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Due to the sensitive nature of its work, the accounts receivable management (ARM) industry is closely scrutinized by regulators and the general public alike. Keeping abreast of this comprehensive regulatory environment is one of the primary challenges facing the industry. To this end, Kaulkin Ginsberg identified a number of different laws and regulatory trends most critical for ARM companies:
Critical Laws in Accounts Receivable Management
- Fair Debt Collection Practices Act (1977)
The Fair Debt Collection Practices Act (FDCPA) establishes guidelines on how, when, and where a collector may contact a debtor. It defines abusive practices (e.g., harassment or misleading representations), specifies notice and disclosure requirements, and outlines enforcement mechanisms against collectors. Business debts are excluded in the scope of the FDCPA.
- Telephone Consumer Protection Act (1991)
The Telephone Consumer Protection Act (TCPA) regulates telemarketing, autodialed, and pre-recorded calls, as well as text messages and unsolicited faxes. Specifically, the TCPA prohibits telemarketing and advertising calls before 8:00 AM or after 9:00 PM (recipient’s time), requires the solicitors (that is, those making the call) to keep a do-not-call (DNC) list, and compels solicitors to provide their name, the name of entity responsible for the call, and a contact address.
Current Trends in Compliance
- Regulation F
Regulation F represents the most significant change to the rules imposed on ARM companies by the Federal Government since the initial passage of the FDCPA in 1977. Specifically, Regulation F limits the number of phone call attempts to consumers, sets guidelines for the use of digital communications in collections, further defines the requirements for a validation notice, and creates a limited content message for use by collectors. Both Regulation F and a supplemental rule dealing with time-barred debt had an effective date of November 30, 2021.
- Consumer lawsuits can be a major driver of costs for ARM companies, especially if the suit in question is class action in nature. FDCPA lawsuits have steadily declined at an average annual rate of 13.4% and are projected to total 6,751 in 2021. This figure should rise in 2022 as ARM companies get used to Regulation F and consumers take advantage. TCPA lawsuits reached a high of 4,770 in 2016, but since then, the figure has declined at an annual rate, on average, of 8.8% to 3,302 in 2020. Based on the year-to-date total as of September, total TCPA lawsuits are set to fall to just 1,852. FCRA lawsuits, meanwhile, have climbed at an average annual rate of 13.4% to a projected 5,421 in 2021. ARM companies may benefit from reviewing their FCRA compliance protocols to avoid rising suits going forward.
FDCPA, TCPA, and FCRA Litigation Trends
Source: Kaulkin Ginsberg & WebRecon LLC
*2021 data based on year-to-date totals from September 2021