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 Unfortunately, many of the rules governing how rightfully-owed consumer debt is collected are woefully out-of-date with today’s culture.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.
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 One example of how being out of date is problematic relates to the simple act of a debt collector leaving a voicemail for a consumer.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.
How the Brexit Agreement Failed the Financial Services Sector
By Steve Taklalsingh, MD UK Business, Amaiz
Over the Valentine’s weekend, it was announced that during January, the first month that the new Brexit-related changes came into force, Amsterdam overtook London as the largest financial trading centre in Europe. Approximately €9.2bn (£8.1bn) worth of shares were traded on Amsterdam’s exchanges each day in January, against €8.6bn in London. How did that happen and why is Brexit to blame?
The Brexit deal for the Financial Sector
The Christmas Eve Brexit agreement delivered an unfair market for UK companies in the Financial Services Sector. The deal meant we were left in a situation where EU-based banks wanting to buy European shares cannot trade via London. EU shares that were previously traded in the UK have moved to the EU on advice of the European regulator. In addition, EU FinTech companies can operate in the UK but, as ‘equivalence’ (agreeing to recognise each other’s regulations) has not been agreed, our FinTech companies cannot now operate in the EU. You can already see evidence of EU companies, particularly those based in Amsterdam and Germany, eyeing up the UK market.
As a sector we’ve never been shy of boasting about our 12% contribution to the UK’s GDP. FinTech, in particular, has been a UK success story. This vibrant scene is looked on with some envy and I’m very proud to be part of it. Internationally, having a foothold in this market, and a London address, was the aspiration of financial services companies who wanted to be taken seriously, but not anymore.
Action to solve the market distortion
The Bank of England chief Andrew Bailey has warned that there are signs that the EU plans to cut off the UK from its financial markets and has urged them not to do so. The indications are that the Government is aware of the ‘problem’ but doesn’t appear to see the clear urgency in resolving it. It has been reported that there are ongoing talks to harmonise rules over financial regulations (equivalence) and that they’re working towards a March deadline.
Number 10 has said they are open to discussions on the equivalence issue and claims that the Government has ‘supplied the necessary paperwork’ and boasts of the UK’s strong regulatory system. It lays the fault of delay firmly at the doorstep of the EU: “Fragmentation of share trading across financial centres is in no one’s interest.” I’m disappointed that they’re not, in public, recognising the seriousness of the situation.
Research on the impact of Brexit
At Amaiz we have worked hard to understand the implications of Brexit. At the beginning of December we carried out research which focussed on the impact on financial services. The report, Brexit Brink: Are British SMEs about to fall off the edge of Europe – or building new bridges? is based on a survey of SMEs across the UK and you can download it free from www.https://journal.amaiz.com/amaiz-guide/. Our findings gave us valuable insight into the deal that was needed for Financial Services.
Most companies had been preparing for Brexit for some years. Whilst there were some that hoped and campaigned for the referendum result to be overturned, that seemed unlikely. The results of our research in December showed that people were as ready as they could be:
- Nearly half (49.2%) of company decision makers had reviewed new regulations set to take force on 1 January 2021 (if there was a no deal Brexit) and made changes to ensure their companies would meet them.
- Only 17% of companies said they had failed to prepare.
The changes that company leaders believed would have the most impact were those to regulations (37.4% of respondents said this was a concern), increased costs of doing business (37.2%), and reduced access to suppliers (35.5%). Overall, 57% of companies believed that Brexit would have a negative impact on their business, and some (6.6%) believed it would destroy their business.
The research found that larger companies were more prepared for Brexit than smaller ones. That’s likely to due to their ability to devote resources to solving the challenges Brexit presents. Those employing between 1 and 10 people were most concerned about increased costs (45.7%) and those with between 11 and 50 employees about taxes and VAT (41.3%).
Larger companies in Financial Services prepared for Brexit by registering companies and offices within the EU so that they could continue trading there. This acted as a fail-safe solution that avoided issues, whether a deal was struck or not, and whatever the nature of that deal. Smaller companies don’t have the resources to do this; they could not open another office on the off chance that they would need it, so Brexit put them in a more vulnerable position.
Impact on the economy
Of course, Brexit came at a time when we were all trying to manage the devastating impact of the pandemic. The FCA (Financial Conduct Authority) and FSB (Federation of Small Business) both published figures in January that show the terrible impact of the pandemic on SMEs in the UK. The FCA found that 59% of smaller financial firms expected that their profits would take a hit this year. The FSB found that nearly 5% of smaller companies expect to be forced to close within 12 months, the largest proportion in the history of the Small Business Index and would mean that 295,000 companies will close this year.
