Creditors Play an Unrecognized and Powerful Role in the Debt Collection Process

Stephanie Eidelman

As the folks at the Consumer Financial Protection Bureau get up to speed, I’d like them to consider a seldom-discussed dynamic that is an important driver for upstanding debt collection agencies: the critical role that creditors play in the behavior of their agency vendors.

The following is an exerpt from a blog I posted today on Forbes.com. You can read the rest of it there.

Debt Collectors are in a tough spot.  They get blamed for all evil-doing when it comes to calling consumers and asking payment for debts owed.  What is almost never talked about is that these companies are hired by someone – a creditor – and the creditor plays a much bigger role in the behavior of debt collection agencies than most people realize.

To be clear, I am talking about “3^rd party” collectors – those hired by creditors to collect on past due bills.  While most reporters like to repeat the idea that debt collectors pay “pennies on the dollar for old debt and then use strong arm tactics to collect”, this is in most cases not true.  In most cases, we’re talking about vendors who are hired by companies like banks, hospitals, retailers, utilities, government entities, doctors’ offices, dentists — you get the picture – and paid on contingency to collect what they can on behalf of the creditor.

To be sure, actions of collectors are regulated by law, and they are responsible to adhere to these rules.  Some of these rules, by the way, contradict each other, making it pretty difficult even for those who are stand-up, 100% law abiding companies, to be 100% law abiding.

Read the rest of this post on Forbes.com.