Listen to this articleThe debt industry needs to pay a great deal of attention to the principles of compliance. When debt collectors are not compliant with the rules and regulations that cover their activities, they could open themselves up to a variety of costly lawsuits and settlements as well as damaging the reputation of their companies.
When debt collection and management firms do not do their due diligence in making sure they comply with all of the relevant laws, they put themselves at a serious disadvantage. Pacific Collection Group provides guidelines for debt industry firms that will help them do their jobs with integrity.
Be Aware of the Laws
First and foremost, debt industry professionals need to keep abreast of any changes to the laws that govern their activities. The federal Consumer Financial Protection Bureau or CFPB governs the national laws that regulate the debt industry. The CFPB provides quarterly guidance to the debt industry regarding best practices.
The CFPB governs debt collection in the areas of mortgages, credit cards, prepaid credit cards, and payday lending. All of these branches of the debt industry have rules and guidelines that must be followed for the companies to operate under the law.
In addition to federal statutes, most states have their own laws governing debt collection. Companies attempting to recoup losses should always be aware of the regulations in their own state as well as those that apply in the borrower’s home state.
Principles of Fairness
Debt industry firms should always operate above-board and in compliance with relevant laws. Some of the principles of fairness that apply to this industry can be carried over to other areas of finance as well. Above all, the debtor needs to be treated fairly and with respect.
Prohibited Activities
The debt collection firm must abide by state and local regulations when attempting to recoup a sum of money. Unfair practices include pretending to be an agency of the government or an attorney, threatening the debtor with a false lawsuit, and contacting employers when they have agreed not to do so.
Other prohibited activities include harassing or abusing the debtor. They may not call in a repeated fashion with the goal of annoying the debtor. They must not use profane language or threaten the debtor with violence. They cannot publish the debtor’s name on a list, but they are allowed to report this information to the credit bureaus under the law.
They must not contact the debtor at work unless they have authorized the company to do so. They are not allowed to call before 8 AM or after 9 PM. If a lawyer is involved with collecting the debt, the debt collection company needs to talk to the lawyer, not the debtor.
Debt collecting firms must be above-board with their practices. They need to identify themselves properly when making calls and sending letters. They must not misrepresent how much the debtor owes. They also cannot claim that they are lawyers, government agencies, or credit reporting companies.
Financial Fairness
Financial principles of fairness that a debt collection firm must follow include not collecting any fees, interest, or charges other than the debt they were contracted to recoup. They should not deposit post-dated checks before the date written on the check. They must also send their mail without any outward notification that it is from a debt collector. This prevents the debtor from
being shamed through the receipt of their mail.
The Importance of Compliance
Debt industry firms that do not abide by these regulations are vulnerable to lawsuits and government fines. They will gain a poor reputation in the community, leading to a loss of income for the company. In addition, debt collection firms will find that they have poor leverage when dealing with debtors if they are known to engage in unfair practices.
In addition to avoiding fines and a loss of reputation, debt collection firms should treat their clients fairly for its own sake. Many people suffer from financial problems, and harassing or shaming them is an underhanded way to do business. People who work for disrespected debt collection firms can become jaded about their work and can fall into the trap of treating people poorly.
Setting an Example
As an expert in the debt industry, Pacific Collection Group exemplifies the best qualities of debt collection. This company provides quality service to its clients while treating debtors with respect. All debt industry professionals need to keep these principles in mind, and they need to make sure that they are compliant with the many laws that govern their operations.
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