What Are Collection Agencies Doing About Due Diligence?

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Yesterday’s top story should serve as a wake-up call to everyone in the ARM industry. It underlines the Consumer Financial Protection Bureau’s mandate concerning vicarious liability: you are responsible for the companies you keep company with.

Specifically, in the case against a slew of fraudulent companies masquerading as collection agencies, several technology providers that cater to the ARM industry were named as defendants for “providing substantial assistance to the Debt Collectors’ unfair or deceptive conduct.”

What should collection agencies and vendors to the industry do in the wake of this development? If an agency is thinking of partnering with a debt buyer, how much due diligence is necessary?

Specifically: are agencies doing enough — and documenting what they are doing — to show a full understanding of the business practices of their clients, their vendors, and their business partners?

Compliance professionals, no doubt, are doing a lot of “I Told You So!”s. Their’s is among the toughest jobs in the industry: they’re not a profit-maker and they almost always have a hundred reasons why a collection agency can’t do something that the owner is convinced will make more money.

However, it’s compliance professionals who will be at the forefront of this due diligence push. And this is new(ish) waters: how will you know that you know enough about another company to trust them not just with your reputation, but your existence?

We’d love to hear from compliance professionals in the comments below. What are you currently doing for due diligence?

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Posted in Accounts Receivable Management, Collection Laws & Regulations, Collection Laws and Regulations, Debt Collection, Debt Collection News, Featured Post .

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  • avatar maryanne-kelly says:

    DBA International’s member created, designed and approved Receivables Management Certification Program addresses not only the due diligence required, but also the reputational risk associated with “the companies you keep company with.”

    The certification program includes a specific vendor management standard: “In order to identify and retain qualified third party vendors and to assure appropriate oversight of such vendors, a Certified Company shall: (a) Establish and maintain vendor management policies and procedures with defined due diligence and/or audit controls; (b) Perform an annual assessment of its: (i) vendor management policies and procedures and provide recommendations for improvements, if warranted, and (ii) third party vendors to determine whether they continue to meet or exceed the requirements and expectations of the company. As part of the annual assessment, the Certified Company may need to perform additional due diligence, including by way of example rather than limitation, vendor audits, review of policies and procedures maintained by vendors, and review of consumer complaints related to the vendor; and (c) Obtain the certification number when contracting with a vendor claiming to be a DBA Certified Company and confirm the vendor’s certification status on DBA’s website.

    By promoting a comprehensive national standard of industry best practices stressing responsible consumer protection, increased transparency and improved educational and operational standards within the industry, the certification program has been well received by legislative, regulatory, creditor and consumer groups, not to mention DBA International members.

    In 2014, the certification program was expanded beyond debt buying companies to include collection agencies and law firms. Expanding the certification program was a critical step in strengthening compliance integration between all the companies in the credit cycle, assuring the consumer that the same rigorous standards are being upheld.

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