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The CFPB expects all collection agencies to have a compliance management system (CMS) in place during operation. Courtney Reynaud, President of Credit Bureau USA, and the other CAC Collection Boot Camp panelists, understand how overwhelming creating a compliant collection agency can be.
“With everything else we have to do to run a successful business, compliance is probably one of the largest business expenses,” says Reynaud. Such a costly and important part of running an agency can be hard to get motivated about diving into. But by understanding what makes up a compliant business, agencies can streamline day-to-day tasks and keep agent training on track. This makes compliant debt collection easier and keeps your business healthy, minimizing risks of litigation.
What Makes Up a Compliant Debt Collection Agency
There are two components that create the framework of a compliant debt collection agency. The first piece is an adequate compliance program. This program should incorporate a compliance management system, as mandated by the CFPB, and proper writing and development of policies, procedures and work instructions.
The second half of ensuring a compliant debt collection agency, however, relies on your employees. Invest time and effort into training new employees in how they should perform their jobs and adhere to the rules of the industry. Make sure you are also engaging in monitoring and corrective action to identify those who are underperforming, violating compliance regulations or perhaps don’t understand their responsibilities as an agent.
What the CFPB Expects of Your Compliance Management System
The CFPB expects collection agencies of all sizes to have an effective Compliance Management System. Make Sure Your CMS:
- Establishes its compliance responsibilities
- Communicates those responsibilities to employees
- Ensures that your policies/procedures meet legal requirements and are also incorporated into your normal business practices
- Reviews operations to ensure the responsibilities are carried out and legal requirements are met
- Takes corrective action as necessary
Other CFPB Compliance Management System Recommendations
According to the CFPB, an effective CMS will have the following:
- Board of Directors and Management Oversight of CMS
- Policies and Procedures Establishing a Compliance Program
- Employee Training
- Monitoring and Corrective Action
- A Consumer Complaint Management Program
- Independent and Internal Compliance Audits
- Complaint Portal and Public Complaint Database
Updates tools, systems and materials as needed – Aside from
managing complaints received directly from consumers, an effective CMS must also address complaints received from other parties (ex. CFPB, BBB, AG, etc.)
What Are Policies, Procedures and Work Instructions?
Policies, procedures and work instructions are important for any business, but are vital to collection agency compliance programs. Without a compliant framework for how to run the office, you risk violating regulations and exposing your agency to litigation. However, understanding the difference between these three terms can be confusing, and make it hard to know how if you’re going about things the right way.
Reynaud suggests anyone unsure of where to begin, or who is simply interested in tightening day-to-day operations of their agency should attend the Professional Practice Management System (PPMS) course offered through the ACA. The class is a certification program designed to teach you how to create and maintain functional office processes. The curriculum, designed for smoothing out daily issues and cutting down on errors, helps maximize compliant debt collection. “It is definitely worth your while, even if you don’t want to become a PPMS agency,” says Reynaud. “It still provides value.”
To help collection agencies get started without the PPMS course, the Collection Boot Camp panel provided a simplified explanation for each of these processes. Here’s how you can understand the difference between policies, procedures and work instructions:
- Policy- Think “Big Picture.” Your company policy usually applies to all staff and is generally not specific to debt collection.
(Ex. Company Policy, Data Security Policy)
- Procedure- Processes organized in conjunction with elements of PPMS or if PPMS not in use – departments or processes within the Agency
(Ex. Element 3 “Client Issues” or “Client Services Department”)
example of Procedure – ppms format
- Work instruction- Step-by-step instruction for how to do a specific task.
(Ex. New Client on-boarding instruction)
Example of a Work Instruction – ppms format
Creating Policies, Procedures and Work Instructions for Compliant Debt Collection
Creating policies, procedures and work instructions is “one of the most difficult and time-consuming parts of developing your compliance management system” says Reynaud. She cautions that it can be overwhelming, and you may not know where to begin. Her advice for getting started is to review current systems that your agency may already have in place. Check them to make sure they are current, accurate, and still being used. This can provide a framework for a comprehensive and up-to-date version that will help your Compliance Management System succeed.
Rather than sitting down in one day to overhaul your system, Reynaud explains that the best time to create or tweak a policy is right after an issue in your office. If a policy, procedure or work instruction you already have in place would have solved the problem, take time to share it with staff and train them on proper implementation. If you find the policy you have in place contains gaps, or is out of date, that could be why you had a problem. Fix and update your existing framework to create a new policy, procedure or work instruction.
If you find that you have nothing existing to address the issue, write a rule from scratch. As always, make sure to communicate with your staff after creation so everyone is on the same page. A great system isn’t worth anything if no one knows about it. Reynaud suggests using a shared document management program to store all documents in one place and make them accessible to all employees. A few suggestions are:
- Cast IMS
- Google Docs
- Through your collection software (some systems offer CMS programs)
Finally, make sure to use one standard format for all policies, procedures and work instructions. Consistency will help you not only write all rules, but aid staff in understanding and adhering to their training to maintain compliant debt collection.
A large part of employee training is proper call monitoring and corrective action. Monitoring agent calls can be done through a speech analytics program, or through random monitoring of collection calls throughout the center.
June Coleman, the CAC’s MAP attorney, urges collectors to think of mentioning call monitoring as they disclose to the consumer that they are on a recorded line (as discussed in leaving collection messages and during telephone collection communications). Agents must tell debtors that they are on a monitored and recorded line during calls if the monitoring is done from recordings to adhere to compliance. If the call may be subject to live monitoring, this must be noted to debtors as well.
Be sure when monitoring calls, you do so using a uniform system, such as a scoresheet. If you want all agents to perform their tasks with proficiency, you must judge every employee using the same rubric. A scoresheet is especially helpful in reminding you what items are expected during a call, prompting you to listen for them while you monitor.
Kelly Parsons O’Brien pointed out that some agencies, such as Credit Bureau Associates where she is the President, does monitoring of whole accounts instead of individual calls. An agent’s performance handling their accounts, and how well they adhere to compliance regulations determines a portion of their bonus. “We’ve found that this does increase policy, procedure, compliance,” says Parsons O’Brien. “Everything has improved with per-account work.”
If a process does fail in your agency, Reynaud recommends you have a plan in place to address and correct it. The key to taking proper action is defining what she calls a non-conformity, or, “non-fulfillment of a specified requirement.” This can be anything from an agent not following procedures to an agency-wide issue, such as a collection letter sent to debtors missing the back page text. Being able to identify these occurrences enables agencies to know when and how to report them.
For a concise guide on creating a compliance management system, download the Compliant Management System: A Guide for Collections.