An association representing state banking regulators is calling for a “greater effort” to develop “uniform and comprehensive standards for regulation” of the debt collection industry in a white paper that it published providing an overview of the industry and how it is regulated.
The Conference of State Bank Supervisors, which includes regulators from all 50 states and the District of Columbia, published the whitepaper as part of its project, “Reengineering Nonbank Supervision.” The collection industry whitepaper represents one chapter in that document.
The document provides a history and overview of the collection industry, hitting all of the high points to describe how debt collection works from the first- and third-party perspectives, along with providing an overview of the challenges facing the industry, including pointing to “state licensing as creating a high barrier of entry since debt collectors need to be licensed in numerous states.”
Along with making some general predictions about where the industry is heading, the document lays out how debt collection is regulated at the state level. The report also details which states currently require licenses for collectors to operate, and how many licenses those states have approved. States that have enacted their own debt collection laws are also listed, along with a list of states — Iowa, Massachusetts, Minnesota, Missouri, New Hampshire, North Carolina, Oregon, Pennsylvania and South Carolina – where legislation is currently pending.
Noting the fragmented state of the collection industry and the patchwork set of rules and regulations at the state and federal level governing collectors and debt buyers, the report predicts that state regulators will “undoubtedly sharpen their focus on this area and state legislatures will likely respond with new or enhanced laws focused on this important part of the nonbank marketplace.” A more comprehensive set of regulation at the state level would also “result in better supervision of debt collection practices,” the report concludes.
