Neither Snow Nor Rain Nor Heat Nor Gloom of Night: Debt Collection and the USPS

This article, written by insideARM's Director of Education Mike Bevel, is part of the iA Think Differently series. Written by or recorded with members of the iA Innovation Council, the series of articles and videos showcases thought leadership in analytics, communications, payments, and compliance technology for the accounts receivable management industry.

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Friends, I am worried about the U.S. Postal Service.

We've not been kind to it in the past (all those "going postal" jokes that were never funny), and it's not always been kind to us (who hasn't had something lost in the mail?), but it's in the Constitution that we have one, a Postal Service, and Things Are Afoot with it that collection agencies should start thinking about.

Putting all politics aside (even though the Post Office is a political entity), here is the issue as I see it:

The USPS has recently gone through some changes affecting the reliability of timely delivery. Current Postmaster General, Louis DeJoy, has acknowledged overall slow-downs in mail delivery. This puts some consumers in danger, especially if they have a payment that needs to be received by a certain date, or others who rely on the post office for medication.

But I worry, too, about the effect on the consumer debt industry.

If you are an agency that sends physical initial validation notices to consumers, time was (say eight months ago), you could assume that it would take up to 3 or 4 business days to reach the consumer. If you sent the letter on a Tuesday, you could expect the consumer to receive the letter by that Friday. Once the consumer has received the notice from your agency, they have 30 days to respond if they think the debt is incorrect -- wrong amount, wrong consumer, wrong account, etc. So, the algorithm might be Friday + 30 days with no response from the consumer equals the date collection efforts can start in earnest without the risk of overshadowing.

But let's say the consumer didn't receive your mailed notice on Friday. Or Saturday. Or even Monday. What if, because of current delays with postal deliveries (on top of a pandemic complete with sporadic quarantines), the consumer doesn't receive it until the following Tuesday -- a full calendar week since you sent your inital notice. Now, the algorithm is one week after Tuesday, plus 30 days.

But you won't know that. You won't be alerted by the post office that your letter was delivered.

There is something called "the mailbox rule." Boiled down to its essence, the Mailbox Rule states that mail in a mailbox, taken to the post office, dropped in a post office bin, or handed to a mail carrier, has the presumption of delivery. "At present, the 'mailbox rule' has provided me with some measure of comfort on the presumption of receipt," says Manny Newburger, Founding Shareholder and Vice President of the lawfirm Barron & Newburger. "But I have been worried that a court could find the postal service’s reliability to have dropped to a point where the rule is no longer valid."

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And that's also where my concern is. You may have followed 1692g to the letter (heh), as you're supposed to. And proof of that would stand up in court if that were the only issue. It's those 30 days that the consumer has to respond that compels me to urge you to give this some more thought. If the consumer didn't receive the letter on the date that your agency has assumed is the date of delivery (which is not the same as the Mailbox Rule -- the Mailbox Rule, again, only asserts that mail received in any of the methods above will be delivered. But you cannot assert that the date you send the notice is the date the consumer receives the notice (unless you're emailing -- and we'll get to that). And the consumer has 30 days. And if your collector should happen to call within that 30 day period because they are led to believe that they are in the clear to pursue collection, because your company's delivery algorithm suggests that the 30-day period for the consumer to respond is over, they may begin collection attempts when they shouldn't.

Several attorneys I spoke with said that almost any agency will accept a dispute or request for validation even if it's past the 30 days -- but that's not what's at issue here. In fact, it's very likely the consumer's dispute or request for validation will suffer the same fate that your initial letter did: it will be delayed by the same stresses that your initial consumer letter faced.

And that seems like overshadowing to me. And it also seems like an easy way for a consumer attorney to make a buck.

"I've been thinking about this, too," says Wendy Badger, Special Compliance of Counsel for Ovaile Law Group. "It is hard to know if the algorithm needs to be adjusted for the validation period, which is counted from the day the consumer receives the notice. I don't think it hurts to give the consumer some additional days/time to receive the notice. In my experience, most agencies who receive a request for verification of the debt send the information regardless of whether or not it is received within the 30 day validation period."

She then went on to add a new wrinkle to the situation:

"I have a bit of a different, though related, concern when it comes to post-dated payments. The FDCPA specifically says the post-dated payment reminder needs to be sent no more than 10 nor less than 3 days before the payment will post. This is designed to remind the consumer of the payment and to take steps to have adequate funds available. With the delays I'm hearing of in postal delivery, even mailing it on the outer edge of the 10 days, the payment reminder may not get there in time. However, because the FDCPA is a strict liability statute, meaning comply exactly or be in trouble, an agency cannot mail that letter more than 10 days before the payment is scheduled to post because that would be a violation. Even though that action is intended to account for postal delays and would comply with the spirit of the law, which is that payment reminder before the payment posts, the agency would still be in violation."

So, what's to be done? I have several suggestions (though not to be taken as legal advice):

1) Add 10 days to your 30-day period for a consumer to dispute before fully attempting collection efforts under the belief that the debt is valid and correct.

2) Use phone calls with consumers to ask if they have received your notice in the mail.

3) Be generous with consumers whose disputes arrive after the statutory 30-day validation period.

4) Think more about an email/text approach. This will require detailed thinking and planning if you're not already doing this; and you may need to reach out to peers in the industry to get help in making sure all the t's are crossed and i's dotted. (Might I suggest becoming a member of our Research Assistant program?)

5) For you compliance folks out there, consider adding "USPS" to your list of Google alerts so you are up to date on known issues, and planned solutions, for this problem.

All predictions are foolish ones in Our Current Time of Trouble. The USPS may work things out and things will go back to what we were used to. The USPS may...stop existing? Allowing the free market a chance to provide that service better. But that can also mean increased lettering costs. I would love to be able to give you a Definitive Answer, but right now all I can do is share my concern. Let me know if you're concerned, too.

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The iA Innovation Council is a collaborative working group of product, tech, strategy, and operations thought leaders at the forefront of analytics, communications, payments, and compliance technology. Group members meet in person (and lately, virtually) several times each year to engage in substantive dialogue and whiteboard sessions with the creative thinkers behind the latest innovations for the industry, the regulators who audit and establish guardrails for new technology, and educators, entrepreneurs and innovators from outside the industry who inspire different thinking. 

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