Predicting what may happen in 2024 to collection agencies in the ARM industry is more of an art than a science. Judicial decisions, new Federal regulations from the Federal Communications Commission, the Federal Trade Commission, the U.S. Department of Education, and the Consumer Financial Protection Bureau (CFPB), and ever-increasing state regulations, make it anyone’s guess as to what trends lie ahead.

Some might say the biggest issue facing third-party collection agencies in 2024 is the uncertainty around the CFPB’s future. Others might say the biggest issues include narrowing margins and the increasing costs associated with compliance and security. Either way, four trends are leading the list for the collection industry.

Trend #1: Judicial decisions

According to WebRecon, the leading provider of litigation and complaint statistics and analysis for the ARM industry, litigation against the industry is diverging in the most balanced pattern in recent memory. This is a curious trend.

In 2023, judicial decisions presented unique year-over-year trends. The Telephone Consumer Protection Act (TCPA), the Fair Debt Collection Practices Act (FDCPA) and Regulation F, the Fair Credit Reporting Act (FCRA), and the continuing impact of the Spokeo decision, [Spokeo, Inc., Petitioner v. Thomas Robins 578 US 330 (more) 136 S. Ct. 1540; 194 L. Ed. 2d 635 (regulatory violations do not alone create standing for Federal litigation)] shake out like this:

• TCPA is up (+8.9%)
• FCRA is about even (-.3%)
• FDCPA is down (-10.3%)
• State court filings are on the increase due to the Spokeo decision.

What does this mean for your agency? Do not take your foot off your compliance pedal. If you credit report, be vigilant about compliance with the FCRA and Regulation V. Focus on your investigations of direct and indirect disputes. Remember the TCPA still requires consent to use an artificial voice or prerecorded message to contact a consumer on their cell phone. And be aware that Regulation F litigation is starting to increase with regard to the Model Validation Notice and call restrictions. Finally, take state court litigation seriously. State courts have spawned some of the industry’s worst decisions.

Trend #2: CFPB rulemaking and regulatory action

The future of the CFPB hinges on the U.S. Supreme Court’s pending ruling in the matter of Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited. The issue in this case is: Did the court of appeals err in holding that the statute providing funding to the CFPB (12 U.S.C. § 5497) violates the appropriations clause in Article I, Section 9 of the Constitution, and in vacating a regulation promulgated at a time when the Bureau was receiving such funding.

If the U.S. Supreme Court rules the CFPB’s funding structure violates the appropriations clause of the Constitution, enforcement actions, rulemaking, and supervisory exams may be suspended or terminated until and unless Congress takes action. Should this scenario occur, Congress will likely restructure the CPFB and its source of funding by amending the Wall Street Reform and Consumer Protection Credit Act or by requiring Congress to approve the CFPB’s budget and appropriate funding.

Despite the ruling, current regulatory principles are not going away. In January, the CFPB released three Advisory Opinions. Advisory Opinions are not to be ignored. They provide powerful guidance to the financial services industry and if followed narrowly, provide agencies with a safe harbor against any liability for the alleged law violation.

One of the CFPB’s recent Advisory Opinions related to permissible purposes for furnishing, using, and obtaining consumer reports. One addressed inaccurate background check reports and consumer disclosures and another reminded credit reporting agencies that consumers have a right to their entire credit file any time it is requested. Another addressed the permissibility and process of banks charging junk fees.

What does this mean for your agency? Maintain the status quo. Do not relax your commitment to compliance. The CFPB is not going away now, and it may not go away in the future. Worse yet, while waiting for the U.S. Supreme Court’s decision and to fulfill the CFPB’s strategic plan before November in anticipation of the 2024 election, CFPB enforcement actions, rulemaking, and supervisory exams will very likely increase as will the number and frequency of Advisory Opinions.

Trend #3: Ransomware Attacks

Ransomware is a type of malware that prevents you from accessing your information systems and databases usually by encrypting your files. It is an event often viewed as one that will happen to the other person’s agency. The ransomware event usually begins with an on-screen notification from the cybercriminal, explaining the ransom and how to make the payment to unlock your computer or regain access to your data.

