In December, we examined many of the reasons why the debt sales marketplace has seen a drastic decline in recent years. Mistakes made by various parties have brought a once-thriving industry down. Solutions to these problems are based on a few central ideas: long-term thinking on business decisions, proper vetting of potential buyers, and fighting the right battles.
DBA and general licensing and approval came too late to address the problem of rogue debt buyers. The debt industry did not police itself effectively and it was the media, not the debt industry, that reported on illegal practices from debt buyers and collectors.
Solution: DBA’s licensing is a step in the right direction, but it is only a partial solution. A less expensive and less cumbersome path to certification and standards that cater to non-traditional debt collection office roles is necessary. The DBA also needs to be more active in calling out violators, even from within its own ranks.
Little to no promotional work was done to undercut the negative press against the debt industry.
Solution: The debt sales industry needs to actively stand against bad debt buyers and show the difference between good and bad debt buyers. The debt industry should also push against negative press and show the economic benefits of debt buyers.
Large debt buyers have exclusive contracts with originators and shut out small business collection shops. Large buyers also did not engage regulators well.
Solution: Large buyers need to decide if they will cooperate with big business or rejoin with their small-business roots to create a more active and robust market. If standards are set, large buyers can work with smaller ones to ensure that debts are collected, bought, and sold cleanly and legally.
Banks have long been mediocre at best in providing proper documentation to enforce debts.
Solution: Large buyers should refuse to do business with banks without proper documentation. Providing reasonable documentation will result in fewer disputes and expenses for all.
Banks and their direct buyers did little to properly vet secondary debt market buyers.
Solution: Banks and buyers should all have processes to vet buyers down the chain and provide clean transfer paperwork. They should also be willing to work with buyers at any point in the chain for long-term protection.
Larger debt buyers settled adverse FDCPA claims out of court, rather than fighting against them to establish better legal precedents.
Solution: Pick good battles and win them. The industry should take ground against the bad parts of FDCPA litigation and make decisions with a long-term plan in mind.
Local businesses did little to push back on state and local political scenes for elections and collections laws.
Solution: The industry should engage with local, state, and national politicians in legislation to protect the industry. Agencies and buyers should know and support politicians on some level.
A small but significant number of debt buyers fail to follow the most common-sense rules of collections.
Solution: Call attention to bad debt buyers and stress that they are in the minority.
Specialized in Debt Consulting Services, Debt Brokering, Asset Management, Collection Agency Startups, Mortgage Note Transactions, and AI-Driven Solutions.
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