Postal Rate Increase Raises Questions for ARM Communications

In a little over a month, debt collection agencies will see their operating expenses increase. The United States Postal Service won approval Wednesday from the Postal Regulatory Commission to raise mailing service prices on commercial postage for the second time in as many years.

Effective April 17, the price of all presorted commercial mail could increase as much as 1.741 percent. Retail rates will remain the same.

Some collection agencies may be able to mitigate the expense by persuading consumers to visit their website to set up payment arrangements or communicate by email.  But no agency will be able to avoid the additional expense altogether; the Fair Debt Collection Practices Act (FDCPA) requires debt collection agencies to send an initial written communication, which most courts, creditors and collection agencies interpret as deliverable through first class mail.

Industry experts tell insideARM that sending collection notices via first class mail falls into the top three expenses for collections agencies, along with personnel and telephone costs. According to ACA International’s 2010 Benchmarking survey, collection agencies sent out, on average, 41,400 pieces of mail per month in 2009.

Rozanne Andersen, national compliance attorney with Morrison Fenske & Sund in Minnetonka, Minn., estimates that a collection agency sends, on average, seven letters via first class mail to every consumer it attempts to collect payment from. Email communication has the potential to limit the necessary first class mail communication to just one per consumer.

“So many banks, utilities, cell phone carriers and creditors are working hard to encourage consumers to go on-line and establish their account and their communications electronically. I predict that will also happen in the collections space,” Andersen said, adding that it already is happening in the student loan sector.

Because many security concerns surrounding electronic communications and payments have been resolved, the key to making electronic communication standard practice is consumer consent, Andersen said. Consumers can demonstrate their consent through actions, such as following up a telephone conversation with a written consent sent either by snail mail or email, she said. Consumers also may consent by going to an agency’s secure website to establish an account and make a payment.

Even though the federal Electronic Signatures in Global and National Commerce Act of 2000 (ESIGN) allows for the use of electronic documentation in interstate and foreign commerce, ACA supports modernizing the FDCPA to specifically address electronic collection communications, said Valerie Hayes, ACA’s General Counsel and Vice President of Legal and Government Affairs

“Until the law is modernized, consumers will continue to be at a disadvantage because the ambiguities in the FDCPA make electronic communications problematic for the industry,” Hayes said.

Vendors in the ARM mailing services space are also waiting on FDCPA clarification around electronic communications. Some are ready to deploy email products and services once the regulatory particulars have been worked out. But in the meantime, electronic networks are being incorporated into traditional mail workflows.

Georgia-based Envelopes & Forms Inc. provides mail services to many collection agencies.  The ARM industry as a whole has been reluctant to take advantage of electronic letter presentation services, according to Chris Deedy, President. But there are plenty of options for clients that want a more robust traditional mailing solution.

The company’s subsidiary offers a product that leverages Intelligent Mail Barcodes (IMB). According to Mike Barfield, SureBill’s vice president, an IMB not only informs users within 24 hours when someone has filed a national change of address notice (NOCA), it can assign an identification number to each piece of mail associated with the customer or account and track it has it moves through the mail system.

“The ID number allows us to track if a payment really is in the mail,” Barfield said.

Brian Davis, CEO of collection agency Coast Professional, Inc. is typical of the executives faced with the quandary electronic communication presents to ARM firms. He said he believes electronic communication is the preferred method for many of the consumers his agency contacts. He also wants the agency, which specializes in education receivables, to use the technology because he believes it would save the company time, money and is more consumer-friendly.  But the West Monroe, LA-based agency doesn’t solicit consumers to communicate electronically to avoid running afoul of FDCPA.

“We don’t invite it and do not want to participate in email communication until it’s clarified, until we know specifically that it doesn’t present any technical or material violation to the consumer,” Davis said.