A plea to the Government
The Government has worked hard to find ways to help small businesses survive the pandemic in order to save jobs. The economy is experiencing an unprecedented recession, with all hopes laid on a swift bounce back as soon as lock down ends. Until then we are in ‘war’ mode. However, helping businesses survive is not just about handing out cash. What the Financial Services Sector urgently needs is a fair regulatory framework and marketplace in which UK business can operate. Instead, the Government has allowed distortions that continue to damage one of the country’s key sectors – one that can drive us out of recession – and appear laid back about resolving the situation!
Bitcoin tumbles 17% as doubts grow over valuations
By Tom Wilson and Tom Westbrook
LONDON/SINGAPORE (Reuters) – Bitcoin tumbled 17% on Tuesday, sparking a sell-off across cryptocurrency markets as investors grew nervous at sky-high valuations and leveraged players took profit.
The world’s biggest cryptocurrency suffered its biggest daily drop in a month, falling as low $45,000. Bitcoin was last down 11.3% at 0939 GMT.
The drop extended a slump of nearly a fifth from a record high of $58,354 hit on Sunday – though bitcoin remains up around 60% for the year.
“The kinds of rallies we’ve been seeing aren’t sustainable and just invite pullbacks like this,” said Craig Erlam, senior market analyst at OANDA.
Ether, the world’s second largest cryptocurrency by market capitalisation that often moves in tandem with bitcoin, also dropped more than 17% and last bought $1,461, down almost 30% from last week’s record peak.
Cryptocurrency markets have been running hot this year as big money managers and companies begin to take the emerging asset class seriously, piling money into the sector and driving confidence among small-time speculators.
A $1.5 billion investment in the crytocurrency by electric carmaker Tesla this month has helped vault bitcoin above $50,000 but may now lead to pressure on the company’s stock price as it has become sensitive to movements in bitcoin.
Rising government bond yields over recent days have hit riskier assets, spilling over into leveraged bitcoin markets, said Richard Galvin of crypto fund Digital Asset Capital Management.
“Markets were quite hit from a leverage perspective so that didn’t help,” he added.
U.S. Treasury Secretary Janet Yellen, who has flagged the need to regulate cryptocurrencies more closely, also said on Monday that bitcoin is extremely inefficient at conducting transactions and is a highly speculative asset.
Critics say the cryptocurrency’s high volatility is among reasons that it has so far failed to gain widespread traction as a means of payment.
Analysts said key price levels have played a large part in determining the direction of crypto markets.
“Because we’re so lacking in fundamentals, it’s the big figures that have proved to be support and resistance points,” said Michael McCarthy, chief strategist at brokerage CMC Markets in Sydney.
“$50,000, $40,000 and $30,000 are the key chart levels at the moment. If we see it heading through $50,000, selling could accelerate.”
(Reporting by Tom Westbrook; Editing by Jacqueline Wong and Nick Macfie)
The future of cryptocurrency in the eCommerce industry
By Josh Brooks, Head of Marketing at OnBuy.co
With some of the biggest names in the business turning to cryptocurrencies, it’s becoming harder to ignore just how influential and impactful these could be on the eCommerce industry – and likely sooner than you’d think.
Although relatively immature, cryptocurrency is making huge shakes in the retail sector, and certainly looks like it’s here to stay. Some of the largest multinational enterprises have already dipped into this new digital playing field and many others are following suit. Just last week, Tesla announced that it had bought $1.5 billion worth of Bitcoin to hold on its balance sheet, and is planning to allow its customers to use this coin to pay for cars. But it doesn’t end there. In the same week, Mastercard disclosed its plans to let merchants accept some forms of cryptocurrencies through its network later on this year, which will convert traditional money to digital currency before entering the companies’ systems. Other leading enterprises making the move to embrace cryptocurrency include Square, who already give users of its Cash App access to buy Bitcoin, and Fuse.io, who recently partnered with Monerium to create a platform for entrepreneurs to turn “communities into economies” via a blockchain.
In the aftermath of last week’s announcements, the price of Bitcoin surged to a record of $48,297, highlighting the problematic volatility of cryptocurrencies. While it’s undeniable that its erratic fluctuation in value holds substantial implications on its profitability, there’s still an ever-increasing buzz around cryptocurrency in the eCommerce world. Before delving into that, it’s first worth noting exactly what cryptocurrency is.
What is cryptocurrency?
