3 must-have training courses for your collections staff

Compliance is a major point of contention for many lenders—particularly when it comes to their collection operations. Many of the laws that were enacted decades ago to protect consumers have components that are almost irrelevant to the collections industry. For example, the Telephone Consumer Protection Act (TCPA) was initially enacted to protect consumers from excessive telemarketing calls. However, the standards of this law are also applied to debt collection, which frankly, was never the intent of the law. While the laws that govern collection operations will most likely continue to evolve with changing technology and consumer behavior, it’s important for lenders to implement regular and relevant training courses for their collection staff. The cost of non-compliance—even when due to ignorance of the law—is high. For example, collection operations that are found in violation of TCPA rules could face fines of $500 to $1,500 per violation! So, as you can see, it’s critical that your collections staff is thoroughly trained to compliantly do their jobs. Here are the three must-have training courses that you should ensure your staff is up-to-speed on:

1. Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)

Signed into law on July 21, 2010, the Dodd-Frank Act created more focused regulatory scrutiny over the financial services industry.  One of the major intentions of the Act was to prevent unfair business practices or other predatory behaviors by lenders which caused confusion or otherwise deceived consumers. The result of this was UDAAP. UDAAP prohibits firms offering financial services from engaging in unfair, deceptive, or abusive acts or practices. However, the challenge for collection firms is that those terms are vague, undefined, and unclear. Likewise, they are essentially determined by the consumer.

Collection operations don’t necessarily know, with certainty, what actions violate UDAAP, making compliance that much more problematic. According to the CFPB, an unfair act or practice:

• Causes or is likely to cause substantial injury to consumers;
• The injury is not reasonably avoidable by consumers; and
• The injury is not outweighed by countervailing benefits to consumers or to competition

While complying with UDAAP may not be a perfect science, the important thing to remember is that you should have a well-documented manual that includes what you expect from your staff when they are interacting with debtors, and what behavior is unacceptable. Your staff should be trained on the policies and procedures included in your manual, and have easy access to the document.

2. Fair Debt Collections Practices Act (FDCPA)

Enacted in 1978 to eliminate abusive, deceptive, and unfair debt collection practices, particularly from third-party debt collection agencies, the FDCPA restricts the time and frequency of collection calls, and provides guidelines for acceptable, and not acceptable, behaviors by debt collectors. However, since the CFPB has become a major player in the regulatory landscape, the former list of specific “don’ts” that previously encompassed FDCPA directives, has become more of an ambiguous model, much like UDAAP.

Proper training should cover the guidelines under which debt collectors may conduct business, define rights of consumers involved with debt collectors, and prescribe penalties and remedies for violations of the Act.

3. The Telephone Consumer Protection Act (TCPA)

The original intent of the TCPA was to protect consumers from excessive telemarketing calls; however, the FCC and CFPB swept debt collection under the same umbrella as telemarketing calls, causing major contention for lenders and collection agencies. In 2012, after much push back from collection operations, the FCC addressed their concerns by providing guidance on what constitutes consent for calls made to wireless lines, as well as other elements of the act.

To prevent or reduce TCPA violations, your staff should be thoroughly trained on all aspects of the law, and continuously monitored to catch and correct violations.

Remaining compliant takes diligence, awareness, and monetary and time resources. However, investing in compliance is critical to avoid potential scrutiny from regulators and/or violations. The ins and outs of the aforementioned collections laws can be complex and overwhelming, so we created our latest ebook, Compliance in the Collections Industry, as a guide to gain a better understanding of the three Acts discussed in this article as they relate to collections operations, and achieve and maintain compliance. Download your free copy today!