The consumer financial services industry, and the accounts receivable management (ARM) as a subset, are highly regulated industries— and for good reasons. Both consumers and creditors routinely rely on mandated protections, requirements, and the legal system to navigate fair practices, financial obligations, and how to proceed when those obligations are not met.
Due to the importance of keeping operations compliant with constantly changing regulations and the necessity for legal representation and counsel, the industry has a large need for lawyers to serve in a variety of roles. If you work in the industry, you’ve probably noticed it’s heavily occupied by various legal service providers. If you’ve wondered why but didn’t want to ask, here is a basic overview of some of the specific roles lawyers play across the industry, and why these roles are so important.
Why So Much Oversight?
There tends to be non-partisan consensus based on lessons learned in history that too little regulation in the financial services space can result in far-reaching consequences for all parties as well as the national economy. As explained in the Money Chat article, “What is the CFPB and How Does It Work,” the overall intent and direction of this relatively recent increase in consumer finance governance and rulemaking has increased standards and accountability for “bad actors” as well as transparency and fair practices for consumers.
Such protections have helped the “good actors” by differentiating them, led to greater self-regulating oversight measures and foresight within the industry as demonstrated by the Receivables Management Association Internationals Certification Program, and helped to better insulate the credit ecosystem from disasters caused by the faulty or unsound creditor and consumer practices of the past (such as the subprime mortgage crisis). However, it has also led to the need to be ready to defend one’s business in case of regulatory scrutiny.
General Counsel & Compliance Law
Working within such a regulated environment creates the need to be meticulously diligent with compliance matters. Consumers and consumer attorneys can file regulatory complaints and even lawsuits against creditors, collection firms, and collection agencies over a laundry list of compliance errors. Fairness to consumers, due diligence, and swift remediation of any root causes is always of utmost importance. Some infractions can even stem from seemingly minor, incidental errors; unfortunately, such scenarios are sometimes sought out and preyed upon by more aggressive types of consumer protection attorneys.
These are all reasons why ARM companies often have in-house or external counsel (as well as Errors & Omissions Insurance!) available to advise, defend, and assist in a variety of compliance areas of the business. Lawyers providing compliance counsel can help to ensure things such as policies and procedures are up-to-par; complaints, counterclaims, and lawsuits receive the proper responses; letters are compliant with evolving and location-based specifications; and local/state/national licensing requirements are properly met and maintained.
Creditors may also require the assistance of civil litigation attorneys to pursue legal remedies for the recovery of debt. Legal representation is necessary to pursue or enforce judgments or post-judgment recovery actions such as liens, garnishments, or executions. Creditors’ rights attorneys can also appear in bankruptcy cases to represent the interests of creditors to whom debts are owed, in foreclosure proceedings to protect creditors’ interests on defaulted mortgages, and in repossession actions to protect creditors in other defaulted secured loan scenarios (such as auto loans).
These are just some of the ways creditors’ rights attorneys are critical to the protection of creditors’ recovery abilities. Keep in mind, without the existence of the ARM industry and the ability to recover losses to some degree, issuers would need to compensate in other ways such as increasing fees and interest rates, which can affect even consumers who do have good credit history.
Corporate, Probate, and Consumer Protection Law
Finally, there are a few other common types of law practiced within the industry. As with any type of business environment, sometimes there is a need for a corporate/business lawyer who can assist with things like mergers and acquisitions and other business-related matters.
On the consumer side, especially for those working with disputes/complaints/suits initiated by consumers, one may come across estate planning/probate attorneys and consumers’ rights attorneys. For example, if a consumer is deceased and a deceased scrub doesn’t catch it first, a probate attorney may contact a creditor or collector representing the interest of the deceased individual’s estate, often hired by a beneficiary of the individual. As for consumers’ rights attorneys, they may contact a creditor, collector, court, or regulatory body to dispute a debt, file a counterclaim, file a complaint, file an order to show cause, file a lawsuit, settle a debt, or other actions to represent a consumer.
These are a few of the most common ways you might see lawyers/attorneys at work in the ARM space. This is not an exhaustive explanation but is meant to provide a high-level overview for non-legal employees within the space who may be interested to learn more.
To learn more about the ARM industry as a whole, follow Receivables Info on Facebook, LinkedIn, and YouTube. Be sure to also check out our Money Chat series for more ways to grow in financial education while exploring the receivables landscape.
About Receivables Info
The Receivables Info team is led by receivables management industry veterans who wanted to create a website for the industry, by the industry. Their goal is to provide a voice to high-quality debt buyers, collection agencies, law firms, and industry veterans to share information about their businesses and their place within the marketplace and the community. The website provides relevant news alerts, articles, videos, and other receivables-related information to industry partners and colleagues around the industry and the globe. Receivables Info is also home to financial education resources for consumers through series like Money Chat.
The information contained in this article is meant to serve as general guidance for entry-level to mid-level ARM industry professionals and is not meant to serve as comprehensive business, legal, or financial advice.