Most experts agree that debt collection trends for 2019 will focus on compliance, but at least one source suggests human resources will share the spotlight. As the perpetual “elephant in the room,” consumer protection will be joined by other compliance changes that are expected to impact the debt collection industry for the next few years. The most profound change will be the notice of proposed ruling (NPR) by the Consumer Financial Protection Bureau (CFPB) affecting the manner in which consumers are contacted by debtors.
Contributing factors to debt collection trends for 2019 include changes in the balance of power at the U.S. House of Representatives, new CFPB management, and input from the FCC and FTC.
Four debt collection trends for 2019 are anticipated:
2. Technology, certification and data security
3. People skills of collectors
4. Company cultures
The long-awaited NPR by the CFPB about increasing consumer protection of debt collection practices should top the list of debt collection trends for 2019. The ruling is expected to follow the areas detailed in the 2016 proposal.
The lead paragraph of the press release announcing the proposal stated that it would “overhaul the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt.”
The six areas of consumer protection include:
Collect the correct debt. Debt collectors will need to “scrub their files and substantiate the debt” with correct information before contacting consumers. Examples cited in the proposal include a “full name, last known address, last known telephone number, account number, date of default, amount owed at default, and the date and amount of any payment or credit applied after default.”
Limit excessive or disruptive communications. Collectors would be limited to six attempts per week to reach consumers through any point of contact. Related protection includes providing consumers with the means to stop collectors from contacting them on “a particular phone line, while they are at work, or during certain hours.” Collectors would also follow a 30-day waiting period before communicating with parties such as surviving spouses after consumers are deceased.
Make debt details clear and disputes easy. Collectors would be required to state the consumers’ federal rights and include detailed information about the debt in initial collection notices. Furthermore, collectors will need to disclose that the debt is too old for litigation when applicable. “The proposal under consideration would also add a ‘tear-off’ portion to the notice that consumers could send back to the collector to easily dispute the debt, with options for why the consumer thinks the collector’s demand is wrong. The tear-off would also allow consumers to pay the debt. The consumer could also verbally question the debt’s validity at any time, and prompt the collector to have to check its files again.”
Document debt on demand for disputes. “If the tear-off sheet or any written notice is sent back within 30 days of the initial collection notice, the collector would have to provide a debt report — written information substantiating the debt — back to the consumer. The collector could not continue to pursue the debt until that report and verification is sent.”
Stop collecting or suing for debt without proper documentation. This part covers four critical areas of documentation:
1. Collecting on debt that lacks sufficient evidence would be prohibited.
2. Collectors will need to stop collections until the necessary documentation is verified if consumers dispute the validity of the debt.
3. Collectors that come across any specific warning signs that the information is inaccurate or incomplete would not be able to collect until they resolve the problem.
4. Collectors also would be required to check the documentation of a debt before pursuing action against consumers in court.
Stop burying the dispute. If debt collectors transfer debt without responding to disputes, the next collector will be prohibited from collections until the dispute is resolved. The proposals also “outline information that collectors would have to send when they transfer the debt to another collector so that a consumer does not have to resubmit this information to the new collector.”
Another regulation, the California Consumer Privacy Act (CCPA), was passed June 28, 2018, but doesn’t become effective until Jan. 1, 2020. Nevertheless, some experts believe it has the potential for inspiring the creation of comparable regulations on the federal level in 2019.
The California law offers immense consumer privacy and provides a framework to protect their personal data. Consumers may conduct data queries on multiple levels, block data sales, request data deletions and more.
It is conceivable that the law may obstruct debt collectors from conducting skip traces to locate debtors. The fallout could result in increased demand for third-party agencies having greater resources for establishing right-party contacts. Ironically, the law could also make it difficult for lenders or agencies to establish right-party contacts, thus generating even greater intrusion as lenders search through larger segments of consumer data.
Technology, Certification & Data Security
Changes to consumer protection and privacy will create demand for effective collections technology, certification and data security, the second item on the list of debt collection trends for 2019.
A review of the CFPB ruling and the CCPA shows that collectors with cutting-edge collections technology will be better positioned for complying with regulations focused on scrubbing accounts, substantiating debt, conducting compliant contact, maintaining proper documentation, and establishing right-party contacts.
Best-in-class agencies are already compliant with existing laws offering consumer protection, so the compliance changes won’t create new demands on accountability. The laws include the Fair Debt Collection Practices Act, Telephone Consumer Protection Act, and Fair Credit Reporting Act.
These agencies also maintain certifications offering a variety of related checks and balances. Examples include SOC I Type II and SOC 2 Type II audited financial reporting and Payment Card Industry Data Security Standard PCI DSS 3.2 (PCI DSS 3.2).
Rising Consumer Debt
This blog has been tracking rising consumer debt for the last few years, and the situation has not improved according to reliable sources such as the Federal Reserve.
The Quarterly Report on Household Debt and Credit by the Federal Reserve Bank of New York’s Center for Microeconomic Data stated that Q3 2018 was “the 17th consecutive quarter with an increase and the total is now $837 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008.”
The quarterly increases included 1.6 percent on mortgages, 2.2 percent on auto loans, 1.8 percent on credit cards, and 2.6 percent on student loans. See our detailed blog article, “Q3 Report: Millions of Americans Are Seriously Delinquent.”
A significant component of debt collection trends for 2019, these factors will create a backdrop for the anticipated changes in compliance and the need for effective collections technology, certification and data security.
The last two trends were introduced by “3 Debt Collections Trends for 2019,” a video and related article from Arbeit Software.
People Skills of Collectors
The need for hiring debt collectors with soft skills will become more essential as consumer protection laws dig deeper in 2019. This approach is already business as usual at best-in-class agencies, but the current state of low unemployment will make it difficult to find enough collectors who communicate effectively with associates and indebted consumers.
In 2017, our team looked at their attributes in “The Profile of a Successful Debt Collector.”
The piece mentioned five essential components:
- Command of compliance
- Excellent conversationalist
- Rebound personality
- Technology literacy
- Driven personality
So how do agencies attract such talented individuals? The answer lies in establishing company cultures that attract quality individuals.
There aren’t rules for creating and maintaining healthy company cultures, but the end result should be a workplace where collectors feel validated, well compensated and want to stay employed. This retention will engender collectors who receive ongoing compliance training and are comfortable in the role of asking consumers to repay their debts. Companies with positive cultures also encourage commitment, teamwork, accountability and philanthropy.
Finally, employees who receive fair treatment from their employer are more inclined to treat debtors in a professional and ethical manner at all times.
Takeaways from Debt Collection Trends for 2019
The debt collection trends for 2019 offer two takeaways. First, the proposed changes will not be traumatic for best-in-class debt collection agencies already engaged in compliant practices. In addition, some companies and financial institutions currently conducting their own collections may determine that contracting a third-party agency is more cost effective than complying with the new regulations.
Companies interested in contracting a debt collection agency with the above qualifications are encouraged to contact Optio Solutions to discuss an individualized collections strategy that will create a favorable return on investment, brand protection and consumer retention.