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Is the Collection Industry going forward or backwards?

This month was a tough one for the collections industry. Attorney Generals from New York, Ohio and Virginia all went after collection agencies and collection attorney firms. Each of these attorney generals claimed that the agencies were violating the fair debt collections act and even claimed fraudulent activity. The Minnesota AG literally shut down the arbitration business by closing down the National Arbitration Association’s credit card arbitration business, which was followed by the American Arbitration Association backing out of the debt collection arbitration business as well. AG’s settled with Bank of America on the foreclosure issues with its' Countrywide subprime division it bought. Even the rental business is not safe. Rent-a-Center is being accused of illegal collection practices in the state of Washington, including harassing customers with profanity during collection calls and scaring children by telling them that their parents would be jailed. Is it coincidence that all these items are happening at once or is there a pattern that is being set? Has the Attorney Generals had enough with the financial services industry or have they figured out a way to go after an industry that is not popular with the media and has deep pockets to gain a badly needed revenue source? The states are hurting for revenue and is our industry the target of a way to increase their revenues? Unfortunately our industry is a prime target for politicians. Lisa Madigan the AG from Illinois (who has aspirations of higher offices) has said the worst type of companies are polluters and collectors. Great, we have been categorized with those who damage our environment. Let’s face it; we do not work in a user friendly industry. I spent 10 years working for one of the credit reporting agencies, when someone heard that I worked there it usually was followed up with a “you ruined my credit” comment. How often do you get a positive comment when you say you work in the collections marketplace? “Thanks for collecting all those debts owed, we know it keeps our rates down!” If you consider that 90% plus of consumers pay their bills on time and have a serious issue in having to pay for someone else who does not pay their bill. If everybody paid their bills on time, interest rates would be low and borrowing would never be an issue.I know I would not want to end up in court in front of 12 jurors and explain that I think the 12 jurors should have to pay my bills because I can’t afford to pay my own bills. If a politician is looking to gain popularity ask them about debt collection agencies? Regulate them, enforce against them, and never support us publicly. The fact that our industry is very necessary to recover funds for businesses is a lost issue. Our industry certainly is not without its faults. We have created this two headed monster with a lot of bad business moves. Universal default will not go down as a smart business decision, profitable in the short run, devastating in the long run. There are rouge agencies out there that do whatever it takes to collect outstanding balances. And the main stream press loves that. Nothing better than getting a collector on tape (or better yet film) screaming and cursing at a poor little old consumer who happens to have the same name as another deadbeat bill dodger. Overzealous collectors can take your business from profitable to shut down if they are not closely monitored. You have such a fine line to balance, if you are overly nice, good luck getting paid. If you are over aggressive, good luck getting paid and expect an on rush of media, consumer lawyers and politicians. Taking the approach as a professional is the best approach. You need empathy for the consumers today, who with the current economic conditions are completely different than the debt dodgers of the past. Now you have middle and upper class debtors who have never experienced delinquencies. How you treat these individuals now, will have a lasting effect on the consumers and our industry. The concept of self regulation has been tossed around for a while but has recently taken on a new drive. Let’s face it, if we do not control the industry, the government will do it. And we all know how successful the government is in regulating an industry. The hardest part of self regulation will be the breaking of the bonds and codes that exist about supporting your brethren in the collections industry. If they are not complying with the laws then turn them in. Let’s clean up our industry before the government does it. And judging by the number of Attorney Generals and FTC complaints, it is just a matter of time before regulations take hold. New York, New Jersey and North Carolina already have pending bills and more states are looking at new laws.

People, lets clean it up now and take out our own trash before the government does it for us! 

Your comments are welcome.

100,000+ New Yorkers Scammed By Debt Collectors – Why Doesn’t the FTC Do Anything?

