The Impact of the CFPB’s Debt Collection Regulation F on the Top Debt Collection Agencies.
Some finance directors are convinced that handling all business functionality in-house is the best approach. After all, if one wants something done right, they do it themselves — correct? For others, especially those concerned with external breaches in data security, it’s a matter of keeping things close to the vest. Meanwhile, a third group of directors believes that purchasing expensive software to manage processes such as accounting, office management and online marketing is the way to go despite having to dedicate existing human resources (or invest in new ones) for program operations.
The DIY approach may work in some instances, but corporate operations such as first-party debt collections require the help of certified professionals and an infrastructure of technology and security. Thus, the question remains: can companies duplicate the success rate of qualified debt collection agencies by doing it themselves?
Determining an answer may seem difficult, but it becomes easier if one is mindful of the key advantages offered by 
outsourcing to a qualified agency:
- Compliance and certification
- Time management
- Cost effectiveness
- Favorable results
Ideally, first-party debt collections should be launched early in the consumer revenue cycle, whether those efforts are implemented internally or externally.
Debt collection agencies do so by contacting consumers in danger of delinquency via oral or written communications and identifying themselves as the debt holder. The goal is to maximize recovery rates while maintaining a respectful relationship with consumers so they remain loyal to the brand. The success of those efforts is a function of experience, strategy and proven methodology.
Compliance and Certification
Top-tier debt collections agencies are directed by executive officers with considerable experience in financial services and a history of ethical business practices. Their efforts are supported by a legal team, certified collection officers, and certified debt collectors to ensure full compliance and brand protection.
The highly regulated financial services industry is a mine field per the 2015 annual report of the Consumer Financial Protection Bureau (CFPB), especially for companies attempting to negotiate the treacherous landscape themselves.
On the other hand, the experienced agency remains compliant with laws around the clock, including the Fair Debt Collection Practices Act, Fair Credit Reporting Act and Telephone Consumer Protection Act with the help of ACA certified Credit and Collection Compliance Officers and certified collectors.
Time Management
Most companies prefer to focus on the primary revenue stream of their chosen vertical versus the challenging process of debt collections where sending demand letters and making phone calls to delinquent consumers is the norm. Time spent collecting debt is time borrowed from the generation of the primary products or services.
Successful first-party debt collections requires the monitoring of performance numbers and trends (daily, weekly, monthly, quarterly and yearly), call reports and long-term objectives. Directors spend considerable time reviewing this information as well as conducting frequent compliance training, extinguishing fires, collaborating with the legal team, and adjusting collection strategies. As complicated as it sounds, this is business as usual for experienced debt collection agencies.
The process also requires fastidious record keeping and documentation that forms the basis of defense should the CFPB conduct an investigation. Those same records may be used in court if the agency decides to file suit against a consumer or to corroborate uncollected debt as a tax write-off.
Cost Effectiveness
Done properly, establishing an internal collections department is like setting up a new venture, including the drafting of a comprehensive business plan. Considerations include the cost of human resources, collection software and updates, phone systems, structural changes or additions (remodeling, cubicles and lockers for personal items such as mobile phones not permitted in call centers), and hiring outside consultants such as attorneys and skip tracers.
Furthermore, the learning curve and time required to form the new department should not be overlooked: establishing the business plan and the approval process by company principals as well as the hiring and training of staff, shopping for software and more.
A suggested shortcut entails comparing the costs and projected results detailed in the business plan with the quotes and projected results from three reputable agencies. In order to make a fair comparison, a company should garner quotes determined by either a contingency agreement or a flat monthly fee. With contingency, companies only pay a percentage of what the collection agencies collect.
Results of First-party Debt Collections
Following the rules of “corporate Darwinism,” agencies either deliver favorable results or they become extinct. The sweet spot of results is what makes the services of first-party debt collection agencies attractive to finance directors.
Top-tier agencies offer greater probability of recovery because they apply the latest techniques and technology, know how to manage time, and provide complete services including compliance and skip tracing. Furthermore, they should be dedicated to optimizing their clients’ return on investment while treating consumers with respect during the entire collection process.
The Optio Advantage
Affiliated with the leading trade associations in the financial services industry, Optio is committed to offering clients measurable results, full transparency, state-of-the-art technology, iron-clad data security, brand protection, enhanced consumer relationships, and 24/7/365 access to secure account information. Industries served include financial services and mortgages, education, healthcare, retail, energy-utilities, telecommunications and automotive.
If your company is searching for a first-party debt collections agency, give us a chance to earn your business by contacting us today for a competitive quote.
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