Paying and retaining quality debt collection associates can be as elusive as Diogenes seeking that one honest man.
Many collection agencies reason that if you pay your collection associates a greater amount than your competition, you will retain a higher quality employee who will collect greater amounts of revenue which will increase your bottom line profit. As such, agencies today are devising commission and bonus structures designed to entice the collector to increase the amount and rate of his collections.
Collection agencies are implementing bonus and commission plans which include themes and games or contests that appeal to the collectors’ competitive spirit. Some are bonuses based on the collector hitting their base quota with a sliding scale increasing as the amount of collections increase over their basis point. Some collectors have been organized into “teams” within a collection floor believing the team will inspire each other to perform better, or place under-performing collectors with more seasoned collectors hoping this competition and reliance on the underperformer will increase the revenue stream.
In short, the bonus plans are as varied as the agencies themselves. And yet, the underlying motivational factor is largely the same: the more revenue you collect for the agency and its clients (in the case of a third party collector), the more you will be paid.
But debt collection agencies are aware that lawsuits alleging Fair Debt Collection Practices Act (FDCPA) violations are reaching epidemic levels. In 2006, there were 3,710 lawsuits filed in which violations of the FDCPA were alleged. In 2010, this number increased to 10,914 FDCPA lawsuits alleging FDCPA violations. These numbers only include federal court filings. State court lawsuits alleging various states’ debt collection laws are just as, if not more, prevalent.
New “national consumer rights mills” are popping up with alarming regularity ready to take advantage of the smallest technical violations of the FDCPA armed with the knowledge that the cost of defense combined with the mandatory attorney’s fee provision more often than not result in the agency settling the lawsuit.
As part of the discovery process in these lawsuits, the debtor’s attorney will undoubtedly send a request for production and interrogatories requesting the manner in which an agency pays its employees and seek to discover its incentive programs which are dependent on the amount of revenue collected. Their argument is that incentive-laden programs give a motive for the collectors to “collect money at all cost.” Since the collector has a financial incentive to collect more money, she is less likely to stringently follow the guidelines and boundaries of the FDCPA and the company’s training policies and procedures and is more likely to use any and all means to collect the debt that is due.
To combat this avenue of attack, collection agencies can incorporate in their bonus payment plan incentive pay for individual collectors based not on revenue collected, but instead on not receiving any complaints or claims from attorneys, government agencies or the Better Business Bureau.
For example, if a collector goes 4 weeks with no written complaints from the BBB, the FTC or written complaints received by the company about their conduct, they would receive a bonus. A sliding scale of increased bonus payments could be tied into the length of time a collector goes without receiving a complaint.
This added bonus plan would give the collectors a direct, financial incentive to fully comply with their training, the agency’s policies and procedures and the requirements of the FDCPA. Management would receive constant and on-going feedback as to the effectiveness of their training. This added bonus structure would also result in yet another employee oversight program and should result in fewer complaints, fewer lawsuits, fewer settlements paid and in the long run, greater profitability for the agency.
Steven R. Dunn graduated from the University of Houston Law Center and has been a licensed attorney based in Dallas, Texas since 1984. His practice primarily consists of representing third party debt collectors in all Texas state courts and federal courts not only in Texas, but also throughout the United States. His areas of expertise includes complex class related litigation, Fair Debt Collection Practices defense, Telephone Consumer Protection Act defense, premises liability, banking and U.C.C. law, business litigation, and employment law. His experience also includes overseeing compliance issues and corporate matters.
Mr. Dunn has appeared as lead counsel, through the pro hac vice process in over twenty federal courts outside the State of Texas and has established a nationwide practice through his association and collaboration of attorneys in other jurisdictions.