Before I go into the details, I need to mention that this shouldn’t be much of a problem for most companies. The rules basically forbid your debt collectors from being Jerks. They would not be allowed to harass or threaten Consumers. They would not be allowed to lie to Consumers. Since an unhappy Consumer generally spreads the bad news about your company you probably shouldn’t be doing any of this in the first place. It’s bad for your reputation and it won’t get you what you want. Empathy works much better.
Your debt collection activities may fall under the jurisdiction of the Fair Debt Collection Practices Act. In addition your Company may no longer be immune from debt collection violations such as calling too early in the morning, calling to frequently or calling when a debtor informs you not to call them again. You need to know the prohibitions that debt collectors know because if you share the information about the debt with other people, you are liable. In fact, you may have problems for any alleged deceptive or unfair practices.
Over the next six month, the CFPB will be proposing new regulations related to first party debt collection as well as Third Party debt collection. Everybody collecting debt will be in the same boat. It will be important for your Company to know the rules of debt collection and train your Collectors to scrupulously follow them.
In particular, here are the major issues the Agency is working on. The addition of interest, fees and other additional charges not specifically authorized in a written contract or allowed by law. Charging late fees when a Consumer payment is received on time is another major problem if the posting of a payment is delayed by the Debt Collector.
You cannot falsely represent the legal status or other attribute of the debt or represent the Debt Collection Agent as an Attorney or Government Employee.
You cannot misrepresent your credit bureau reporting procedures or say you will accept settlements if the Company does not accept settlements.
For now, only Companies who use a different name for their own debt collection or who obtain debt transferred from other Companies are subject to investigation, but over the next six months it is expected that the regulations will be extended to general Consumer debt collection regardless of the source.
This is NOT a big problem. If your Debt Collectors are violating the rules mentioned here, just stop them or fire them if they won’t stop.
It is neither difficult nor costly to set up your In-House Consumer Debt Collection to meet the expected regulations. If you are honest and courteous with your Consumers you probably are already in compliance. Basically the rules are not to abuse debtor contacts and not to lie to the Consumer. The problem is making sure some of your Agents aren’t breaking the rules to collect more money. In case you are interested, more money is collected with kindness, compassion and understanding anyway so being a Jerk is of no real advantage.