The year is gradually running to a close, and in a couple of months, 2020 rides in. People do a lot of spending, and creditors are giving out loans while expecting repayments before the end of the year. Debt collection agencies are on the lookout for debtors refusing to pay to collect the money owed successfully.
A collection agency uses different legal means to get debtors to pay up their debts. They can be middlemen working with some agencies or independent agencies. Debt collection agencies are usually niche-specific. This means that some agencies might just be focused on repayment of credit cards and bills. Also, some other ones are focused on recovering student loans, mortgage loans, and automobile loans, etc.
Many collection agencies have debt limits; some do not help in collecting any amount less than $1000. In the same vein, some agencies collect any amount depending on the percentage gain they will make from the collection.
As the new year is fast approaching, we have studied this industry and discovered challenges that could limit the successful collection of loans and debts. The top 3 hurdles which will be faced by debt collection agencies include;
Debt collectors are third-party agencies. They are guided by practices and laid down rules governing how and when agencies can legally contact and request for loan payment from delinquent individuals.
The Fair Debt Collection Practices Act, which is an amendment to the Consumer Credit Protection Act,1968 is the official act guiding agencies when it comes to debt collections. This act has some laid down rules which collection agencies must abide by when acting as third-party in the debt collection process.
As 2020 is approaching, individuals are getting more aware of their legal rights, and as such, they know how debt collection works. Debtors have the right to file a legal suit against any debt collection agency who violates the rules guiding debt collection.
Some of the guides in these acts are very important. If flouted, debtors can capitalize on and them to use against the agency reaching out to them. One of these regulations is that debt collection agencies can contact debtors via limited communication sources. Also, they must state the name of their company and the creditor they are working for when contacting the debtor. They must also say the amount payable by the debtor and allow the debtor to verify this information. The collection agency must also send a written “validation notice” to the debtor within five days of contacting the debtor.
Asides this, the collection agency is also not permitted to reach out to the debtor before 8:00 am or 9:00 pm. The collection agency must also respect the debtor’s privacy by not divulging any information relating to the debt to the debtor’s friends, neighbors, relatives, or even employers.
The awareness of debtors to this act is getting increased daily. Lawyers and advocates are now getting individuals to be more aware of their rights, and so by 2020, all these guides might be working against any debt collection agency who does not abide by the regulations.
Also, in May 2019, the CFPB (Consumer Financial Protection Bureau) proposed an update to the Fair Debt Collection Practices Act. The proposed law would help Data Collection Agencies to contact debtors via channels and lead to an increase in communication for fast repayments. Although it is being reviewed, it would affect the way the operations of debt collection agencies when passed.
Top economists and markets experts have predicted a looming economic recession approaching in the year 2020. The predictions are between 25%-60%. This recession is palpable and very possible. This is as a result of the ongoing trade wars between the US and some other countries trading actively in the country. Also, the election is approaching as November 2020 is just around the corner; this can affect just anything in the second half of next year.
How will this affect debt collection agencies? During recession periods, assets values fall rapidly, and liabilities increases. Thus, investors and lenders avoid taking risks as much as possible. During a recession, a lot of individuals might have to change jobs, and most times, it is from a high-income job to a low-income job.
During this time, most people don’t take loans, and it is because they won’t be able to pay back due to interest fluctuations during the economic recession. So, many debt collection agencies might find it demanding to get clients during the period of recession. Lenders watch carefully before releasing any amount, and borrowers are set limits to their borrowings. Most debt collection agencies might, at this period, start having to handle very tough cases because only the tough ones choose to be debtors around this period.
It is no longer news that by November 2020, the two parties, Republican and Democrats will be going headlong in the contest for power in the United States election and whoever emerges will significantly affect the finance market, especially that of student loans.
According to the NBC News, the view of several democrat aspirants is that student loan which now stands over $1.6 trillion in recent years should be either canceled or limited. Also, prominent aspirants such as Donald Trump, Elizabeth Warren, Kamala Harris, and many others are in support of tuition-free public institutions.
So, if the Democrats win the elections, then it automatically means that student loans might be scrapped or significantly reduced. This decision will tremendously affect debt collection agencies as it will substantially reduce their operations. Debt collection agencies gain a lot from student loans because it is easier to get repayment from these. So, if there is a cancellation or limitation in any form, then, they might have to watch out for stricter challenges in 2020
These hurdles seem palpable and unavoidable. However, agencies with a good sense of projections will start planning how best to overcome the challenges in the coming year. Thus, agencies can quickly learn to walk their ways through each without sustaining any significant hurt or setback.