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48 Tex. J. Bus. L. 1 (2019-2020)

handle is hein.journals/txjbus48 and id is 1 raw text is: Consumer Collections By: Michael J. Scott' I. Introduction A. First, a Perspective According the Federal Reserve, there are 59.5 Billion debit or credit card swipes a year in the United States. That boils down to 165 million swipes/day; approximately 15% of which occur in Texas (25 million/day; 1.8 million/hour; 30,000/minute; 500/second). That's a lot of plastic, and much of this article will be geared to the type of consumer debt that is created in the retail debt arena. However, any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes is likely a consumer debt. 2 A substantial majority of consumer transactions are related to the use of credit cards; meaning somebody owes somebody money. Historically, the default rate for credit card accounts is about 2.5%, although during the peak of the financial crisis in 2008-2009, that rate was as high as 7%. Since financial institutions are not in the business of losing money and for them the industry is a net-net business, the unfortunate reality is that somebody either collects this debt or all of the remaining credit card holders make up the difference. In 2017 the total amount of credit card debt charged off was greater than $20 Billion, an estimated $3 Billion of that occurring in Texas. The consumer has defaulted - now what? It all depends on the financial institution. Some try to collect the debt in-house, some send it to collection agencies, some send it straight to legal recoveries, some sell it for whatever the market will offer, and others just sit on it and wait. They each have their philosophies and their strategies. Often times, these strategies take into consideration issues which go beyond simple collectability; issues such as brand protection, consumer loyalty and risk avoidance. In the end, these are business decisions made at the multi-billion-dollar level, and they all have their reasons. B. Context This paper is practical, not technical. It is about how the real world works. As such, it provides case citations which are intended to be illustrative, rather than exhaustive. Adding to the complexity of this topic is a myriad of United States District/Appellate Court decisions, each with unique facts spread over time and geography, and which pertain to subjective, fact-laden issues. These decisions reflect both an evolution of thought, as well as a regional perspective which is difficult to summarize into clean rules. The ACA (American Creditor's Association) has some 260 pages of annotations which make for recommended reading for any attorney who regularly practices as a debt collector.1 Finally, this paper also contains both statements of opinion and prospective. You are free to do with these as you wish. 1 Michael J. Scott, presentation at The University of Texas School of Law CLE, The Fair Debt Collection Practice Act and The Texas Debt Collection Act (Practical Approach) (Sept. 1-2, 2011). 2 Fair Debt Collection Practices Act, 15 U.S.C. § 1692a(5) (2011). 1

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