Credit Card Collections: Preparing for the Storm on the Horizon

Patrick Morris

As the credit and collections industry weathers the economic storm of the past few years, there are those who believe that the sounds of thunder and lightning threaten its very survival.

While this storm has affected all consumers and all industries, we cannot allow our critics to define us and continue to paint a bleak picture. Regardless of whether you collect credit card debt, student loans, or other receivables, I believe this is the moment and opportunity to positively shape our future.

The problems that have been encountered in the past weren’t created by one segment of debt collection and neither should the solution. If we are to survive and thrive, it will take courage, commitment and collaboration from the entire credit, collection and asset buying industry.

With years of mainstream media coverage depicting consumer horror stories about credit and debt collection practices, along with growing complaints and lawsuits, have corroded an already tenuous industry reputation.

Public outcry from consumers and consumer groups continue to incite:

• Negative media coverage
• Tighter federal and state regulation
• More restrictive state legislation and threats of new federal legislation
• An increasing number of state attorneys general actions

Plans for industry reform

Today, federal laws governing the industry, including the Fair Debt Collection Practices Act (FDCPA), Telephone Consumer Protection Act (TCPA) and Truth in Lending Act (TILA), are woefully outdated. Hyperactive consumer attorneys file suit and run boot camps to target debt collectors. And a new undefined player has emerged on the scene — the newly created Consumer Financial Protection Bureau is now open for business, joining the Federal Trade Commission as one of our federal regulators.

Change is Coming: Improving Validation and Documentation

There is little doubt that monumental change is coming to the industry, and it will happen with or without our involvement. ACA International sees these challenges as an opportunity and we have chosen to be actively engaged as the storm approaches. Our commitment to the recently introduced “Blueprint for Modernizing America’s Debt Collection System” and other tools to help members combat erroneous lawsuits have set us on a course to actively shape the future.

Modernizing the FDCPA and TCPA to improve clarity and enhance communication will have a significant, cross-industry impact. Of note to collectors of credit card debt, the Blueprint calls for changes to the validation notice to include the name of the original creditor and to provide an itemization of the fees and interest applied by a collector after it is placed for collection or by a debt buyer after it is acquired.

In addition, we will advocate amending TILA to improve debt documentation by requiring that original creditors maintain consumer account information for no less than seven years from the date of charge-off, which is consistent with the amount of time a debt can be reported on a consumer’s credit report. This will help collectors provide documentation to consumers responsive to their disputes regarding the amount of the debt, to whom the debt is owed, or the party responsible for paying the debt.

An Important Story to Tell

We can’t lose sight of the fact that, despite our best efforts, most media (outside of InsideARM.com and those who cover the industry specifically), lawmakers, regulators, and other stakeholders don’t know much about debt collection. There are important stories to tell, which makes an ongoing commitment to outreach and engagement imperative.

Despite a contentious legislative, regulatory, and media environment, the credit and collections industry fulfills an important role in our nation’s economy, aiding in the recovery of consumer debt for millions of government and private sector entities. Without the important work of industry professionals, organizations fail, people lose jobs, prices rise, taxes increase, and credit becomes less available.

One of the untold and underreported stories is that this is a generous industry. Members of the credit and collections industry generously support the ACA International Education Foundation and its mission to promote consumer financial literacy via Ask Doctor Debt. Additionally, many give back to their local communities in the form of vital financial and volunteer support; and closer to home, companies across the nation and their employees routinely:

• Host food, clothing, book and toy and gift drives
• Raise funds and participate in community walks and relays on behalf of cancer, diabetes, heart disease, and autism, among others
• Serve in elected office; work with kids as athletic coaches and mentors; and volunteer community organizations such as the chamber of commerce, schools and local civic groups

Together we can effectively help reduce complaints and lawsuits; modernize federal law; build and strengthen essential relationships; and more actively engage and educate media and key stakeholders on the important impacts of consumer debt collection.

Success will take our Collective Efforts

We will weather this storm, because we have a vision and we know the solutions that will make the industry even better. The Blueprint has provided us with the compass that helps show us the direction forward, and our long-term success will rely on active involvement, increased communication, courageous new thinking and cross-industry collaboration and advocacy.

Patrick J. Morris is ACA International’s Chief Executive Officer. An association executive for the past 16 years with a wealth of experience in financial services, regulatory and legislative issues, international affairs and insurance, Morris was previously the executive vice president and chief operating officer of the National Association of Federal Credit Unions in Arlington, Va. He joined the association, which represents the interests of the nation’s federally chartered credit unions, in February 2007.