In Search of a Unified Front on Capitol Hill

Mike Ginsberg

When it comes to the CFPB and regulators in general the goal among debt collectors, debt buyers, collection lawyers, recovery managers and other collection professionals in the United States should be the same: to establish a unified front to address regulatory change impacting collection practices. In light of the CFPB’s Advance Notice of Proposed Rulemaking, having a powerful, unified voice on Capitol Hill has become even more paramount of a goal.

To date, no such unified front exists and, as a result, a growing number of fractional groups are forming where members are voicing their concerns among each other and to their respective industry associations. While concerted and noble efforts are currently underway among these smaller groups, the ARM industry as a whole finds itself scrambling to catch-up instead of having a defined leadership position already established to address regulatory changes as they are being proposed.

This is an unfortunate position to be in because debt collection is not a new service offering. Some have joked that collections is among the oldest professions that ever existed. While some form of collection most likely occurred among cavemen, it was actually the farm barter system in the early 1900s, over a century ago, that gave rise to the earliest form of debt collection as we know it in the United States. Consumer debt started gaining traction in the 1920s when the U.S. economy entered the industrial age. In the late 1930s, some U.S. retailers developed charge accounts designed to be repaid over extended periods of time and those that weren’t were turned over to very small collection agencies to collect the accounts locally and face-to-face. The first industry association, the ACA, was formed in 1939. The practice of extending credit grew rapidly after World War II and in the early 1950’s the predecessors of Visa and MasterCard came into existence. At that time consumer debt was $19 billion.

Debt buying traces its roots back to the 1960s when isolated retail stores sold past due accounts receivable to free up cash to run their operations and to the bankruptcy courts in the late 1970s. Debt buying began in earnest when the RTC sold debt to fund the federal government’s bailout of failed savings and loans.

Debt collection is definitely not new yet the industry does not have a unified voice when it comes to addressing significant matters that have the potential to dramatically alter collection practices and procedures for years to come.

A major social and political topic in recent years has centered on gun control. This important topic has escalated to front page press in recent times as a result of major catastrophes such as the deadly Sandy Hook elementary school shootings last year and the D.C. Navy Yard shootings more recently. Whenever a violent outbreak involving guns occurs, the National Rifle Association is immediately involved to defend gun rights. The NRA claims to be “America’s Longest-Standing Civil Rights Organization,” established nearly 150 years ago. Their CEO, Wayne LaPierre, is placed front and center to vocalize the views of its members, however confrontational those views might be received. LaPierre held this position since 1991 and worked for the NRA since 1977.

While I don’t think it is completely fair to compare gun control to debt collection, I use it only to make an important point. The NRA has a unified and powerful voice to defend gun rights when challenges arise that have the potential to dramatically impact their usage. The ARM industry needs a unified and powerful voice to defend themselves when changes come that impact the industry as a whole too.