ACA & DBA Respond to New York Times Unnuanced Piece on Collection Industry

ARM industry trade groups ACA International and DBA International penned the letter to the editor below in response to a piece that appeared in The New York Times last week. The letter has yet to be published in the paper, but the associations wanted the industry to have an opportunity to read their response.

April 5, 2012

Letters to the Editor
The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

In his April 2, 2012 column, Joe Nocera asserts that banks and debt collectors “take advantage of the poor and unsophisticated” consumer as a normal course of business. Despite some valid points, Nocera misinforms the reader by making exceptions to usual industry practices appear as the norm.

The contracts that banks use to sell accounts to debt buyers typically contain account validity and information accuracy representations, along with request rights for the buyer to access available applications and statements. The account receivables management industry does not view its work as “dirty work,” it is its principal business. Those that buy the majority of sold debt are institutional, professional companies that have a large incentive to collect compliantly. Nocera’s suggestions comes dangerously close to proposing the dismantling of America’s credit system which is vital to the consumer lending segment of the U.S. economy.

The availability of affordable credit and goods and services is paramount to our state and national economies, as is the collection of these assets when accounts are delinquent or defaulted. Our credit-based culture is centered on the notion of repayment. If a consumer is contacted they deserve to be treated within the guidelines of federal and state law. Creditors, their assignees and collectors should strive to have accurate documentation when seeking to collect on a debt, but that shouldn’t absolve the consumer from his or her role in this equation.

We agree with the need to protect consumers, especially those who are most vulnerable to predatory and illegal practices, but Nocera fails to address the critical notion that consumers have a shared responsibility in repaying debts they owe. What incentive would consumers have to pay their debts if they knew they would be wiped clean if they can avoid a debt collector long enough? This practice opens the door for debtors to game the system, and would erode America’s credit based economy.

Debt buyers and collectors must follow a wide range of existing state and federal laws and regulations. Marginalizing the entire industry of debt buyers and collectors from the economic cycle, whether through additional legislation or regulation, won’t net the type of positive results Nocera is proposing. Rather, it will cause catastrophic long-term impacts for consumers including penalizing the majority of consumers who pay their bills on time with higher costs of credit to cover the costs of the small percentage of consumers who don’t pay. At risk is the cost and availability of credit, let alone goods and services.

In the new era of growing federal and state regulation of financial services, our industries, along with the Consumer Financial Protection Bureau (CFPB) and other governing bodies, should work to rid themselves of bad practices. However, we must preserve the rights for private institutions to enforce their contracts with consumers and collect on what they or their assignees are rightfully owed.

Our industry is working with the CFPB, as it has with the Federal Trade Commission, the states and others to protect consumers and allow for the important work of our members.

Forgiving consumers from the consequences of the collections process or court proceedings is simply not the solution.

Sincerely,

Mike Bendickson, President
DBA International

Mark Neeb, President
ACA International