Collection Vendors Pose a High Risk for Companies, Expert Says

A company’s collection vendor can be one of the highest risks  a lender has — maybe the highest — said attorney John Redding, a partner at BuckleySandler LLP, during a
presentation at last week’s Auto Finance Risk and Compliance Summit in San Diego.

Redding warned attendees to be careful when outsourcing servicing. He called collections, in particular, “a high risk area — but also high value.”

While regulators will hold the collection agency accountable for any wrongdoing they find, regulators also believe that the creditor is directly responsible for the vendor, Redding warned, and  regulators will “deem it a failure of your compliance management system for not properly overseeing vendors.”

Redding told attendees at the conference the “tone at the top and attitude matter,” echoing an earlier presentation from Ally Financial Inc. Chief Compliance Officer Dan Soto.

Redding said companies using third-party servicing vendors such as collection agencies should take a sampling of recorded calls on a regular basis; make sure any issues are addressed across the board; share and “socialize” issues across the entire collections group.

It’s also important to make sure processes and procedures are in writing, he said. “If it’s not in writing, you’re not doing it — even if you are,” Redding said.