debt-collection-compliance

Over the last decade, the debt collection industry has come through sea changes and taken a course towards reaching compliance. Debt collection agencies of all sizes adopt the latest technologies to ensure they stay compliant with actual requirements. Yet, the regulatory landscape continues to evolve at a comparatively high pace, and new challenges appear with regulatory updates.

Let’s see how the collections industry tackles ever-changing compliance regulations, pointing out what and how to tackle.

Compliance Requirements or the Time of Challenges

Perhaps, the biggest challenge for the compliance industry affecting debt collectors’ bottom line is the requirement of the Consumer Financial Protection Bureau (CFPB) to implement a compliance management system in each collection agency’s operations.

In general, compliance management is a delicate process that requires continuous planning, training, and even sourcing. However, it adds up to the overall operational costs of an organization.

Back in the times, debt collection agencies didn’t consider compliance when planning yearly budgets. Only with the advent of the CFPB, compliance became the topic of focus. However, the shift was controversial from the very beginning; some collection agencies readily embraced it, while others persistently resisted it or even changed their business models in the hopes of escaping the regulatory burden.

For a debt collection agency, keeping up with changes in regulations turns out to be a challenge. In the case of an existing law’s modification or the introduction of a new law, the point is to adapt quickly to these, which most agencies handle easily. However, when it comes to a new interpretation of existing law, changes are more difficult to follow. The same laws may be differently interpreted among different jurisdictions.

How should debt collectors navigate around the ambiguity? One way is to find an automated compliance management software to handle compliance issues for you, but we will talk about that in more detail later in the article.  

What is Going on Now, or Trying to Circumvent FDCPA Compliance

Speaking of changing business models. Specifically, many third-party collectors become first-party ones to get unrelated to third-party stipulations under the Fair Debt Collection Practices Act (FDCPA). With that change in the business model, collectors can act as creditors or even healthcare providers without complying with the FDCPA.

Unfortunately, not every agency comprehends how to perform a proper transit, eventually getting stuck somewhere in-between the first-party and third-party models. Maybe this should not be the case at all, and instead of changing roles, they should adopt a “cutting-edge” solution? Indeed, the answer may lie there.

The Role of Technology in Compliance Management

From the CFPB’s perspective, the compliance management software is more than simply a tool; instead, this is the art of following regulations while continuously demonstrating it. Technology is undoubtedly a “backbone” of the whole process that automates the main aspects of debt collection. At a collector’s request, custom reports can be provided, showing compliance in all aspects of the financial law.

Some debt collection agencies build such systems from the ground up, which definitely plays not in their favor, primarily from the monetary viewpoint; the development may cost $100,000 at least. Instead, implementing an out-of-the-box SaaS compliance management solution will be a wiser, more cost-effective move.

Compliance Areas to Focus on

Besides the default TCPA and FDCPA compliance concerns in your debt collection procedures, define what are the other questions you should seek answers to when reaching debt collection compliance. Always keep them in mind as neglecting these may disrupt your collection operations.

HIPAA Compliance

Think about policies and procedures to implement to prevent HIPAA violations as such. To deepen your knowledge of the topic, consider the recent known breaches that took place in the industry.

HIPAA-compliance

Perform regular training with your staff members on building proper internal compliance rules and all the relevant documentation. In particular, talk to your HR department; do your recruiters perform specialized training on discrimination and harassment issues? Compliance is not just about legal.

Policy Updates

Keep tabs on your policy documents and manuals and make sure you perform audits regularly. When problems occur, do you seek to go to the heart of each one, define their essence, and respond to them accordingly? 

Several Metrics to Follow

Besides reaching compliance, you should demonstrate it to your clientele. To do that, start with the relevant KPIs.

  • Legal actions — the fewer legal actions (such as lawsuits), the better your collections compliance system should work. After all, this is not just about saving money but maintaining a reputation as well.
  • Disputes and complaints — make sure you promptly respond to client issues that arise in the process; this way, you will reach compliance successfully. Not a single inquiry should go out of your sight.
  • HR issues — finally, what about the internal culture in your office? If your own staff has complaints, then it means your corporate culture has certain downfalls. At this point, you should handle them to make sure your corporate compliance works as planned.  

In the end, it all comes down to finding a solution able to handle compliance issues for you. “Handling” suggests process adjustments following the latest updates in collection laws. Guess what? We have the solution to show you!

Paydit: a Compliance-first Debt Collection Platform

Paydit is a compliance automation platform that allows you to collect consumer debts while staying compliant with FDCPA, TCPA, EAPO, DSO, and other laws, and easily adjustable to all local regulations, ensuring regulatory-friendly consumer interaction. Also, Paydit adjusts legal wording in debt reminders and defines the appropriate time for making calls. 

Want to discover Paydit’s regulation capabilities in full? Request a demo on the website.

Nick Varnitski, Co-Founder and CEO at Armada Labs

According to Bloomberg, even small but incremental debt collection improvements present an opportunity worth billions of dollars. At times of recession, understanding this is particularly important as fine-tuned debt collection may accelerate recovery, optimize expenses, and improve consumer relations.

Thank you for downloading the report! Enjoy it!