The collections industry continues to make the news on a daily basis. The Consumer Financial Protection Bureau’s (CFPB) guidance states it supervises agencies with $10 million or more in annual receipts, which may make many smaller agencies offer a sigh of relief. But not so fast. Even though the CFPB is currently focused on bigger agencies, there are others out there that are still taking a closer look at all agencies. The Federal Trade Commission (FTC) is closely watching, consumer’s right’s attorneys are clamoring for the next class action lawsuit, and the CFPB is watching their complaint portal very closely. If your name shows up consistently, or with the same types of complaints, the CFPB will come knocking on your door.
So even if you aren’t one of the “big guys” you’ll want to be sure to keep yourself out of the headlines. Here are four things that the big agencies do to stay compliant and grow, which you can easily adopt.
1) Use data to your advantage: Identify non-collectible accounts such as bankruptcy and deceased; identify cell phones and remove them from your auto-dialer; be aware of litigious consumers; and identify active military personnel.
Most large agencies have processes in place to utilize data to their advantage and to be pro-active in identifying certain types of consumers that are known to be higher-risk to collect against. Let’s take a look at each of the above individually:
- Bankruptcy: Proactively identifying bankruptcies in your portfolio is the best way to avoid violation of the bankruptcy act’s automatic stay. Don’t wait for the consumer or their attorney to notify you about the bankruptcy. By then you’ve probably already made a phone call or sent a letter in violation of the stay. Most bankruptcy filing notifications go to the original creditor, and by the time they trickle down to their agencies, it’s too late. Be proactive and look for the bankruptcy at placement and before each major collection activity. Or better yet, refer to #3 below to understand portfolio monitoring for this data.
- Deceased: While calling the house of a deceased consumer won’t get you into as much hot water as calling the house of a bankrupt consumer, it’s still a very sensitive situation. Make sure to check your portfolio for deceased consumers so you can properly handle those accounts.
- Cell Phones: New suits and settlements are in the news weekly, 90% of American’s own a wireless telephone, more than 50% of US households are cell-only, and Telephone Consumer Protection Act (TCPA) litigation has increased 560% since 2010. There is no excuse to not have a process in place to identify and remove cell phones from your automatic dialer. Remember, you can still call cell phones, just not via your automated dialing system.
- Litigious Consumers: While there is still more art than science to identifying consumers who have sued collectors in the past, it’s still a good idea to try to locate these consumers from the start, and either move them to a queue where collectors are trained to handle these types of consumers, or just close and return these accounts to the creditor.
- Active Military Personnel: The Servicemembers Civil Relief Act (SCRA) was established to protect those who protect the US. The Department of Defense has created a way for us to identify those who are on active military duty. Many companies are choosing to proactively identify these consumers, and move them to a collection queue where no legal activity is taken, interest rates are lowered, and collection calls are made with the understanding that whoever you reach in the household may be under extra duress, so they understand that these calls are a little different.
2) Use scoring to help streamline your collections process: Most of the big agencies use a score of some type to determine the “contactability” and/or “collectability” of consumers upon placement, thereby allowing them to segment their portfolio, and concentrate their efforts on those accounts that have a higher propensity to pay. Scoring can help you to:
- Identify the most collectible accounts to collect on the highest percentage of dollars
- Reduce collections spend by streamlining portfolio management
- Optimize decisions using analytic technology and comprehensive alternative data insight
3) Use batch processes rather than individual look-ups: for bankruptcy, deceased, phone, cell phone, address and active military. All of the data elements mentioned in #1 above can be accessed in a batch process, thereby eliminating the time it takes an individual to manually loop up the information online. In a batch process, you gather up your accounts, forward them to your data vendor (via a secure transmission method), and receive your results back in a batch file. You can then program that information directly into your collection software. If you are using a collection software integrator, check with them on the vendors they provide, you’ll find that most have integrated with the larger data companies to make this process much more seamless. If you have proprietary collections software, most data vendors will work with you to output your files in a format that can be easily loaded into your system. To take the batch process one step further, some data vendors offer a monitoring scenario, whereby they will keep a copy of your consumer file, and look daily for changes to the data, and provide you a daily update file with new or changed information.
4) Know your vendors: Don’t always look for the least expensive. You usually get what you pay for. If your data vendor isn’t compliant with the rules, regulations and laws that govern the data industry, they may be putting you and the consumers at risk. Make sure the vendors you are sending your consumer’s PII to know what they’re doing and will take care of your consumer’s data. Also make sure that your vendors are protecting you – if you are utilizing data and scores for a purpose governed under the FCRA (Fair Credit Reporting Act), DPPA (Driver’s Privacy Protection Act), GLBA (Graham-Leach-Bliley Act) or other regulations, make sure your data provider is providing that data to you properly, and that you are using the data properly. These quick checks will go a long way in helping to protect you when it comes to data:
- Ask about their data security guidelines – are they protecting your data?
- Ask about their credentialing process – do they check out their prospective customers and ask about permissible purposes for the regulations above?
- Ask about their employee training – do their employees understand the importance of data security?
- Compliance with regulations – if you are obtaining FCRA data, ask about their consumer dispute and data correction process.
By making a few changes to your processes, and taking a little time to network and know your vendors, you can not only make sure you are being compliant, and protecting yourself as well as consumers, but also allow your business to grow and thrive.
By Linda Straub Jones