A lack of scholarly research and concerns whether additional regulations will make the collections industry better or worse are the reasons why a professor from George Mason University spent two years working on a report that was released earlier this week.
Prof. Todd Zywicki, who happens to have a seat on DBA International’s Certification Council, published the report, “The Law and Economics of Consumer Debt Collection and Its Regulation” to examine whether additional rules, including the Consumer Financial Protection Bureau’s proposed debt collection rule, will have a positive or negative impact on the industry.
“This is an industry that is under a lot of heat,” Zywicki said, adding that not many papers have been published on the industry in the past two or three decades. In fact, Zywicki mentioned that the peer review portion of the publishing process may have taken longer than expected because there are not a lot of academic experts in the field.
Zywicki was hoping to stir a debate about the pros and cons of additional regulation on the industry, especially as the CFPB contemplates its proposed rule.
“A lot of the low-hanging [regulatory] fruit has been picked,” Zywicki said. “With new regulation, will that make the system better or worse?”
Zywicki did note in his report that the new rules could help benefit the industry, especially in the area of customer communication. Current laws and regulations were written before the advent of cell phones, email, and text messaging and as more consumers ditch landline phones, there is a need for collectors to be able to contact debtors using the communication tools that the debtors have.
Collection agencies are encouraged to read the paper and use it as a tool to help in establishing their internal best practices, balancing those against what the CFPB and other regulators are doing, and develop an effective system, Zywicki said.
