Press Launches Fresh Round of Collector Scrutiny

You may have noticed a lot of articles in the mainstream media recently on debt collection agencies. Nothing new for the accounts receivable management industry, but the focus of the pieces has changed quite a bit over the past year.

Used to be, when a newspaper ran a story about a collection agency, it was to highlight the financial ruination an ARM firm was visiting upon unwitting – and completely innocent, of course – consumers. Over the past couple of months, the trend has shifted to highlighting the financial ruination of the collection agencies themselves as recovered dollars are increasingly hard to come by. Part “News of the Weird”, part supposed karmic grave-dancing, these articles were simply pointing out that things are so bad, even collection agencies are having a rough go of it.

And it’s not like we at insideARM have been completely innocent: our ARM industry confidence survey has shown rapid deterioration in collection performance over the past three quarters, providing plenty fodder for these stories. (Shameless plug: the Q4 2008 Confidence Survey Results will be released later this week)

But over this past weekend, a new kind of story has cropped up: the consumer-focused “know your rights” story. Long a stable of the mainstream press, this new round of stories is a little more ominous, as they offer specific tips on how to chronicle collection correspondence and how to hide assets from collectors.

The genesis of the stories is pretty straightforward. The Associated Press put out a series of articles Friday on how to deal with collectors. The articles came to my attention when the AP reporter called me asking for data on credit card charge-offs. I happily referred her to our research department which supplied the numbers; the article was live online less than two hours later.

The cause for alarm in these articles is the wide circulation they enjoyed over the weekend. In newspapers and Web sites from the San Francisco Chronicle to the Washington Post, the pieces ran. This is actually not a bad thing, as an informed consumer – a fully informed consumer – can be a good person to talk to.

But the specificity of the suggestions leads some of us here to believe that the AP may have gotten wind of a larger story. Remember: the FTC is still sitting on their recommendations for FDCPA reform. The top three suggestions in their bullet-point piece “6 tips for dealing with debt collectors,”: 1) Ask the collector to verify the debt; 2)  Try to work out a payment plan with the debt collector; and 3) Ask the debt collector to accept a settlement for less than you actually owe.

I guess we’ll have to see if these pieces are portending action or just a reaction to a difficult consumer environment.