Whether lawmakers and regulators grant the debt collection industry the right to contact debtors by cell phone, email, and text message, or mandate more documentation when pursuing a debt, collection technology will play a major role in the coming years as recovery strategies shift to include new requirements and contact options.
For some debt collection technology vendors, the contributions may be as simple as making minor changes to products so they can be applied to new mandates by regulators, according to Ron Fauquher, SVP and Chief Strategy Officer at Ontario Systems, a leading receivables management software provider. For other technology firms, investments may be more significant, he noted.
Courtesy of the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) is now charged with interpreting the Fair Debt Collection Practices Act (FDCPA) and will be able to issue new rules governing the accounts receivable management industry. The Bureau, which will be up and running in less than two months, hasn’t said what FDCPA related issues it will tackle first. The FTC began to lay groundwork for the CFPB by hosting a debt collection technology roundtable last month in Washington which attempted to address issues like Foti compliance and rapidly-changing communication technology.
But given that the volume of debt collection consumer complaints exceeds all other consumer complaints, rules regarding consumer communications may be near the top of the CFPB’s list of things to do, bringing about new compliance mandates for the ARM industry.
“A lot of people have bashed the CFPB because of what it can do, but the vision, if applied right, can be good for the ARM industry,” said Fauquher, a co-founder of Ontario. “The best thing to help collection agencies is for the bureau to quickly address the confusing issues around contracts, cease and desist notifications, and identification and disclosure compliance. If it does that, the industry would become a whole lot more efficient overnight.”
Many of the tools ARM professionals need already exist, Fauquher said. For example, the technology is now available to transport loan origination documentation and signatures some courts and state regulators are beginning to require to file lawsuits against consumers. The problem, he said, is that privacy laws and some creditors’ systems are keeping that information out of reach.
“The regulation needs to be cleaned up,” Fauquher said. “That’s an area the CFPB can help with.”
Rapidly changing market trends is another matter. Ever-changing social and technology trends are fragmenting how consumers communicate with each other, purchase goods and pay their bills. That concerns Michael Buckles of Birmingham, Mich.-based debt collection law firm Buckles & Buckles, P.L.C., who worries that communications with consumers could be hampered or compromised.
“Any form of permissible information that is convenient and secure is the key in resolving any debt,” Buckles said.
To help clients meet future consumer contact and communications challenges and avoid compliance mishaps, collection technology providers will have to navigate myriad technologies that have downstream impact on debt collections, such as PayPal and person-to-person payment systems that make it harder to track the flow of money, Fauquher noted.
This can lead to confusion on how to invest capital. “[Collection technology firms] have to invest now for things that they don’t know will be allowed,” Fauquher said. “At the same time, until they get clarity, even if have technology ready to use, they don’t know which way to go.”
One thing is clear, at least from Ontario’s perspective; collection technology providers can’t just develop products that help agencies become compliant.
“In the future (the technology) has to be built in such a way that it does not allow non-compliance to occur,” Fauquher said.
The CFPB will be the ARM industry’s chief rule-maker, and as such, its primary mission is to protect the consumer. It may even require collection agencies to help it educate consumers, as insurers and credit card issuers must.
Fauquher said the industry should get used to the idea that the bureau’s rules regarding compliance will be the minimum required for compliance, and could get more stringent in some areas as state and local regulars add to them.
As a result, more technology firms could be called on as de facto compliance consultants because most collections agencies don’t’ have deep compliance expertise.
“They wait until (regulation) comes and expect us to help them,” Fauquher said. He noted that Ontario has added compliance experts from the medical, banking and ARM industries to advise the company during the product development process. “If tech providers are not doing this, it will be hard to apply their products in an effective way.”