Last year the FTC received 280,998 complaints about questionable debt collection practices. We think consumers and responsible members of the industry can agree that number is higher than it should be. The FTC is fighting that battle on three fronts. We’ve brought dozens of cases – both on our own and with state partners – to enforce the Fair Debt Collection Practices Act and Section 5. We’ve fought to have 75 bad apples removed from the debt collection barrel. And we continue to educate consumers and businesses about their rights and responsibilities in the collections process. But there’s another important effort underway.
Recently I was a panelist at a meeting of DBA International, a trade association that represents many members of the debt buying business, and I was asked about DBA’s ongoing efforts to put together a program of industry self-regulation.
The FTC has always been an enthusiastic proponent of effective self-regulation. We think the benefits are obvious. Self-regulation can encourage compliance through an alternative dispute resolution approach that is far less disruptive than litigation. It can foster fair competition so that law-abiding companies don’t have to go head-to-head with competitors that cross the line. And especially in industries whose reputation has been tarnished by bad apples, it can be an important step toward winning back public confidence.
We’ve also learned that self-regulation is worth doing only if it’s done right. We’ve looked at a lot of self-regulatory set-ups over the years. There’s no one-size-fits-all approach, but the good ones seem to have some characteristics in common.
- Effective self-regulatory programs are transparent. They feature consistent, workable standards that are easily understood by industry members, consumers, and law enforcers. A key component of transparency is avoiding conflicts of interest. No sweetheart deals or smoked-filled rooms. Effective regimens are open, autonomous, and above-board.
- Effective self-regulatory programs are nimble. For most industries, the innovation button seems to be stuck on fast-forward. The best programs stay ahead of the game with active industry monitoring and standards that respond to changes in technology and the marketplace.
- Effective self-regulatory programs have teeth. Self-regulation doesn’t work when there’s lip service, but no bite. An effective enforcement mechanism is essential – for example, referring to law enforcers those who don’t promptly cure their practices.
- Effective self-regulatory programs have industry buy-in. Look at programs that have stood the test of time and what do you see? They all enjoy the widespread support of industry members. Businesses may not always agree with the result, but they respect the integrity of the process. And they put muscle behind it by actively participating and encouraging others to participate, too.
We’ll watch with interest as self-regulatory efforts continue in the debt buying industry and other sectors.