whole membership would have the opportunity to vote on the matter the next day at ACA’s annual meeting in Dallas.

The full proposal notes that debt buyers make up around 6 percent of ACA membership, while creditors (currently defined as original creditors) comprise 13 percent.

NECA’s main goal in proposing the changes is to create a more obvious distinction between a debt buyer and a third party debt collector. More specifically, the proposal is designed to combat a particular phrase that has become familiar in stories, and even in legislation, targeting debt collectors: “pennies on the dollar.”

“We were talking to lawmakers in Connecticut for a particular bill and the first thing they said was, ‘OK, so first you buy the debt and then…’ and I had to cut him off,” said David Sands, President of the New England Collectors Association. “We don’t do that;, we are a contingency collection agency. Even friends and family believe that’s what we do. We’ve morphed into one stew in the public’s perception.”

Sands notes that no one is suggesting debt buyers would have no place in a rebranded ACA. “The current debt buying membership represents the best of the best, and we need their input,” he said. “As a creditor – which they are – they can still be called on to provide guidance on any matter that impacts third party collection agencies.”

It is too early to determine whether or not the Board will approve the proposal and move the matter forward to a vote by the general membership. But there was immediate reaction by several groups to the proposed changes.

The ABD Committee issued a position statement the day after the proposal was announced. The debt buyers’ group noted that they objected to the proposals.

“We appreciate [NECA’s] concerns; however, we believe the many threats facing our industry require all members of the accounts receivable management industry to work together with a single, unified voice,” the committee’s statement said. “If debt buyers and third-party collection agencies cannot work together, we will be overrun by the debtor advocates and we will all suffer.”

Martin Sher, President of ACA International, told insideARM that the ACA Executive Committee “currently supports all membership divisions and units at this time.”

“We are much stronger and much more influential as a group if we’re all under one tent,” said Sher. But he cautioned that this was merely the current position of the Executive Committee, and should not be taken as an indication on how the vote would go.

The message of unity was echoed by DBA International, an association of debt buyers that is separate from ACA but often cooperates on certain matters.

“With increased scrutiny, proposed legislation and regulations, this is a time for the ARM industry to stand together,” said Barbara Sinsley, Counsel to DBA. “This proposal could give the appearance that there is an issue between collection agencies and debt buyers.”