The System Is Not Broken; It Is Out of Balance

The accounts receivable management industry is under siege by state and federal lawmakers, state and federal regulatory bodies and the press. The current political climate favors consumer protection at all levels of government.

In just the first 13 days of 2011, legislation to curtail or restrict some form of debt collection activity was introduced in Connecticut, Indiana, Iowa, Mississippi, Montana, New York, North Dakota, Oklahoma, Virginia, and Wyoming and this is just the beginning of the legislative session for most states.

The proposed legislation listed below is a sampling of the issues under consideration by these various state legislatures:

• Expand the scope of debt collector licensing requirements to include debt buyers;
• Increase the cost of the debt collector licensing fee;
• Restrict the use of credit reports and the type of information that may be reported;
• Require written confirmation of a debt collector’s debt validation process;
• Require debt collectors to disclose to all persons that such person is not legally required to pay or repay a deceased debtor’s debts;
• Add punitive damages to the list of remedies a consumer may seek;
• Extinguish the existence of a debt after the statute of limitations expires; and
• Codify that a violation of the FDCPA is a deceptive practice under state law.

On the heels of this activity, last week the Consumers Union, Inc. and the East Bay Community Law Center released its paper, “Past Due: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now,” (“Consumers Union Issues Scathing Report on ARM Industry,” Feb. 3). The paper asserts,

This movement by lawmakers to impose more onerous restrictions on lay-collection activities and the rant by consumer protectionists about the appalling increase in collection litigation is disturbing. Those who can influence policy need to realize the system is not broken; the system is out of balance.

Creditors have the right to expect consumers to pay for the goods and services they have received and debt purchasers have the right to expect consumers to honor their obligation to pay their just debts. The lay-collector should be able to freely communicate with consumers at a time, place and manner convenient to the consumer, and consumers have the right to be treated respectfully, to request validation of the debt, valid service of process and to due process under the law.

The Consumer Union claims the reason for the increase in debt collection lawsuits is because of creditors and debt buyers. This could not be further from the truth. The reason for the increase in collection lawsuits is because of the increase in the number of consumers who did not pay for that which they received.

When collection efforts are unsuccessful and debts remain unpaid, creditors and debt purchasers have the right to reduce their claims to judgment. They should not be criticized for doing so or cited as the reason for the increase in collection lawsuits.

As so aptly stated by the Consumer Union, we are experiencing a fiscal crisis. This means creditors and debt purchasers need to reduce their claims to judgment, not because they are interested in harassing the down and out, but to protect their interest in the debt so that it may be collected when the economy rebounds and those who are unable to pay their debts today are in a financial position to pay their debts tomorrow.

To expect creditors and debt purchasers to do anything less is to say there is no need for accountability on the part of consumers to pay their just debts and to say they are the cause for the increase in collection lawsuits is simply wrong. Anyone who claims that seeking redress in the courts is anti-consumer should either go to law school or talk to an attorney. The United States judicial system is predicated on due process, rules of civil procedure, the opportunity to be heard and the need for the plaintiff to meet its burden of proof before judgment is entered in the plaintiff’s favor. In my opinion, there is no greater form of consumer protection.