FTC Associate Director Writes About Debt-Buying Industry’s Efforts To Regulate Itself

Reilly Dolan, an Acting Associate Director at the Federal Trade Commission wrote a blog post this morning on the debt-buying industry’s attempts to regulate itself.

Dolan was a panelist at DBA International’s recent Executive Summit and he wrote about his experience and what he saw and heard during the time he was embedded in the debt-buying industry.

The FTC has always been an enthusiastic proponent of effective self-regulation. We think the benefits are obvious. Self-regulation can encourage compliance through an alternative dispute resolution approach that is far less disruptive than litigation. It can foster fair competition so that law-abiding companies don’t have to go head-to-head with competitors that cross the line. And especially in industries whose reputation has been tarnished by bad apples, it can be an important step toward winning back public confidence.

Then, Dolan took his post a step further and listed a set of principles that the he and the FTC think should be at the core of any industry’s effort to regulate itself.

1. Effective self-regulatory programs are transparent. They feature consistent, workable standards that are easily understood by industry members, consumers, and law enforcers. A key component of transparency is avoiding conflicts of interest. No sweetheart deals or smoked-filled rooms. Effective regimens are open, autonomous, and above-board.
2. Effective self-regulatory programs are nimble. For most industries, the innovation button seems to be stuck on fast-forward. The best programs stay ahead of the game with active industry monitoring and standards that respond to changes in technology and the marketplace.
3. Effective self-regulatory programs have teeth. Self-regulation doesn’t work when there’s lip service, but no bite. An effective enforcement mechanism is essential – for example, referring to law enforcers those who don’t promptly cure their practices.
4. Effective self-regulatory programs have industry buy-in. Look at programs that have stood the test of time and what do you see? They all enjoy the widespread support of industry members. Businesses may not always agree with the result, but they respect the integrity of the process. And they put muscle behind it by actively participating and encouraging others to participate, too.

Then, he added the kicker:

We’ll watch with interest as self-regulatory efforts continue in the debt buying industry and other sectors.

There has been a lot of discussion on this site over the years about the role that players in the industry should play when it comes to policing. The thinking is that if the industry can police itself, then the regulators like the FTC will not have to swoop in and clean up many of the messes that happen.

How the industry should police itself has been subject to much debate. Some have called for a publicly available blacklist of companies and individuals who should not be allowed to conduct business in the industry. Others have chosen to shame individuals that were thought to have engaged in shady dealings. I think that this site can play a vital role in exposing the ne’er-do-wells of the debt-buying industry. The one key component that is usually lacking when it comes to these kinds of efforts is neutrality. People complain – and in many cases they are right to – because they have an axe to grind. And it can be difficult to wade through the bias to see what’s at the core of the complaint. Because, too often, these complaints lack facts and evidence. They are rants about how someone screwed someone else over. That is not how the industry should regular itself. 

DBA has done a great job, but the scope of it’s powers are limited to those individuals and companies that are members of the association. It can’t sanction a non-member. 

If the industry is truly interested in self-regulation, then it needs to be about business, not personal grudges. It needs to be cold and fact-based, not emotional. It needs to be honest and forthright. And it needs to have both sides of the issue shared. It can’t be one-sided if any policing is going to be effective. Innocent until proven guilty has to be the expectation. 

I look forward to your unemotional comments.