The latest US trends in debt sale should give us all pause for thought. Last month the Federal Trade Commission (FTC) published The Structure and Practices of The Debt Buying Industry, a report it describes as “the first of its kind” empirical study of debt purchasers.
The FTC already receives more complaints about the debt collection industry than any other and, as the industry has expanded, so has the number of complaints. What the study seeks to do is explore if there is a link between debt buying and consumer protection problems.
We could debate why the US market is not reflective of the UK market, but that really does not matter. What matters is that, in the eyes of regulators and legislators in the US, there is a perception that, at all stages of the collection process, there are serious concerns about the quantity and quality of information that debt buyers have and ultimately how American consumers are treated. At the recent Debt Buyers Association Annual Conference in Las Vegas, the mood in the coffee shops and bars (where the real debate is held!) was decidedly downbeat. The view was expressed that the secondary debt sale market is all but over. As for the primary market, the hypersensitivity to negative media exposure fuelled rumours that the larger, high-profile lenders may withdraw entirely from the market in order to address the perceived risk to brand value and reputation.
I know the political and regulatory environments are different in the UK, but there are enough historical parallels in debt sale to suggest that, in this case, it is reasonable to hypothesise that ‘what goes on over there will ultimately come over here’. As an industry, I think we have a choice: await the reputation-driven withdrawal of key players and the slow but sure demise of the debt sale industry in the UK as we know it, or be proactive and provide an alternative method of ‘de-risking’ by putting in place systems and processes to provide detailed information to all parties about every single interaction with every single individual we deal with and that ultimately put the debtor at the heart of what we do.
By Mark Wright, Director of Debt Sale, TDX Group
Read the full article, originally published in the March edition of CCR, here.