By Pat Morris, CEO of ACA International
At the end of the proverbial day, we’d all rather spend our hard-earned money on things we enjoy rather than having to pay back debts we’ve incurred. Even the U.S. government struggles with this same thing when it comes to public debate about debt. Yet, policymakers, regulators and consumers continue to advocate that paying a rightfully owed debt remains important.
Debt collection isn’t the “wild west.” Consumer debt collection is among the heaviest regulated activities in America, governed by federal and state law and regulation, and enforced by federal and state agencies and attorneys general. Unfortunately, many of the rules governing how rightfully-owed consumer debt is collected are woefully out-of-date with today’s culture.
These rules don’t account for modern technology and communication preferences. There is a lack of clarity created by a patchwork of laws and regulations that often conflict with one another, creating significant concerns. In the end, America’s debt collection system hinders compliance and creates harmful confusion for consumers, creditors and debt collectors.
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Consumer protection is critical but there must be clarity and balance allowing for the lawful collection of rightfully owed debt. It can’t be so burdensome as to remove the legal or moral obligation of a consumer to pay what they owe so long as they are able. In reality, most consumers pay their bills yet are penalized with higher costs to cover losses from consumers who don’t. Our credit-based society relies on consumer debt recovery such as credit cards, car loans, student loans, mortgages, medical bills, cell phone and utility bills making it vital to keeping credit readily available and affordable.
The Fair Debt Collection Practices Act (FDCPA), the primary federal law governing consumer debt collection, was enacted in 1978 and hasn’t been significantly updated since. When the FDCPA was enacted, lawmakers could not have contemplated today’s modern technology, including voicemail, the Internet, email and social media. One example of how being out of date is problematic relates to the simple act of a debt collector leaving a voicemail for a consumer. The FDCPA strictly prohibits a debt collector from disclosing the existence of the debt to anyone other than the consumer or their attorney. Intentionally not disclosing a debt to other people makes sense, but this requirement predated the prevalent use of voicemail. Because the FDCPA requires a debt collector to identify that the call is from a debt collector, they are disclosing the existence of a debt that may be overheard by a person other than the debt owing consumer. There currently exists no safe harbor language defining a message that can be left on voicemail for a consumer that won’t result in the potential for a collector to be sued. The only practical alternative is for more frequent calls in the hope of connecting with the consumer.
The Telephone Consumer Protection Act (TCPA) was enacted in 1991 in the wake of consumer frustration over telemarketing solicitations. One component of the TCPA prohibits calling a mobile device using automated dialing technology without the express consent of the consumer. This provision doesn’t exist with landline telephones and doesn’t prohibit calling a mobile device by dialing manually. The use of mobile devices has changed dramatically since 1991. According to the Centers for Disease Control and Prevention, most every adult has a cell phone and more than 30 percent of consumers now live in a household without a landline telephone. There are now as many mobile devices in the world as there are people. More businesses than ever before now use automated dialing technology to more efficiently and accurately attempt to contact millions of consumers for legitimate business purposes. Even though the TCPA wasn’t intended for debt collectors, and the Federal Communications Commission has determined that a debt collection call is informational and not a telemarketing solicitation, lawsuits from exploitive plaintiffs’ attorneys continue to rise.
As the leading voice of the credit and collection industry, ACA International is leading the charge to advocate for modernizing outdated laws. Starting with its Blueprint to Modernize the American Debt Collection System, which laid out plans to collaborate more closely with federal and state regulators and policymakers, we’ve moved ahead on several fronts with high expectations for forward progress in 2014, including:
- Continuing to seek opportunities to help the Consumer Financial Protection Bureau (CFPB) better understand complexities of the collection industry and help our members better understand its new regulator. Along with proposed rulemaking, consumer complaint resolution and Large Market Participant examinations, our engagement will include encouraging the CFPB to craft safe harbor language for collectors to leave voice mail and other essential collection functions.
- More aggressively monitoring and responding to TCPA related lawsuits that provide tools to help ACA members fight back. This includes making much needed funds available to identify and support litigation of precedent setting cases.
- Exploring federal regulatory and legislative strategies to reform TCPA.
- Growing the capabilities of ACA State Units to monitor and engage advocates on state and local legislative initiatives. This also includes building on the industry’s relationship with state attorneys general and regulators.
ACA International has a vital role in helping to achieve reforms, and the collective expertise of our members can help improve communication with consumers and eliminate unintended consequences. Without communication we can’t resolve the reason for the contact, can’t identify a wrong party contact, and importantly can’t address or resolve consumer complaints. Public and private sector organizations cannot reach consumers with updates about time-sensitive information such as student loans, package deliveries, airline flight changes or an adverse financial action such as foreclosure, negative credit reporting, collection of a rightfully owed debt, or litigation.
The world has changed significantly since 1978 and 1991, and it frustrates everyone – businesses and consumers alike – when the laws don’t follow suit. The implications of not modernizing outdated laws are creating a tipping point whereby consumers may find it more difficult to obtain affordable credit if there is no reasonable way a creditor can recover the debt, which will drag down the nation’s economy.
About the Author
Pat Morris is CEO of ACA International. He has nearly 20 years of executive leadership experience within the financial services and insurance industries including the National Association of Federal Credit Unions, the International Committee for Information Technology Standards, the International Federation for Produce Coding, and the Kansas Association of Insurance Agents.
Morris began his professional career as an officer in U.S. Marine Corps. He holds an undergraduate degree from Christopher Newport University in Newport News, Va., and a Masters of Public Administration from the University of Kentucky.