Democrats May Target Debt Collection for Regulation

by Mike Bevel, CollectionIndustry.com

With the balance of power now shifted in both Congress and the House, the industry can expect scrutiny as Democrats lead the charge into the fray of consumer issues.

“Debt collection is?in the cross hairs — the abuses, the aggressive practices,” Samuel J. Gerdano, executive director of the American Bankruptcy Institute, a nonpartisan organization that studies bankruptcy issues, told the Dallas Morning News?s Pamela Yip. “There will be a lot of oversight hearings. There will be a lot of pressure on regulatory agencies to do more than what they’ve done in the past.”

Consumers and debt collectors have been locked in an ages-old battle. Due to sheer numbers, it?s easier for consumers to draw attention to perceived abuses and aggressive practices than it is for the industry itself to effectively defend itself against what often wind up being spurious charges. With Democrats in power, expect to see more of these battles against the accounts receivable industry play out in the court of popular opinion.

Relatedly, also on the chopping block is the IRS?s plan to use private debt collection agencies to pursue back taxes. The proposal has received nothing but the ugly step-child treatment from leading Democrats ? most notably Massachusetts?s Barney Frank ? and it remains doubtful if the program will survive at all.

Also on the Democrats? Consumer Reform Agenda:

• An increase of the minimum wage to $7.25/hour

• Dramatic overhauls to the credit card industry (long seen by Democrats as a bastion of unfair and confusing practices ? right after the debt collection industry, of course

• An end to predatory mortgage lending

• Overhaul of student loans

• 401(k)s

Consumer advocates are cautiously optimistic that Democrats will give their concerns a serious forum.

“We are hopeful that the Democratic majority will be inclined to look at consumer abuses in the financial services marketplace,” said Plunkett of the Consumer Federation of America. “How far they go is anybody’s guess. 2008 is an election year, and virtually nothing happens in Washington during an election year.”