10 Oct CFPB and Collections
Congress enacts Dodd-Frank with a generalized mission. No industry really wants more help from the Government. Most in the collections industry are left asking themselves what this means to our business and practices? Some have gone as far as invent dysfunctional practices in anticipation of some extreme scenarios. What should we believe?
The Consumer Finance Protection Bureau (CFPB) assumed responsibility for a host of existing regulations. Among those is the Fair Debt Collection Practices Act (FDCPA) which has governed ethical practices in collections for years. Originally developed for third party collections, FDCPA was adopted industry wide as the standard by which we govern ourselves. Aside from some isolated violations the industry has done a pretty good job of remaining in compliance. There has been no move on the part of CFPB to implement any changes to the act. Prior to 2012 the Fair Trade Commission (FTC) fielded FDCPA complaints. That responsibility has now gone to CFPB. The top 6 consumer complaints, in order, have been very consistent year over year. Number one is repeated calls followed by variations of misrepresentation or abuse. No doubt the bureau will find fodder for new guidance in the nature of consumer complaints moving forward. For now, collection practices that are FDCPA compliant are CFPB compliant.
Here are some thoughts on collection practices that will serve you well:
- Stay on the high ground with disclosure and how customers are treated. Nothing good ever came from customer abuse and deceptive practices. Treat customers with dignity and respect. A collection call is a professional business call. Treat it like one. Lenders have every right to collect fair debts and be clear about what is required from customers. Use a consistent model for each call that can navigate both associate and customer to a resolution.
- Get first call payment solution when customers are contacted. There will not be many opportunities. Repeated conversations with no resolution create the perception of harassment when Associate skill may be to blame.
- Document development, training and monitoring of collectors. In the event a response is required for a CFPB inquiry there is a clear internal audit trail. Test Associates at random in simulated environments to test specific skills and compliance. Develop leaders to train and enforce good practices. There is a direct correlation between the personal competence of leaders and the competence of those they lead. Every good organization has competent, hands-on, first and second line leadership.
In our many years of experience across the industry we have seen any number of practices that have either led or should have led to FDCPA violations. Every one of them had at least three opportunities where potential violations should have been detected and prevented. The nature of future regulations will depend on effective and compliant practices today.