ACA Sets the Record Straight!
ACA International responds to Huffington Post article.
8/12/2019 7:00 AM
Editor’s Note: On behalf of our members, ACA International keeps a watchful eye for inaccurate, biased news that promotes an unfair perception and understanding of the accounts receivable management industry. The analysis below, written by Leah Dempsey, ACA’s senior counsel and vice president of federal advocacy, is in response to an article published Aug. 7, 2019. The analysis will be submitted to The Huffington Post and published on social media.
ACA International believes the article titled, “Consumer ‘Protector’ Is Ready To Make It Easier For Debt Collectors To Harass You,” published by The Huffington Post Aug. 7, 2019, paints a one-sided story that fails to include many relevant facts and unfairly impugns debt collection professionals. Zach Carter, the author of the article, clearly fails to understand the important role the accounts receivable management (ARM) industry plays in ensuring consumers have access to credit.
The Huffington Post statements about ARM industry professionals are unfair to the thousands of hardworking men and women who spend their days working to help consumers settle important financial matters. Notably, 70% of the 129,000 employees who work in the industry are women, while 40% represent racial and ethnic minority groups. 1
In the article there are also several missing facts that, if included, would significantly dilute the narrative that the debt collection industry receives special treatment from the Consumer Financial Protection Bureau. It notes that “the biggest players in the American debt collection business traveled to Philadelphia to have a talk with Kathy Kraninger, the new director of the CFPB, ” about the bureau’s new rules. What a simple search of the Federal Register reveals, and what the Huffington Post fails to note, is that Director Kraninger also met with “consumer” advocates the same day in Philadelphia to hear their thoughts on the CFPB’s proposed rule for the debt collection industry, the full details of which are publicly available. 2
Director Kraninger, according to public remarks in April, has also met with “over 400 consumer groups, state and local government officials, faith leaders, military personnel, academics, non-profits, financial institutions, former and current members of the Bureau’s advisory committees, and consumers.” It also fails to mention that it was also the practice of former CFPB Director Richard Cordray to host a meeting with both industry and advocacy groups to garner feedback, when the CFPB released a rule at a field hearing.
The Huffington Post article argues that under the new rule, “debt collectors would be entitled to call households every day, indefinitely, for each debt a consumer owes.” This statement leaves out many other requirements proposed under the rule for contacting consumers and in the Fair Debt Collection Practices Act, the federal law governing debt collection activity. For example, it fails to note that under the proposed rule, when a collector connects and speaks with a consumer, the collector cannot contact the consumer for seven days following that.
Although the article seems to insinuate that frivolous lawsuits are a figment of the industry’s imagination, they are in fact a widespread problem of real concern that handsomely rewards the trial bar more than any consumer. It is not uncommon for such lawyers to demand tens of thousands of dollars to resolve claims arising from hyper-technical violations, such as something like having the wrong word in a letter, rather than address any kind of abusive behavior that would actually harm a consumer. In much of this litigation the attorneys, not the consumers, take the lions-share of any settlements.
One judge in the Eastern District of New York in the case Kraus v. Professional Collections Bureau of Maryland, Inc. makes this same point: “While the Court struggles to see how Avila protects consumers, little imagination is required to envision how the plaintiffs' bar will make use of it. During oral arguments, plaintiff's counsel advised the Court that many cases have been filed as a result of the Avila decision. No doubt this is true. But are those cases serving to root out genuine instances of debt-collection abuse? Or are they, instead, serving largely to facilitate debt evasion and to prop profits among the plaintiffs' bar?”
The Huffington Post article laments that the CFPB’s proposed rule acknowledges and provides new requirements for modern communication methods such as email, which are indisputably how consumers prefer to be communicated with in 2019. And, in the same vein, criticizes the debt collection litigation process.
Small businesses and creditors, such as the local doctor’s office or a lawn care professional, must be paid at some point so they can remain in business and continue to provide services. Earlier intervention through two-way communication using modern technology is the alternative to litigation for many creditors. The solution can’t simply be that no one has to pay their debt ever. Notably, in 2016, ACA’s debt collector members returned a net of $67.6 billion in collected accounts to the U.S. economy, which represents $579 in savings on average per U.S. household.
Additionally, while the Huffington Post seems skeptical of the concept of “fee waivers” that may result from two-way communications, a discount or waived fee could make a significant difference to a regular person trying to make ends meet, while maintaining their ability to access credit and services.
Lastly, the article seems to imply that the economic benefits of collecting unpaid debt is something fabricated by the ARM industry. These economic benefits are well-established in academic research and by groups like the Federal Reserve. 3
1 JOSH ADAMS, Diversity in the Collections Industry: An Overview of the Collections Workforce, January 2016.
3 Todd J. Zywicki, The Law and Economics of Consumer Debt Collection and Its Regulation, Mercatus Working Paper, Mercatus Ctr at George Mason Univ., at 47 (Sep. 2015).
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