In short, cryptocurrency is a form of digital currency that’s independent from banks and governments. Instead of being regulated by a central control, cryptocurrency uses encryption techniques to control its use and administer its release. Transactions are verified by a decentralized system and then distributed on a blockchain (a digital public ledger) as a public account of records. This prevents the user from spending the coin multiple times, acting as a check and balance to regulate use.
Cryptocurrency can be bought through a broker, traded online, transferred between peers using ‘cryptocurrency wallets’ or mined, all of which is typically recorded on a blockchain. Although Bitcoin (BTC) is the most well-known cryptocurrency, there are many other types of digital currencies available under the name of ‘Altcoins’, a blanket term used for all Bitcoin alternatives. These include Ethereum (ETH), Litecoin (LTC), Ripple (XRP), Neo (NEO) and thousands of others that have emerged since 2018. Some Altcoins use a peer-to-peer exchange system like Bitcoin, while others use unique mechanics that can offer different levels of protection and privacy. For example, some coins don’t use a blockchain at all, offering fully private transactions, while some offer pseudo-anonymous transactions in the form of encrypted data.
The term ‘cryptocurrency’ was coined as a neologism made up of the root word ‘crypto’, meaning ‘secret’, and ‘currency’, the system of money for a specific region or country. This stands as both its name and definition in one, representing a hidden – or secret – system of money.
The benefits of using cryptocurrency in eCommerce
Both centred around tech, it would be fair to assume that cryptocurrency and eCommerce have the potential to complement each other quite nicely – and, in a few cases, they already are. Cryptocurrencies, particularly Bitcoin, are already infiltrating the eCommerce industry, offering an innovative, viable and streamlined digital solution for many existing blockers. With the ability to appease consumer demand for immediacy and security, while expanding market share for retailers, cryptocurrencies could prove extremely beneficial for the eCommerce industry if adopted efficiently. More and more companies have grown to understand these benefits, leading to a surge in consumer attention, and it may not be long before we start to see the commercial use of cryptocurrency as standard.
One of the biggest problems eCommerce companies face during globalisation is having to adjust prices and currencies to accommodate the individual fiats of each country. Fiat money is the government-issued currency used as standard in any given country, like British pounds or US dollars. While OnBuy is circumventing this concern for its retailers by providing auto-currency conversion and using PayPal to process global payments, cryptocurrencies also negate this concern entirely as they can be used in every country of the world without having to adapt prices or currencies, making global expansion far more streamlined for businesses. Further to that, there’s a vast, ever-growing community of people using cryptocurrencies across the world, offering an entirely new market share to target. Through accepting this method of payment, via a digital wallet or credit card platform, eCommerce companies could delve into this new market and appeal to a greater volume of consumers.
Due to the blockchain, it’s difficult to reuse or counterfeit cryptocurrencies and cancel a transaction once it’s complete (without the consent of the retailer). This not only gives retailers more control, but also offers them greater protection against fraud, as there’s no central control that could withdraw the funds from their account without consent. In addition to this, the encryption technology used by cryptocurrencies also offers a greater level of security for buyers’ data, preventing the likelihood of cyber-attacks.
Cryptocurrency is processed immediately, unlike bank transactions which can take a few days to process, giving the retailer instant access to funds. This allows companies to streamline their cash flow, which is particularly beneficial for those with aggressive expansion plans. What’s more, this allows for instantaneous shipping of products once the required payments have been made, allowing for a fast-tracked delivery service which is particularly appealing to buyers.
Blockchains not only affect transactions but the exchange of useful information to the buyer, too. Retailers can use the blockchain to make associations, track inventory and create personalised, targeted offers and discounts to buyers. Not only that, they can issue redeemable reward points to returning customers whenever they hit a particular spending threshold. These special offers and loyalty programs can attract more customers and further expand their market reach.
Is the eCommerce market ready for cryptocurrency?
Although the commercial use of cryptocurrency has many advantages, which are becoming increasingly apparent as it infiltrates the eCommerce sector, there are some substantial risks associated with it that are currently hindering its mainstream adoption. More commonly used by the major tech giants and technologically-advanced buyers (the minority), rather than large-scale brands or smaller, independent retailers, cryptocurrency may not be suitable for the current commercial scene as it stands today.
