Debt Collector Registry and Dispute Resolution Proposal May Alienate Prominent ACA Affiliate

Hoping to mitigate the impact of potential new government regulation (“Proposed Consumer Financial Protection Agency May Oversee FDCPA Enforcement,” June 25), ACA International recently told its members that it will explore forming a debt collector registry and dispute resolution program to address the growing number of complaints against the accounts receivable management industry.

In a letter to its membership in late July, ACA said that a task force it created in December 2008 to explore the creation of a self regulatory organization (SRO) for the debt collection and purchasing industry recently recommended the creation of a Debt Collector Registry and National Debt Collection Dispute Resolution Program. ACA’s Executive Committee issued a proposal to further explore the creation of the programs, which it presented to its Board of Directors.

But the proposal, which passed on a 36-30 vote by ACA’s board of directors at the annual meeting last month in Las Vegas, has already caused a rift within the ACA membership.  The California Association of Collectors (CAC) tells insideARM that its members are preparing to vote on a motion to rewrite its bylaws to allow ARM companies CAC membership without the current prerequisite ACA membership.

Lloyd Dix, vice president and general counsel of Union Adjustment Company of Burbank, Calif., helped draft the motion that will be voted on in September at CAC’s annual meeting. Dix said he and some other CAC members are concerned that ACA is straying from its mission of being an industry advocate and taking action on core issues without membership input. He pointed to recent actions by the board of directors to purchase a $1 million office in Washington, D.C., increase dues to shore up reserves and allocate thousands of dollars of funding to explore forming a debt collector registry and complaint resolution program without input from the general membership.  

“They are moving the association in a completely new direction and not asking the general membership,” Dix said. “I don’t believe the ACA had enough dialogue on these issues. I object to what they’ve done and to the way they’ve done it.”

ACA bylaws require members of affiliate associations to be ACA members. If CAC members pass the motion as is, CAC would no longer be the official state unit for ACA, said Rozanne Andersen, ACA executive vice president and general counsel. However, its 400 members, which represent roughly 12 percent of the ACA membership, could become ACA members.  Andersen said ACA may also seek to make another chapter its official state unit for California.

“We’re hopeful that will not happen,” Andersen said. “It’s premature to cut the line. We’re still very much in a study phase [of the SRO proposal].”

ACA said it is moving forward with plans to study the viability of a collector registry and complaint resolution program because there is a movement in the government to do the same.

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“ACA has the opportunity to proactively be part of the solution developed by Congress rather than be responsive to a program implemented by the government,” ACA’s president, Karolyn Rubin, wrote in a letter to members.

Although ACA’s board voted to proceed with a viability study for the SRO by a small margin, Kaulkin Ginsberg Associate Michael Lamm said he believes that collection agencies should understand the need for such an organization.  

“What they don’t understand is the rules and what is going to govern it,” he said. “It’s a great idea.  Let’s figure out the details and make sure the details are in line with what the members in this industry all feel is appropriate.”

ACA, however, is weeks away from finalizing a self regulatory program it can carry to ACA members or take to federal regulators and lawmakers.  So far it has told members that the Debt Collector Registry would require all entities and individuals who fall within the definition of debt collector under the Fair Debt Collection Practices Act (FDCPA) or state law to register as a debt collector and pay an annual registration fee, which has not yet been determined. Individual debt collectors would have to take and pass an exam proving their knowledge of the laws regulating the industry in order to be eligible for registration.

Meanwhile, the ACA envisions that the National Debt Collection Dispute Resolution Program would resolve any complaints that are filed by consumers against collection agencies, individual debt collectors and debt purchasers. ACA board members hope the Federal Trade Commission, state attorneys general and state regulators would forward the complaints they receive to the resolution program, where it would provide mediation and arbitration services for the debt collection and debt purchasing industry.

Jerry Greenblatt, president of El Cajon, Calif.-based Inland Capital Services, told insideARM that ACA shouldn’t be in the regulation business. He said the programs ACA has proposed would not preempt any federal or state agency, just add another layer of mandatory licensing and expense on industry members, which could put many small collection agencies out of business.

“There’s nothing to negate any of the legal challenges we face,” said Greenblatt who plans to vote in favor of Dix’s motion.  "This registry is looking to address the biggest offenders, but those people are not going to register and they are still going to be out there.”

Andersen, however, contends that if the FTC, the industry’s current regulator, buys into ACA’s SRO program it could bring “professionalism to the industry not seen in the past.”