In December, we examined many of the reasons why the debt sales marketplace has seen a drastic decline in recent years. Mistakes made by various parties have brought a once-thriving industry down. Solutions to these problems are based on a few central ideas: long-term thinking on business decisions, proper vetting of potential buyers, and fighting the right battles.
The Failure of the Industry to Police Itself Collectively
DBA and general licensing and approval came too late to address the problem of rogue debt buyers. The debt industry did not police itself effectively and it was the media, not the debt industry, that reported on illegal practices from debt buyers and collectors.
Solution: DBA’s licensing is a step in the right direction, but it is only a partial solution. A less expensive and less cumbersome path to certification and standards that cater to non-traditional debt collection office roles is necessary. The DBA also needs to be more active in calling out violators, even from within its own ranks.
The Failure of the Industry to Promote Itself Effectively
Little to no promotional work was done to undercut the negative press against the debt industry.
Solution: The debt sales industry needs to actively stand against bad debt buyers and show the difference between good and bad debt buyers. The debt industry should also push against negative press and show the economic benefits of debt buyers.
The Failure of Large Buyers to Engage in Free-Market Practices
Large debt buyers have exclusive contracts with originators and shut out small business collection shops. Large buyers also did not engage regulators well.
Solution: Large buyers need to decide if they will cooperate with big business or rejoin with their small-business roots to create a more active and robust market. If standards are set, large buyers can work with smaller ones to ensure that debts are collected, bought, and sold cleanly and legally.
The Failure of Banks to Provide Excellent Documentation
Banks have long been mediocre at best in providing proper documentation to enforce debts.
Solution: Large buyers should refuse to do business with banks without proper documentation. Providing reasonable documentation will result in fewer disputes and expenses for all.
The Failure of Banks and Sellers to Properly Vet Buyers
Banks and their direct buyers did little to properly vet secondary debt market buyers.
Solution: Banks and buyers should all have processes to vet buyers down the chain and provide clean transfer paperwork. They should also be willing to work with buyers at any point in the chain for long-term protection.
The Failure of Large Debt Buyers to Fight Against Improper FDCPA Claims
Larger debt buyers settled adverse FDCPA claims out of court, rather than fighting against them to establish better legal precedents.
Solution: Pick good battles and win them. The industry should take ground against the bad parts of FDCPA litigation and make decisions with a long-term plan in mind.
The Failure of the Industry to Fight Well on the Local Level
Local businesses did little to push back on state and local political scenes for elections and collections laws.
Solution: The industry should engage with local, state, and national politicians in legislation to protect the industry. Agencies and buyers should know and support politicians on some level.
The Failure of a Small but Significant Handful of Debt Buyers to Play by the Rules
A small but significant number of debt buyers fail to follow the most common-sense rules of collections.
Solution: Call attention to bad debt buyers and stress that they are in the minority.