When the CFPB introduced Reg F in late 2021, a lot of attention focused on the change in collector-debtor communication practices. A less discussed, but equally significant change is the increased oversight responsibilities creditors have when outsourcing collections. With the CFPB’s announcement about extending its supervisory authority to non-bank financial institutions, vendor management and auditing is increasingly becoming a priority for originators and lenders. As a result, for collection agencies, robust compliance management and reporting capabilities now represent a competitive advantage when marketing their services to creditors.
For creditors and collectors alike, Reg F oversight requirements create a new reality of shared compliance responsibility. In this post we discuss how servicers and creditors can better collaborate by using new tools that provide all parties with critical insights and generate the transparency and trust needed to succeed in a tightening regulatory climate. With the help of these tools, servicers can function as trusted compliance partners for creditors, instead of potential high-risk liabilities. They can also help growing ARM businesses minimize risk when contracting with 3rd parties.
Easing the Oversight Burden
Reg F transforms the creditor-collection agency relationship equation by requiring close cooperation on compliance issues. But it also raises legitimate concerns about increased workload and financial burdens. For collections agencies, adding staff to extract data and compile reports might be near-impossible in times of declining ARM industry profits. Likewise, for creditors, the new oversight responsibilities also require increased documentation and audits that are resource-intensive.
Advanced, AI-based compliance management platforms can ease the burden on all parties by automating many processes. In fact, they can transform the burden into benefit by providing insights and reports that are incisive and actionable as well as timely. They can help creditors and agencies develop more trusted relationships with their vendors, automate reporting, reduce risk and compliance management costs, and mitigate reputational and legal threats.
The most valuable platforms cover the full operational spectrum, from monitoring, archiving and alerting through remediation, reporting and agent coaching. While many servicers have separate archiving, speech analytics, scoring or coaching systems in place, switching to an “all-in-one” solution can reduce risk of critical data being lost in transitions and eliminate manpower-intensive bridging of gaps between systems. They reduce the overhead involved in generating compliance health reports and provide 1st parties with the visibility they need into servicers’ operations and associated risks.
What to look for in a compliance platform
When selecting an end-to-end compliance management platform, make sure it comes with these 4 essential capabilities:
Comprehensive reports and audit trails
New Reg F-mandated oversight responsibilities mean that vendor due diligence and regular audits will be central elements of creditors’ compliance processes. In case of an external audit, seamless documentation of issue discovery, vendor communication, and remediation activity are a big plus.
End-to-end compliance management platforms offer comprehensive activity documentation at a single access point. Servicers can easily provide creditors with the data they need, and enable them to track performance and improvements over time. Automated systems allow creditors and servicers alike to be audit-ready at all times, with violation and mitigation logs always current.
100% coverage
Traditional monitoring process sampling covers only a small percentage of interactions. Agencies and creditors may be unaware of misconduct that falls outside of the sample unless (or until) a complaint is filed or a regulator knocks on the door.
Automated monitoring systems audit 100% of calls, providing a comprehensive picture of legal risks for collectors as well as for creditors. Multi-language capabilities represent an extra “bonus” since they can monitor and transcribe consumer interactions conducted in foreign languages such as Spanish or Chinese, and then automatically translate to English.
Real-time risk monitoring
Traditional sampling and auditing methods not only fail to cover the entirety of consumer interactions, they also introduce substantial delays and gaps between the moment the violation has occurred and when it is detected and ultimately mitigated. Remediation is most effective when it’s provided immediately following the problematic event. If audit results are received only monthly – or even weekly – intensive monitoring and coaching will be likewise delayed, enabling poor practices to become further entrenched and exposing all parties to risk. By the time post-coaching performance is assessed, several weeks might have passed.
In contrast, AI-based, automated monitoring solutions flag violations as they occur, so that mitigation and agent coaching can be initiated immediately. With information regarding risks available as they emerge, stakeholders can act to protect themselves against costly litigation, potential fines and damage to their brands. Real-time monitoring and reporting can give creditors that “ear” to the ground that is usually not available when using 3rd party services.
