Congressional Hearing Highlight: Debt Collectors are Helping Small Businesses

ACA International advocated for consumer protection and fair accounts receivable management industry laws and regulations in advance of a House subcommittee discussion on debt collection March 11. Following is an excerpt from a discussion during the hearing based on that advocacy.

3/15/2021 8:00 AM

AdvocacyNewsCOVID-19
Congressional Hearing Highlight: Debt Collectors are Helping Small Businesses

Lawmakers stressed the importance of legal debt collection practices and access to credit and consumer communications, especially during challenging times like the COVID-19 pandemic, in a House Financial Services Subcommittee on Consumer Protection and Financial Institutions hearing Thursday.

Here is an excerpt from the discussion between U.S. Rep. David Kustoff, R-Tenn., and witness Joel Griffith, research fellow, financial regulations at The Roe Institute for Economic Policy Studies, The Heritage Foundation. A video clip of the discussion is also available here.

Kustoff: Could you compare the consumer circa 2008/2009 to the consumer now during the pandemic? Does one fare better than the other?

Griffith: It is night and day, looking at the typical consumer now versus during the Great Recession, and this really shows up when we look at the delinquency rates. During the Great Recession, during that financial crisis, we saw the default rate quadruple and it was actually at a rate that’s about six times the default rate that we see now. We’ve seen repeating patterns of that if you look at just the standard credit card default rates. The credit card default rate during the Great Recession soared from about 4.6% to 6.8% on overall credit lines, and we’re actually near a record low in delinquencies during this crisis. The other big difference is just the rapid pace of recovery. It took years to recover from the Great Recession nationally and [now] within one year we see states that are actually bigger now economically than they were a year ago.

Kustoff: As it relates to debt collection and debt collection services, if they’re further restricted, what would be the impact on small businesses?

Griffith: Many small businesses actually rely on debt collection agencies to collect bad debts. If you handicap the ability of debt collection in general, you might be trying to help those that are in dire financial situations, [but] what you’re actually doing is impacting those small businesses [and] you’re making it harder for them to extend that credit in the future. And, long-term, it’s going to make those who need the credit the most even less likely to be able to obtain it from their local businessperson.

The hearing, “Slipping Through the Cracks: Policy Options to Help America’s Consumer During the Pandemic,” explored gaps in consumer protections during the pandemic and evaluated possible policy responses to ensure all consumers and small-business owners can get through this period of uncertainty and share in the economic recovery.

Several of the bills at issue during the hearing present concerns for the accounts receivable management (ARM) industry and consumers. ACA International addressed concerns with the legislation on behalf of members and the ARM industry in a letter to the subcommittee.

Read ACA’s complete coverage of the hearing here.

Members interested in learning more about ACA’s advocacy strategy and opportunities to connect with state and federal legislators and regulators are invited to attend the Washington Insights Virtual Fly-In April 22.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

Congressional Hearing Highlight: Debt Collectors are Helping Small Businesses

Lawmakers stressed the importance of legal debt collection practices and access to credit and consumer communications, especially during challenging times like the COVID-19 pandemic, in a House Financial Services Subcommittee on Consumer Protection and Financial Institutions hearing Thursday.

Here is an excerpt from the discussion between U.S. Rep. David Kustoff, R-Tenn., and witness Joel Griffith, research fellow, financial regulations at The Roe Institute for Economic Policy Studies, The Heritage Foundation. A video clip of the discussion is also available here.

Kustoff: Could you compare the consumer circa 2008/2009 to the consumer now during the pandemic? Does one fare better than the other?

Griffith: It is night and day, looking at the typical consumer now versus during the Great Recession, and this really shows up when we look at the delinquency rates. During the Great Recession, during that financial crisis, we saw the default rate quadruple and it was actually at a rate that’s about six times the default rate that we see now. We’ve seen repeating patterns of that if you look at just the standard credit card default rates. The credit card default rate during the Great Recession soared from about 4.6% to 6.8% on overall credit lines, and we’re actually near a record low in delinquencies during this crisis. The other big difference is just the rapid pace of recovery. It took years to recover from the Great Recession nationally and [now] within one year we see states that are actually bigger now economically than they were a year ago.

Kustoff: As it relates to debt collection and debt collection services, if they’re further restricted, what would be the impact on small businesses?

Griffith: Many small businesses actually rely on debt collection agencies to collect bad debts. If you handicap the ability of debt collection in general, you might be trying to help those that are in dire financial situations, [but] what you’re actually doing is impacting those small businesses [and] you’re making it harder for them to extend that credit in the future. And, long-term, it’s going to make those who need the credit the most even less likely to be able to obtain it from their local businessperson.

The hearing, “Slipping Through the Cracks: Policy Options to Help America’s Consumer During the Pandemic,” explored gaps in consumer protections during the pandemic and evaluated possible policy responses to ensure all consumers and small-business owners can get through this period of uncertainty and share in the economic recovery.

Several of the bills at issue during the hearing present concerns for the accounts receivable management (ARM) industry and consumers. ACA International addressed concerns with the legislation on behalf of members and the ARM industry in a letter to the subcommittee.

Read ACA’s complete coverage of the hearing here.

Members interested in learning more about ACA’s advocacy strategy and opportunities to connect with state and federal legislators and regulators are invited to attend the Washington Insights Virtual Fly-In April 22.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

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