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Ed Wallen | 05 May, 2022

The Fair Debt Collection Practices Act (FDCPA): From compliance to best practice

The relationship between consumers and debt collectors has changed significantly over the years – largely due to the influence of the Fair Debt Collection Practices Act (FDCPA).

The FDCPA is a federal law enacted in the United States Congress to eliminate anti-consumer practices in collections and recovery. But how exactly does the FDCPA achieve this and what effects has it had on the industry?

What is the Fair Debt Collection Practices Act (FDCPA)?

The FDCPA was originally enacted by the US in 1978 and has seen various amendments to adapt to the ever changing landscape of technology – most recently the amendment of Regulation F.

While the act is a consumer protection amendment specifically focusing on the actions of third-party debt collectors, many states now have almost identical legislation applying to the original creditors. The goals of the FDCPA and similar laws are to protect consumers from abusive communications and harassment while ensuring they’re provided with sufficient information to make educated decisions about their debt.

In recent years, the benefits of maintaining a cooperative, respectful and positive relationship with customers has grown clearer for organizations. Helping the customer feel supported in their debt management helps banks and other lenders build a more trusting and stable customer base.

How does the FDCPA work?

The main aspect of the FDCPA and similar legislation is to establish the form and frequency of permissible communications between debt collectors and consumers. The law covers a wide range of restrictions on communicating with consumers, including a debt collector being limited to seven calls within the space of seven days, or being prevented from contacting consumers at inconvenient times. Ultimately, it offers consumers the legal backing to protect themselves from potentially harmful situations while providing an incentive for businesses to create cooperative and positive relationships.

How has the FDCPA improved best practice in collections and recovery?

The original introduction of FDCPA saw many businesses initially struggle to adapt to the restrictions, with many describing it a barrier to collecting debt. But whereas once the FDCPA was largely seen as an irritation, over the years it has guided improvements in debt collection practice which have proved beneficial for collectors and consumers alike, and extend far beyond the act’s initial purpose.

The most forward-thinking organizations realize the benefits of following cooperative and positive practices in their collections operations. By accommodating the needs of the consumer, organizations are able to build a more satisfied and well-supported customer base through trust, ultimately helping to boost retention.

Consumers are now provided with the relevant information they need, contacted at times that are convenient for them and at a limited rate. But, rather than simply comply with the FDCPA and related legislation, organizations now see the financial and social benefits of providing their customers with a range of additional services and benefits; consumers can now use specific platforms and debt validation services to help them manage their debt, fostering a more cooperative and beneficial relationship.

The emphasis on the relationship between business and consumer has helped streamline the debt collection process. Consumers get a more supportive experience to help them manage and resolve their debt, and businesses are able to reach and retain a customer base through their positive actions.

Building stronger relationships with your customers

The importance of customer relations for financial institutions is growing, with the recent introduction of the FDCPA’s regulation F, putting further restrictions on how debt collectors can contact consumers. At C&R Software, we put the customer and debt collector relationship at the heart of everything we do. We see a cooperative relationship between debtor and debt collector as an important factor in collections and recovery, and provide the software to achieve this.

The Debt Manager solution is designed to make the process of collection simpler, more effective and more responsive to consumer needs. An optimized system results in a more streamlined process for agents and consumers alike.

Is it time to streamline your own collections and recovery operations? Contact us today to learn how we can help you build a more tailored experience for your customers’ individual needs, keeping you fully compliant with all legislation.

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