FDCPA Reform Should be More Balanced

Late last week, the FTC released its report addressing FDCPA reform proclaiming that “the nature of consumer debt has changed in numerous important ways since enactment of the FDCPA” 30 years ago.  While their proclamations throughout the report are valid and will undoubtedly be addressed through reforms of the Act, I am concerned that the FTC is late to its own party.

Over the past 17 months since we all met on Capital Hill at the FTC workshop on FDCPA reform, the economy has gone into a tailspin. As it implements reform, the Federal Government has to place as its primary concern the staggering levels of consumer debt that now exist – a level that has reached nearly $2.6 trillion, even when excluding consumer debt by real estate. Neither can they ignore the growing urgency of collecting escalating amounts of past due debts due to U.S. businesses, healthcare providers, and all levels of government. In January alone, more than $2.43 billion in securitized credit card debt was written off.  

In today’s volatile economic times especially, implementing sweeping changes to the FDCPA that hamper the recovery efforts of the vast majority of collection businesses that follow the rules would be a catastrophic mistake.  Modernizing the laws to address the use of communication technologies that have emerged since the report was written makes sense on the surface, but not, for example, to a point where cell phones are restricted from being called.

Yes it is true, as the report points out, that the industry of debt buying really picked up steam in the 1990’s when most large credit card issuers started selling varying amounts of their past due accounts receivable consistently as part of its recovery process.  So what?  The point is not that it grew to a position of prominence.  The point is that it is a critical part of the recovery process and needs to remain that way in spite of reform.  

The Commission went on to state that it believes that changes to FDCPA are necessary to address the evolution of consumer debt, collections, and technology over the 30 years since the Act was written to “provide better consumer protection without unduly burdening debt collection.”  I think everyone would agree that by taking a balanced approach to reform that addresses the needs of credit grantors, collection professionals, and consumers, all parties will benefit.  

Before the consumer advocacy groups respond, let me state loud and clear that I completely agree that the Act needs to be updated to address all of the changes that have occurred over the past three decades and consumer rights must be protected – not sacrificed – to improve recovery efforts.  I just want it to happen in a way that improves the chances of recovering past due accounts receivable that are owed and should be collected.