The easy credit of the last decade led to the fall of financial behemoths rocking the U.S. economy like it hadn’t been rocked in decades. In an effort to prevent this from occurring again, Congress passed The Dodd-Frank Act, which lead to the creation of the Consumer Financial Protection Bureau (CFPB), whose sole goal is to protect consumers.   

The CFPB, as well as other finance sector regulators, believe that implementing large, robust compliance systems will greatly reduce risk to both the economy and consumers.  There is a growing misperception that small businesses are a greater risk because they cannot provide the compliance systems large businesses can.  Even if this were true, it ignores the fact that small business inherently provide less risk and greater consumer protection by their very size and the manner in which they operate. Nowhere is the need for the active participation of small businesses greater than in the consumer credit market, especially for those consumers that are the most vulnerable in the credit cycle. 


Small businesses provide greater protection in terms of data security. In an industry that accumulates and stores Personal Identifiable Information (PII), larger companies have the disadvantage of being responsible for vast amounts of information and accounts, as well as potential risks associated with overseas operations. Larger companies are also a more centralized, lucrative target for hackers and criminals seeking such information. Small businesses in this industry have less of this information, fewer physical locations (if they have more than one), and are not nearly as valuable a target for hackers. With the advent of secure cloud technology, small businesses have access to the same tools used by larger businesses.

Small business debt collectors like me tend to operate in geographic regions. Operating in the Pacific Northwest, I have an excellent feel for the local economic situation. Even when the region does well overall economically, pockets remain that are more distressed than others. Local knowledge provides the ability to treat individual consumers compassionately based on the specific market conditions affecting their lives.  

Small business owners are more hands-on in the management and oversight of operations and staff. The flatter and more personal operating structure bodes well for establishing a culture of integrity and sound business practices. Over the last few years, my staff has varied in size from six to 12. At most, the staff person farthest from my office door is only 40 steps away. I am aware of every transaction and can hear the conversations with consumers. I know the compassion and integrity in which consumers are treated.  

Small business owners invest considerable time, capital and sweat equity to build a viable business they can be proud to own. If my business fails, it will have a detrimental effect on my life, the lives of my staff and our families. We cannot push the envelope on practices perceived as unfair or deceptive. We cannot afford to have a rogue employee break consumer protection laws or steal consumer PII. We cannot afford to defend ourselves in long battles with a consumer protection agency or pay a resulting penalty. We cannot afford to risk our reputation with charges of criminal wrongdoing. Consumers are safe with us because we must treat them well.  

Small businesses want to compete by offering a better service and experience for the consumer. Competition in the debt collection industry increases the amount of money that banks recover when they sell accounts, providing increased credit availability for consumers.  

Debt collectors also compete with each other for the limited funds the consumer has to settle their defaulted accounts. When the consumer obtains a sum of cash to settle their accounts (i.e. tax refund, overtime or bonus, funds from family, etc.), they can “shop” those funds to identify the creditor/collector willing to provide the most favorable discount. This competition is good for the consumer as it provides an avenue to reduce or eliminate their debts at a discounted price. 

If an outgrowth of the Dodd Frank Act leads to fewer debt buyers, as has been the trend, there will be fewer companies for the banks to sell accounts to, reducing the amount banks recover and creating less competition for favorable outcomes for the consumer’s debt settlement. Fewer companies operating in an industry injects the heightened risk of collusion. Can you imagine what could happen if only a handful of companies own all the non-performing debt in the industry? Our most vulnerable consumers do not need to face this additional risk.

Fair is the owner of Fair Resolutions, Inc., a debt buying and collection organization in Washington state assisting consumers in the successful resolution of outstanding accounts.