Debt Collection 101: Regulations & Compliance

Posted by Joey Nichols on Jul 20, 2020 8:00:00 AM

Compliance management is a disciple that cannot, and shouldn’t be taken lightly no matter what industry you are in. However, when it comes to collections, it is even more pertinent to success. Over the years, new regulations and compliance policies are enforced and/or amended, differentiating the way agencies collect and emphasizing the need for adaptation. Although collectors are legally entitled to attempt to collect all owed debts, there are restrictions on the methodology they utilize including the Fair Debt Collection Practices Act, Fair Credit Reporting Act, and Software Compliance.

The Fair Debt Collection Practices Act (FDCPA) 

Enforced by the Federal Trade Commission (FTC) since 1978, The Fair Debt Collections Practices Act (FDCPA) has been the main federal law that governs the collections industry. Working to eliminate abusive and unfair debt collection practices, the FDCPA also protects collectors from unlawful competition and gives consumers a way to validate the accuracy of their debts. The FDCPA also prohibits collectors from the following: 

  • Distributing false information 
  • Reporting false information to credit companies 
  • Harassing consumers 
  • Contacting debtors at unusual times and places 
  • Utilizing unethical ways to collect debt 
  • And LOTS more.  

However, its regulations only apply to debt incurred for reasons related to mortgages, credit cards, medical debts, and any other debts related to personal or familial matters. The FDCPA does not cover business or corporate debt.  

The FDCPA is enforced by the Consumer Financial Protection Bureau (CFPB), responsible for maintaining and updating regulations by monitoring both collection agencies and consumers. In fact, the CFPB was responsible for the recent change that requires agencies to have a compliance management system in place, challenging agencies’ collection methods and affecting their bottom line.  

Software Compliance 

It’s no secret that all technology should be secure. However, debt collections technology in-particular requires security in both the mechanics of the program and in compliance obligations. Both aspects of security are of paramount importance. In fact, as technology continues to change, the importance continues to increase as developers and collectors alike must know their role in complying with both Federal and State laws.  

As a developer, security awareness and how the technology handles, encrypts, and transmits data over networks must be taken into account. It is important to monitor policies and procedures for protecting data over open and closed networks, as well as performing routine risk assessments. The most efficient programmers are adept at anticipating the needs of the industry and responding to client needs quickly. However, when it comes to technical compliance, these needs must also be aligned with parameters that will inevitably become more and more strict as time goes onespecially as they relate to omni-channel communication methods.  

For instance, the Telephone Consumer Protection Act (TCPA) specifically addresses debt collection agencies that use the telephone as a tool to do their work. The TCPA is governed by the Federal Communications Commission (FCC) and outlines parameters for when collections calls are allowed to take place, and the legal methods of automated dialer technology. In order to communicate via email and text messaging while staying in compliance, collectors must first obtain the authority to use such measures by the debtor themselves, and subsequently keep accurate records of those that do. 

As a collection agency, safeguards must be made to protect client data at all costs through the use of a Compliance Management System (CMS)When training debt collectors and their client partners, it is important that the experience is collaborative. At the same time, it is important to protecting private debtor files using transmission efforts that ensure privacy, while allowing agents to see what is necessary to perform the collection activity.  

State Laws 

Many states also have laws about debt collection practices. In fact, many of them bare resemblance to the FDCPA. Keep in mind that your state may have an Unfair and Deceptive Acts and Practices law which applies to debt collection, and therefore must be followed closely. 

 

Sources: 

LexisNexis,

ACA International

PDC Flow

Federal Trade Commission (FTC)

Topics: Insider, Compliance

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