Analyzing the GAO Recommendations for FDCPA Reform

It’s been only a few days since the Government Accountability Office (GAO) released its report on credit card debt collection practices, complete with specific recommendations to Congress on modifications to the Fair Debt Collection Practices Act (FDCPA), (“Government Report Recommends Significant Changes to FDCPA,” Oct. 22).

But the accounts receivable management industry has certainly taken note.

First, if you haven’t had a chance to read the report in its entirety, take some time to do so: http://www.gao.gov/new.items/d09748.pdf. Yes, it’s a long government report, but it’s a fascinating look at how this country’s rulemaking apparatus rationalizes the regulatory environment it creates. There’s some really interesting stuff in there.

Second, understand that the report is directed to members of Congress. The recommendations that are laid out in the document will have to go through the formal lawmaking process.

And that’s the point of one of the recommendations. The GAO said that the Federal Trade Commission (FTC), the debt collection industry’s current regulator, should have the authority to make changes to the law when it sees fit. This would mean that the agency could take input from the industry and consumers and alter the law without having to go through Congress. It would also mean that collection agencies would not need to rely on very rare FTC opinions and case law to interpret some of the gray areas of the FDCPA.

For that and other reasons, ACA International sees the report as a major positive. Adam Peterman, ACA’s government affairs director, told me in a message last week that the group is “happy that they’ve pointed out a lot of the issues we’ve been trying to point out.”

Indeed, the recommendation that stands out the most is the one where the GAO charges Congress to update the FDCPA to “reflect technologies that were not prevalent when the act was originally enacted.” The ARM industry has been noting the antiquated nature of the FDCPA, originally passed in 1977, for years. With the backing of a group like the GAO, the FDCPA may soon clarify issues surrounding the use of cell phones, answering machines, predictive dialers, and even email.

But I’ve also heard some words of caution surrounding the report. The third official recommendation to Congress was that the FDCPA be modified to “help ensure that debt collectors and debt buyers have adequate information about the debts transferred and adequate documentation to verify the debts they seek to collect from consumers.”

A debt buyer that I spoke to last week noted that this language was very scary. Asking specifically not to be identified, he said that Congress could interpret this many different ways. And in the current legislative and regulatory environment – with consumer protection being the operative theme in Washington – he said there is no reason to be optimistic about lawmakers’ interpretation of that recommendation.

When forced to put a silver lining on things, our anonymous debt purchaser said that Congress could put the onus on creditors on the documentation/media side of things.

One thing is clear from the report, however: meaningful reform is coming for the FDCPA.

The FTC in early December wraps up its series of three panel discussions on legal collections in Washington, after issuing an FDCPA report earlier this year. Expect recommendations from the regulator to come quickly in light of the GAO report.

Of course, the whole matter then goes before Congress, where the real battle begins. The industry should definitely view all of these reports and recommendations as a beginning rather than an end.