In 2023, at least three collection agencies were subject to a ransomware attack. One was very large and collects healthcare debt, another is a 50-person shop that also collects healthcare debt. In each of these instances, the agencies were forced to shut down for more than three months. The reason for the months of downtime resulted from their wise, but costly, decision to not pay the ransom demanded by the attackers in exchange for decryption. This resulted in needing to completely rebuild the agency’s security and technology infrastructure. Each lost a significant number of healthcare clients. The third agency primarily collects private student loan debt, however, details about the attack were not disclosed.

Collection agencies are attractive to cybersecurity thieves because they use, transmit, and house millions, if not billions, of data points about consumers, their clients, employees, and their leadership team. Compromise of any of this data can not only lead to reputational harm it can lead to dire financial harm.

Ransomware groups will continue targeting businesses because they see the software used by enterprises as vulnerable due to its traditional maintenance cycles. These groups are also developing more secure code, making it harder for security researchers to reverse engineer and analyze.

What does this mean for your agency? No business is immune from a ransomware attack. Attackers usually penetrate your organization by sending spam emails to a member of your staff with the staff member mistakenly responding. Cyber insurance may help after a phishing attack has been successful but training your staff, leadership, board members, and service providers on the ways attackers use spam emails to prompt a reply and the importance of not responding to a phishing email is an effective way to prevent a ransomware attack in the first place.

Agency leaders should take cybersecurity seriously and reduce the vulnerability of their information systems and databases by taking appropriate steps. Most importantly, invest in a disaster recovery plan. An environmental disaster represents an obvious need for a disaster recovery plan. Today, we know ransomware can be more harmful or catastrophic than a natural disaster.

Trend #4: Americans with Disabilities Act (ADA)

If your agency has a website or a payment portal, you probably have an ADA problem. Most agencies have ignored ADA compliance because they think of it as a list of requirements for brick-and-mortar businesses. Nothing could be further from the truth. We all know the plaintiffs’ attorneys have preyed upon the collection industry with frivolous lawsuits, class-action suits, and literally driven agencies out of business. ADA plaintiffs’ attorneys may be next on the list.

Comparatively speaking, these FDCPA predator attorneys are filing fewer FDCPA suits every year and need to find a new cash cow. Hopefully, this is not the first time you have heard that the plaintiffs’ attorneys have found the Americans with Disabilities Act. Of all the trends listed in this article, ADA litigation is the biggest threat against the collection industry. In its June 20, 2023 publication titled, New ILR Research Shows Abusive ADA Lawsuits Skyrocketed, the U.S. Chamber of Commerce Institute of Legal Reform explains the situation.

“The latest ILR research, Preserving Protections, Curbing ADA Litigation Abuse shows Americans with Disabilities Act (ADA) lawsuits have skyrocketed since 2013 and have disproportionately impacted small businesses. Aside from the tens of thousands of examples of abusive and cookie-cutter ADA lawsuits against businesses, the study also found alarming trends nationwide:

• Of the total 103,172 ADA cases filed from January 2009 through April 2023, nearly 75 percent were filed in California, New York, and Florida.
• More than 80 percent of those cases have been brought by “high volume plaintiffs”—those individuals who file at least eight lawsuits annually.
• A 349-percent increase in ADA lawsuits being filed nationwide from 2013 to 2021.”

What does this mean for your agency? It means three things. First, have your IT team run your client-facing website, your consumer-facing website and portal through a free WCAG ADA checker. Within minutes, the program will identify the ADA violations on your site and rank them in terms of priority. There are many ADA checkers available on the internet. Many consider accessScan the industry standard for accessibility testing. It is a free service and is designed to scan for full WCAG Level AA compliance.

Second, you can take steps to immediately correct the non-compliance items on your websites and portals. But, to properly address non-compliant items, you may need to hire a company to assist you.

Third, your trade association’s or industry group’s legislative agenda must include ADA Litigation Abuse. Your insurance company must also keep watch for ADA Litigation Abuse.

Keep watch

2024 brings with it a host of uncertainty for collection agencies. Many anticipated that the U.S. economy would be the biggest area of concern in the coming year. As it turns out, the economy is much farther down on the list of concerns. Instead, the vast amount of legal activity should be top of mind for collection agencies. The results of these and other cases will have a lasting effect on this industry. So will the technology they use to address the results…whatever they are!