By Brad Davidzik
On Jan. 2, 2013, the Consumer Financial Protection Bureau will begin monitoring debt collection agencies. As stated by the Dodd-Frank Act, the bureau will oversee collection agencies with revenues of more than $10 million each year for collection of personal, family or household debt, and overdue student loans.
It will check violations of the Fair Debt Collection Practices Act such as making repeated phone calls, threatening debtors with prison, calling family members or calling debtors at work.
Although this is a step in the right direction, the actual number of agencies under scrutiny will be limited. Only those collecting more than $10 million a year, plus some smaller agencies contracted to larger financial institutions such as banks, will be affected. Out of the approximately 4,500 debt collection companies in the country, about 175 have receipts of more than $10 million. The bureau will only scratch the surface of this problem.
While larger agencies have their share of violations, it’s the smaller operations that commit the most egregious and outrageous violations. Larger agencies tend to have compliance officers and attorneys, plus, they better prepare their employees with procedures and policy manuals.
The collection industry is an extremely competitive field – to survive, employees have to prove they can collect – and it’s those who collect the most that get the best accounts to work on and who make the most money.
It appears to me that success in the collection business comes a lot more easily if you bend the rules. Employees of small firms, who are not trained or supervised as thoroughly as those at larger firms, tend to violate the act with much greater frequency.
In 2011 the Federal Trade Commission, which handles complaints regarding violations of the act, recorded more than 180,000 complaints, an increase of 13,950 from 2000. Yet ACA International, a trade group representing collection agencies, is pushing back against the bureau’s oversight, saying the regulations are arbitrary and the $10 million threshold is too low – it should be $250 million.
Raising the threshold to $250 million would cut the number of firms under scrutiny to such a small portion of the industry, it would render the bureau’s efforts almost useless.
If the bureau is going to be effective, more than the top 175 out of 4,500 debt collectors should come under its oversight.
The Dodd-Frank Act is a good start, but regulators need to go further to help consumers who suffer harassment at the hands of debt collectors.
Brad Davidzik is an attorney with Jeffrey Freedman Attorneys at Law, which handles bankruptcy, disability, personal injury and Fair Debt Collection Practices Act cases.