A Collection Agency Errors & Omissions (E&O) Insurance policy is designed to protect debt collection agencies and debt buyers from legal claims related to their professional services. It covers financial losses due to negligence, errors, omissions, or wrongful acts.
What Does Professional Liability (E&O) Insurance Cover?
Coverage can vary depending on the policy, but it typically includes:
- Allegations of Wrongful Collection Practices: Claims of harassment, misrepresentation, or unfair debt collection practice.
- Errors & Omissions in Debt Collection: Coverage for mistakes made while attempting to collect debts.
- Misrepresentation or Inaccurate Information: Protects against claims that incorrect statements were made to debtors.
- Breach of Contract: Some policies may cover failure to meet contractual obligations with clients.
- Legal Defense Costs: Covers attorney fees, court costs, and settlements or judgments arising from covered claims.
- Regulatory Violations: A good policy will provide coverage for violations of the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), and the Telephone Consumer Protection Act (TCPA)
The ARM industry is heavily regulated, making agencies and debt buyers frequent targets of lawsuits. Even if a lawsuit is frivolous, legal defense costs can be significant. Many creditors and financial institutions require agencies to have E&O insurance before doing business.