Summit Seeks to Find Common Ground between Collection Industry and Consumer Groups

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While there is worry that the Consumer Financial Protection Bureau’s new regulations will create problems for the collections industry, some ARM industry insiders are using the current period of Advance Notice of Proposed Rulemaking (ANPR) provided by the CFPB as an opportunity to communicate openly with consumer groups. 

Last month, an ARM publication, insideARM (affiliated with the iA Institute) hosted a Large Market Participant Summit in Washington, DC.  The summit included a panel moderated by an ARM defense attorney and in-depth discussion of what consumers want to see happen regarding the CFPB’s proposed new rules.  While many of the suggestions provided during the summit were not in sync with the ARM industry’s best interests, there were still some common goals found between consumers and collection industry insiders.    

Both sides reiterated the need for better data flow and verification of consumer debt.  Consumer advocates suggested one database that could be populated by the creditor or original lender, and accessed by downstream collectors.  However, according to Barbara Hoerner, counsel and Chief Compliance Officer at collection agency Progressive Financial Services, such a database could have negative consequences, such as data standards requirements added to ARM firm systems already struggling to handle the current ones. 

Both sides did agree, however, that a push toward better communication is important.  In such, any rule that the Consumer Financial Protection Bureau creates that serves to encourage more consistent and accurate communication would be readily accepted by both consumer advocates and ARM industry insiders.  However, the specifics of how better communication efforts would work in an increasingly digital landscape are muddy, at best.  Email communication and voice mail communication are two particularly difficult topics facing the industry, but regulators are beginning to see the value in focusing on them.  In the meantime, many in the collections industry are looking on the bright side and hoping the rulemaking period provides much-needed communication happening between both sides of the debate.  

Are complaints against collections practices being resolved?

How Will The Increase In Consumer Confidence Affect The Collections Efforts My Company Will Have To Make?

Is The Consumer Finance Bureau Becoming Draconian Like In Its Attempts To Audit And Control Collection Firms?

The Consumer Financial Protection Bureau is in charge of overseeing banking practices so that consumers are protected from abusive tactics.  It was created in 2010 as one of the parts of the 2010 Consumer Protection Act, and while most people will agree that the consumer must be protected against abuses it needs to be asked if the bureau is actually overreaching in an attempt to audit collection agencies.

Last January 2013, CFPB declared that any party with greater than $10 million in annual revenue from consumer debt collection activities will be subject to the Bureau's audit. The 3 major categories of debt collection included under the rule are:  (1) firms that buy defaulted debt and collect the proceeds for themselves; (2) firms that charge fees for collecting defaulted debt owned by another company; and (3) debt collection attorneys that collect through litigation.  This is the first time that the federal government will supervise collection attorneys.  Because of this, the CFPB will start overseeing about 175 debt collection agencies, representing more than half of the debt collection industry's annual receipts.

Why Collection Firms Are Targeted

Collection agencies and firms seem to be targeted a lot more because it is up to consumers to complain about practices.  Since no one likes to be called about a payment (even when they know they owe the money), it is more likely that they will complain to the Consumer Financial Protection Bureau.  That means that the more complaints, even when they are not justified, make it more likely that a firm will be paid closer attention to.

Is It Fair?

While there are some collection agencies which have made mistakes and in some cases even overstep the things they can and cannot do, most firms are responsible in their practices.  Collection firm owners and workers will be happy to see an abusive firm go off the market, but unfortunately a lot of the good players in the industry are also suffering the consequences.  Some will be happy to make the industry look bad which means the firms have to pay a fine plus legal fees even when the complaint seems to be a little unjustified.

What Firms Can Do

The one thing that the best firms have been doing is to ensure that their personnel have the latest in training so that they can stay updated with the latest changes in the industry.  The bureau can propose changes in the laws at any time and if adopted the firm must comply from day one.  

Retaining Good Employees and Motivating Staff in Tough Economic Times

The collections industry has certainly seen easier times than the current economic and fiscal climate.  With escalating consumer debt and an economic recession still keeping many debtors unwilling or unable to pay their bills, employees of the collections industry face difficult and demanding shifts dealing with people who are both stressed and distressed.  So in the midst of all that stress, how do you motivate your employees to stay in the industry without running away as fast as they can? 

With incentives that work, you will be able to increase the morale and loyalty of your staff members while helping them achieve greater productivity in a challenging work environment.  Although monetary rewards are usually the best incentive for employee retention and boosting morale, there are several non-monetary incentive schemes that can be used, as well, to increase your staff’s commitment to the job.  Better working conditions, better communication with management, time off and contests are always great ways to provide non-monetary incentive to your employees who perform well. 

One way to measure employee performance is “promises to pay per hour,” which involves calculating the percentages in which your employees are able to reach successful negotiations with debtors with a promise for payment.  Additional performance measures can be assessed when contractual payments are upheld by debtors, and payments are made based on a promise to pay that the employee initiated through his or her contact with the debtor.   

However, one of the best ways to provide non-monetary incentive is through greater recognition of high performance.  Publicly recognizing employees for a job well done can be one of the most effective methods to encourage employee retention and maintain positive employee motivation.  The desire to be “top dog” in a work environment will lead many employees to put their best effort toward successful collections.  Such recognition usually suggests future advancement in the company and increased wages with that advancement, so employees will look at it as a type of future monetary reward.