Due to the nature of cryptocurrency exchange and additional coin generation, the market value of cryptocurrencies fluctuate erratically. This makes cryptocurrency far less reliable than fiat currency. This poses many potential issues for both buyers and sellers alike, particularly with the valuation of goods and services, and it gets even more complicated in the case of returns. If a customer buys a product for X-amount of coin and wants to return this item a few weeks later, but the value of the cryptocurrency fluctuates in this time, how much coin would the seller return to them? In these cases, the seller could make a loss or they could lose custom through their buyers making a loss and, with a lack of a consensus in the community, there’s no right or wrong way to go about this situation, making it all the more difficult.
Lack of trust
One of the biggest blockers preventing the mainstream adoption of cryptocurrency is the lack of trust surrounding it. This is not just down to the lack of an established central control, but also media scepticism and the use of technological lexis which is largely misunderstood by the average consumer. There’s a general air of uncertainty around cryptocurrencies, bolstered by fears of illegalities, which provides retailers no guarantee that consumers will use these provisions if adopted, leaving questions as to whether it’s even worth the risk.
How financial industries are responding to cryptocurrency
Gone are the days where traditional banks could brush off cryptocurrency as a passing craze. The market for cryptocurrencies has grown at a tremendous rate in recent years, and is now worth over £1 billion. As such, banks and other traditional financial institutions are having to face the reality that cryptocurrency is likely here to stay, and have already begun exploring adaptations to keep up with competition.
In 2019, JPMorgan Chase launched their own cryptocurrency, JPM Coin, which harnesses cryptocurrency’s instantaneous nature, offering faster transaction settlements and funds transfers between clients – and they’re not the only ones. In fact, more than 100 banks across the world have tested instant payments via Ripple (XRP), and activity shows no sign of slowing down soon.
It’s unsurprising that cryptocurrency is gaining international interest, particularly as it allows for hassle-free, cheaper foreign exchange. Currently, the foreign exchange system is time-consuming, expensive and requires a nostro account, a corresponding foreign bank account which holds the domestic currency of the country where the funds are held. With cryptocurrency, funds are automatically converted to coin and changed to the destination currency in seconds, omitting costly holding fees while significantly shortening the exchange process. Bitbond, a German online bank, are already harnessing this technology, using Bitcoin as a bridge asset to transfer loan amounts into the destination country.
As understanding around cryptocurrency grows, the benefits of its technologies are becoming clearer. From faster payment processing to the facilitation of international cash transfers, enhanced data protection and reduced overhead and operating costs, it would be remiss of financial institutions to not explore the dynamic technologies and systems that cryptocurrencies provide.
How stablecoin is shaping the future of cryptocurrency in eCommerce
The volatile nature of cryptocurrency is one of the more substantial blockers that has prevented its adoption in the eCommerce world, but that may all be about to change at the hands of stablecoin. Stablecoins attempt to tackle unreliable price fluctuations by pegging the value of cryptocurrencies to a more stable asset, typically fiat money. These are more commonly known as ‘fiat-collateralised stablecoins’, where a reserve is created to securely store the asset backing the cryptocurrency, essentially serving as collateral. As such, stablecoins offer the best of both worlds, providing the instant process and privacy of transactions made with cryptocurrencies, while offering the volatility-free stable valuations of fiat currencies
There are four key variants that are necessary for the mainstream adoption of cryptocurrencies in eCommerce: development and accessibility of the appropriate technology, consumer demand, corporate champions and an accountable regulatory central control. All aside from the latter are currently available, courtesy of stablecoin. If the final variant emerges over the course of the next few years, cryptocurrency certainly has the potential to successfully breach the eCommerce industry.
Interestingly, the aforementioned partnership between Fuse.io and Monerium may well be the start of this necessary transition to standardise cryptocurrency. This partnership aims to bring regulated fiat money to Fuse.io’s “low-fee” and “high throughput” blockchain, supporting micro-economies with a scalable, cost-effective payment solution. However, unlike stablecoins, the digital money will be “unconditionally” redeemable at any time, with funds capable of transferring directly into bank accounts without the need for counter-parties. This announcement has certainly excited the tech world, and it has the potential to act as a catalyst for the mainstream adoption of cryptocurrency if proven successful.
This market is still very much untapped, but the future is certainly looking bright. As such, eCommerce managers and those in the industry should closely monitor news about blockchains and cryptocurrencies, and create a contingency plan for the easy implementation of such in the event that they do become more widely adopted and standardised.
Josh Brooks, Head of Marketing at OnBuy.com – the fastest-growing marketplace in the world and one of the fastest-growing tech startups in South West England, bringing innovation to the eCommerce industry. Developing future solutions involving cryptocurrency and fintech is one of the areas of expertise for OnBuy.
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