Data privacy and security compliance
Advanced platforms integrate data security and privacy guardrails to ensure full compliance with consumer data protection requirements. Features to look out for include automated PII redaction, out-of-the-box tools for data residency compliance, end-to-end encryption, SOC2, ISO 27001, and PCI compliance.
Built with Compliance Officers in Mind
Compliance officers can rely on Sedric for comprehensive insights and reports at whatever level they need. From agent dashboards to operation-wide performance and risk dashboards, Sedric enables agency leaders and creditors to manage risk and be audit-ready at all times.
Whether for regulatory compliance or performance optimization, the AI-based automated Sedric compliance platform gives servicers a competitive edge and helps creditors reduce regulatory risk, creating trusted relationships that benefit customers, lenders and the services that bridge them.
Compliance officers can rely on Sedric for comprehensive insights and reports at whatever level they need. From agent dashboards to operation-wide performance and risk dashboards, Sedric enables agency leaders and creditors to manage risk and be audit-ready at all times.
Whether for regulatory compliance or performance optimization, the AI-based automated Sedric compliance platform gives servicers a competitive edge and helps creditors reduce regulatory risk, creating trusted relationships that benefit customers, lenders and the services that bridge them.
“Training and monitoring of consumer-facing employees will be critical to ensure that an organization is compliant. Technology will support and help the credit and collections industry meet demanding obligations with ease and efficiency, in order to produce the outcomes a regulator wants to see.”
Consumer Financial Services Regulatory & Compliance Group
Clark Hill
“Our challenge going forward is to position our industry and our companies as desirable places to work. We must implement diversity, equity and inclusion in our workplaces, and get the word out that we have changed. Ask your newest employees for feedback—what would make our workplace desirable for their friends and acquaintances? In this post-pandemic world, getting people to crawl out of their comfortable cocoons may be difficult, but it can be done!”
CACi
“In the last few years, the buzz of the call centers faded away. Now that many people still have the opportunity to continue to work from home, performance directors need to pivot their focus. We need to ensure that the training is effective in this new environment. The move is from hours in a classroom setting to immediate, personalized micro-learning units that enforce the corrective behaviors.”
Resurgent Capital
“The digital collections movement continues to be in full steam and we are excited to see all of the new technologies that are coming into the ARM industry to help drive enhanced collection performance in a compliant manner. We anticipate additional M&A consolidation globally in the ARM industry, as more digital ARM companies look to accelerate market entry and obtain blue-chip clients and deploy digital-first solutions.”
“Digitization will be critically accelerated in 2023. Recovery organizations may be required to furnish consumers’ account data through consumer-selected platforms that will likely be different from organizations’ traditional payment portals. Organizations should start preparing their technology and operations for that contingency now to harness the trend to their benefit.”
Kredit
“Data is the new oil, and extracting data from all sources, especially voice, will be a must-have in 2023. We are in the age of machine learning, and ML runs on data. Getting ALL the data and getting it into one place for the ML to do what it can are the key differences between organizations that will make it and those that don't.”
Indebted
“In 2023, collectors and creditors will be required to work closer together. Reg F oversight requirements have created a new reality of shared compliance responsibility. Servicers and creditors can better collaborate by using new data-driven compliance platforms that provide all parties with critical insights and generate the transparency and trust needed to succeed in a tightening regulatory climate.”
As Gen Z enters the workforce, you’ll have up to four generations in your agency. Everyone learns differently. Young people learn from TikTok videos, and there is a professional term for this: micro-learning. Such short videos are especially efficient when sent out close to the time when the violation occurred.
Barron & Newburger
The most efficient training systems I’ve seen are those which build surgical, data-driven compliance content and provide agents the exact training they need when they most need it. This approach avoids wasting time and money on training which does not address the need. Continuous, role-based training programs that focus on the needs of each individual agent are some of the most efficient and effective I’ve seen.
Bedard Law Group
“Training is only going to be effective if it's done at or near the time the violation occurred. As agents handle hundreds of calls a week they will not have the capacity to remember particular moments of each consumer interaction. Therefore, effective monitoring will be critical to address the deficiency when it happens, in order to remediate quickly so that it does not become a systemic problem going forward.”
Consumer Financial Services Regulatory & Compliance Group
Clark Hill
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