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    5 Key Compliance Questions to Ask Before Outsourcing Collections

    Making the decision to outsource some or all of your financial institution's collections work is no easy task. Even when you recognize that your internal staff does not have the time, resources, or ability to efficiently keep delinquencies low, it can still be difficult to trust a vendor, particularly in this era of data breaches and regulatory scrutiny.

    Sometimes, after weighing all of your options, outsourcing collections may be the best business decision. In many cases, vendors who specialize in collections have the staff and resources to dedicate 100% of their time to addressing your delinquent accounts—oftentimes at a less expensive rate than your team can accomplish in-house.

    If your financial institution decides to work with a vendor for your collections efforts, it’s vitally important to ensure your partners perform at an optimal level. To evaluate whether your outsourced partner is performing at a high level, it’s wise to understand their compliance procedures and establish agreed upon best practices for the work they do on your behalf.

    If you've decided to take the next step and work with an outsourced collections provider, here are the five key compliance questions you should ask before signing on the dotted line:

    1. Are you properly licensed?

    This may seem like a no-brainer, but it is a common question that can be overlooked. Many states require different licenses, bonds, and/or fees for third-party collectors, and it's critical that the vendors you are considering are properly licensed to help ensure your institution does not come under regulatory scrutiny.

    2. What kind of training does your staff receive?

    The type and frequency of training an outsourced collections provider gives their staff is an important indicator of their compliance standards.

    A collections partner is essentially speaking on your behalf, and the last thing you want is for an untrained vendor employee to be threatening or insensitive to one of your delinquent borrowers. Not only would that be a reputational risk, but if the consumer files a complaint, you could ultimately be held liable. At the very least, our organization recommends that collection staff have training in the following areas:

    • Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)

    • Fair Debt Collections Practices Act (FDCPA)

    • The Telephone Consumer Protection Act (TCPA)

    3. How do you gain access to my institution's delinquent borrower data?

    There are essentially two ways for outsourced collections providers to gain access to your borrowers' data—they can VPN directly into your core system, or via secure FTP. It's critical to understand how this data is exchanged because the former method gives multiple people outside of your institution access to your borrowers’ sensitive personally identifiable information (PII), increasing the risk of fraud and potentially exposing you to cyberattacks and hacking.

    4. What kind of reporting do you provide?

    An outsourced collections provider is only as valuable as the reporting they provide. After all, if they aren't providing robust reporting to demonstrate to you how many calls they're making, their cure rates, queue averages, payment activity, etc., how can you fully understand how well your portfolio is performing? Preferably, look for a vendor who can provide customized reporting—or at the very least, give you enough information in their reports to give you a full 360-degree view of their performance.

    Related Reading: 5 Standard Reports Your Outsourced Collections Partner Should Provide

    5. What other compliance controls do you have in place?

    Staff training is a critical component of compliance, but there are several other things that a diligent, proactive outsourced collections provider should do to ensure they remain compliant with current and future regulations. Some examples include:

    • Call-monitoring software

    • No cell phone on premises policies for collectors

    • Clean desk policies for collectors

    • Documentation, review, and resolution policies and procedures for consumer complaints

    • Regular internal and/or external audits

    • Access to—whether in-house or via a third-party consultant—a compliance team to provide guidance, training, best practices, and policies and procedures

    Vetting vendors is certainly not a quick or easy process. It requires thorough due diligence, but in the end, when you take the time to find the right outsourced collections provider for your institution, it will be well worth the time and effort.

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    Amy Bailey

    Amy Bailey is the Director of Compliance with primary responsibilities of supporting, developing and managing compliance policies and procedures to ensure business operations are conducted in compliance with regulatory and legal requirements. She acts as the advisory contact for client inquiries and escalations for the SWBC collections outsourced services.

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