One of the key outputs of the US debt industry focus on compliance and regulatory adherence is the increased rigor around policy and process audits conducted on suppliers such as collection agencies and debt buyers. In the current regulatory landscape, however, creditors need to question whether this approach is enough to satisfy regulators who have been doling out fines, not because of a lack of monitoring of the policies and processes, but as a result of suppliers not adhering to these policies and processes.
As such, we believe that the audit landscape will change significantly over the coming year, examples of which will include:
Supplier audits will not only ensure that policies and processes exist, but will also focus on validating that they are adhered to.
Creditors will use systemized solutions to provide greater visibility of their suppliers which will become critical in executing the above audit activity.
A commonly accepted phrase across the industry highlights how “a fundamental objective of the CFPB is for the industry to self-identify, manage and mitigate UDAAP or other regulatory breaches”. This illustrates that the aim of the CFPB is for the industry to identify and resolve issues on its own, rather than awaiting a raft of complaints from consumers to the regulators. To achieve this, creditors need to ensure that the agreed policies and processes are being adhered to, through either sampled account level auditing or the utilization of systematic tools.
The fundamental concept behind account level auditing is to monitor the activity completed on accounts; this can be conducted through reviewing accounts on the vendors’ systems or even through mystery shopper activity. These techniques are critical to ensuring that both pre-agreed strategies are being executed and to identify any process flaws which damage the customer experience, e.g. delays in payment processing or the uncertified application of fees.
In the current environment the frequency of this activity needs to be increased to monthly, at minimum, to enable the identification of any process exceptions.
One key aspect of this activity is call listening which ensures that vendors are interacting with customers in a manner which aligns both to regulatory requirements, and to the creditor’s own standards. TDX Groups’ call listening activity on over 1,000 calls per month initially identifies that in excess of 5% of agency calls fail to meet regulatory guidelines with over 20% providing an insufficient customer experience. The identification of these issues, however, enables robust action plans to be put in place so that agencies can significantly reduce these numbers.
As the industry slowly moves towards robust account level auditing, those currently applying best practice regulatory adherence with respect to vendor monitoring are now applying systematic solutions. The systematic solution to account level auditing captures account level agency activity data to enable the immediate identification of any process exceptions, such as excessive or out of hours calling. Likewise, call listening activity is now moving towards systematic solutions, at its simplest using the above account level activity data to select calls to review. The latest revolution utilizes automated voice recognition software to enable creditors to “listen” into a greater proportion of calls and better identify those that require human review and potential intervention.
In summary, although the vendor auditing landscape has evolved throughout the past year, we anticipate a fundamental change in the activity conducted throughout the forthcoming year. Although the presence of policies and processes will remain of vital importance, the focus of creditors will shift towards ensuring that these policies and processes are being adhered to. Those creditors at the forefront of the industry will begin to deploy systematic solutions to satisfy the CFPB’s desire for the industry to immediately identify, manage and mitigate and breaches against industry codes such as UDAAP and TCPA.