Collection Lawsuits Tracking Ahead of Last Year
Strong credit and collections guidelines alongside advanced bank software, helps organizations remain in compliance and avoid litigation. Regulations are there for a reason and companies that are lax in following the rules suffer the consequences.
Recent headlines have tested the industry and forced them to become more resourceful and aware of their practices.
According to the latest report from WebRecon, a data-tracking firm Fair Debt Collection Practices Act cases year-to-date reached 2,125, tracking way ahead (32.3%) of the last year’s 1,606 cases.
In August alone, the CFPB received about an estimated 834 different debt collector complaints with California logging 470 complaints, followed by Texas with 381.
One Bad Apple Should Not Spoil It for Everyone
In one case, Federal prosecutors are seeking to seize hundreds of thousands of dollars from a Concord, N.C.-based company accused of using unfair and fraudulent practices.
The firm is under investigation for the alleged fraud scheme that began in 2011, according to a federal court complaint filed. The forfeiture complaint accuses the company of making up debts and threatening consumers.
The complaint alleges employees allegedly inflated debts as much as 500%, took in payments on already-paid accounts and misrepresented themselves as law enforcement agents, according to prosecutors. Documents further allege the employees threatened debtors to make payments.The Better Business Bureau office in Charlotte, N.C. recently put the firm on its Dirty Dozen list with an "F" ranking.
The complaint states the debt gathering company president also used millions of dollars from his businesses to launder through at least four bank accounts.
These types of cases sometimes often result in new rules – and therein is the concern. Some industry experts implored the CFPB should to consider the impact of further regulation on legitimate businesses, consumers and the economy.
Our Online Self-Guided User Training Modules provides interactive training, to ensure consistent and compliant representation approaches, at no additional cost to support IBS clients, allowing platform users to take the online classes based on their availability.
Don’t Over-Regulate the Industry
Regulation of the industry is essential, but it could go too far in harming consumers and businesses, according to a report.
The study “The Law and Economics of Consumer Debt Collection and its Regulation,” by Todd Zywicki, senior research fellow for the Mercatus Center at George Mason University, noted that while regulations are essential to the credit-based economy, rules that go too far could result in higher interest rates and less access to credit for consumers, especially low-income and high-risk consumers.
Regulation of some practices can have other unintended consequences.
According to report, extensive regulation already exists in the industry. Other factors the CFPB should consider are that restrictions concurrently decrease supply and amplify demand, can lead to adverse impacts on credit card lending relative to other forms of lending, and come at the expense of some consumers who must to pay more for credit and receive less access to credit.
CARM-Pro robust software helps banks and credit unions increase revenues and reduce costs through improvements in compliance, resource efficiency, and superior reporting.