Open Letter to All Members of ACA, International

  Open Letter to All Members of ACA, International       July 9, 2009           Dear Fellow ACA Member,   Is it the role of ACA International to act as an advocate of the Collection Industry, or to regulate the Collection Industry? Is ACA leadership spending our money wisely?   I am writing this letter as an individual dues paying member of ACA, International and not as a member of any other association or board, in order to convey my concerns and questions as to the direction our association is taking.   I am concerned with several recent initiatives undertaken by the ACA Executive Committee, including the association’s recent dues increase, change of fiscal year and attempt to force individual state units to change their membership year, reluctance to limit budgetary votes by its Board of Directors to in person meetings, and its attempt to regulate the collection industry through its own Dispute Resolution Program and SRO turned Debt Collector Registry.   I must first question the dues increase. Last year at the Annual Board of Directors meeting the budget was presented by ACA Staffand included the $1M purchase and $300K in refurbishing costs to purchase a office condo in Washington D.C..   Within 60 days of the BOD approving that budget a special telephonic meeting was called to increase dues. I am quite concerned as to why this increase was not addressed in an open forum at the in person meeting of the BOD, where members could have been made aware of the proposed increase and voiced their concerns.   I must ask myself: did staff know at that time that the increase was necessary? If they did not know at that time, why didn’t they know? Most of all, if the BOD knew a dues increase was necessary, would they have voted for the $1M cash purchase of the D.C. Condo?   I have been unable to ascertain as to where the increased revenue from the dues increase will be spent. It has been cited that the dues increase is necessary to bolster reserves, which have not been in compliance since enacted by the BOD. It appears ACA would have had adequate reserves had they not purchased the condo. Shouldn’t this have been considered prior to making the purchase in D.C.? Did ACA consider other alternatives to purchasing the condo for cash?     The ACA Leadership Committee has cancelled the Association’s Unit Leadership Conference citing “financial pressures of the current economy”. Leadership is already cutting programs while raising dues, due to the economy. Perhaps they should consider what effect this dues increase will have on us as members.   There is a motion to be brought before the BOD next week to roll back the dues increase. This is not water under the bridge, but an opportunity to correct an ill informed decision. I encourage you to contact your National Director and urge them to vote in favor of rolling back the dues increase.             I now move on to the Fiscal Year/Membership Year change, cited by ACA leadership as necessary because we as members are too confused in dealing with a calendar and membership year. Leadership also states this will help with approval of the budget and will alleviate the need for the BOD to take up time considering and debating the budget at the annual meeting.   In my opinion, the primary and most important fiduciary responsibility of the BOD is the consideration and debate of the annual budget which is approximately $8M per year.   Changing the fiscal year accelerates dues and results in, us as members, paying 19 months of dues in a seven month time period. What’s worse is paying our dues in December, the worst month for revenues in our industry.   We must ask ourselves, is changing the fiscal year really in our best interest as members? We will have an opportunity to question this Fiscal/Membership Year change and why it is really necessary, at the General Membership Meeting next week. I encourage a no vote on this change.   I am equally confused as to why ACA Leadership would be opposed to the idea of limiting votes and approval of budgetary and fiscal matters to in person meetings of the BOD, wherefair and open discussion and consideration can take place, with the benefit of the input of members like us.   I am equally concerned with ACA undertaking the endeavor of administering a mandatory Dispute Resolution Program/Collector Registry and must question how well thought out these programs are and how they will affect our industry.   Last year the dispute resolution program went from being administered by the National BBB to being administered by a separate entity to be formed by ACA. As presented it would require an agency’s to consent to a conciliation period and I as understood it mandatory arbitration to be paid by the collection agency. The program does not guarantee that it would eliminate traditional remedies such as law suits available to the consumer but would only add a layer to the mix. The program also did not guarantee the protection of information acquired within the Dispute Resolution process which could later be used against the agency.   Along with the Dispute Resolution Program, the BOD was presented a brief summary of a proposed Self Regulatory Organization (SRO). It is important to remember that only a presentation took place and no action was taken by the BOD on the SRO.   Subsequently a task force was formed and met approximately ten times by telephone conference and just recently, citing the fear of President Obama’s formation of a new government entity to protect the financial rights of consumers, theyturned the SRO into a mandatory Debt Collector Registry. This Registry, to be formed by ACA with our money, will be considered and voted on by the BOD at the annual meeting next week.   This registry as I understand it would require all agencies to register each collector, and may include finger printing, background checks, testing and on-going training.                   I have heard that this registry could add upwards of $10M to ACA International’s already $8M annual revenues and will not preempt any local or state regulatory agencies, but will instead only add another layer of government and expense to our already challenged industry.   While many of us do background checks, finger printingand training we are able to do this within a competitive market and are not limited in doing our pre-employment screening through ACA, International or some subsidiary it will form.   I read an AP article today, Frank backs plan for a consumer protection agency By ANNE FLAHERTY which it appears the majority of lawmakers are resistant to the idea and have doubts as to its success.   How many of us thought the sky was falling with the enactment of the FDCPA, FCRA, GLBA, HIPPAA,and other acts and laws that govern us. We are already regulated by a federal agency, and those of us that work within the law will most likely not be affected by a new federal agency if it is even formed to regulate us.   This item has been put on the BOD agenda through a placeholder and will be considered with only a few minutes debate without the benefit of prior review of its structure, mamangement, feasibility, budget, revenue or affect on the industry, just as the $1M D.C. condo purchase was voted on last year.   The fact is we do not know if and when this new government agency will be formed or if it will change the regulation of the industry. There is no need to rush a decision which could have devastating effects on our industry.   A smart agency owner once said something to the effect, “I could be shot on the way into my office, so maybe I should just shoot myself first, before it happens” This seems to be the approach our leadership is taking on this issue.   I have asked the national directors that represent my state unit to either table the motion to create a National Debt Collector Registry until more information is obtained and the proper time for debate and discussion is allotted or in turn vote NO on its formation.   Once again I ask, should it be the role of ACA to advocate for us or for ACA to regulate us?   It is incumbent on us, as dues paying members to question our leadership and the direction they are taking our association. Is it really in the best interest of us as a membership body and our industry.   I invite your comments as fellow association members to jgreenblatt@inlandcapitalservices.com.     Sincerely, Jerry Greenblatt Inland Capital Services 663 Greenfield Dr. El Cajon CA 92021 619-291-8520