Preparing Well-Seasoned Compliance Procedures

In the year since the CFPB's Supervision and Examination Manual on debt collection was published, collection professionals have worked to understand how to best comply with the bureau's suggestions for handling complaints.

Enhancing your internal complaint resolution policies is a process not unlike preparing a meal-you have to assemble your ingredients and adjust the seasonings before you serve it up.

"We get the ingredients and guidelines [from the CFPB], but then we season to taste for our individual company," Bender said. "You implement things in a way that makes the most sense for your organization."

Ciskey and Bender stressed that collection companies should always be in the business of managing incoming complaints. Companies must create and test internal policies and procedures to accept complaints, investigate issues, remediate any harm that has occurred and prevent the situation from occurring again.

Review Your Recipe: Working with the CFPB

Upon receiving a complaint through the CFPB's portal, one of the first things companies must understand is the nature of the violation. Companies should consider:

* What are the facts that gave rise to the complaint?

* Is the problem pervasive or an isolated act?

* How long has the problem been occurring?

* Does the problem affect the company's business model?

* How was the problem detected and who uncovered it?

* What compliance policies and procedures were in place to prevent or identify the issue?

The CFPB has given companies a relatively short timeframe to respond to complaints submitted through the portal. Companies have 15 days to respond to complaints and 60 days to close complaints from the time they first receive them.

"Those are not business days-those are calendar days," Bender noted. "So if you have the misfortune of having a complaint in the portal come through before a holiday weekend, for example, that could use up four full days of your 15. So vigilance is pretty important in this process."

While the CFPB expects companies to be proactive about processing complaints received, it does observe all portal activities and will step in to investigate a complaint further.

"Some agencies think that if they mainly service health care or are not a large agency, they may not be above the line of radar for CFPB concerns," Bender said. "But even if you don't draw a lot of complaints or have $2 million in revenue, your company will still be on the radar screen for complaint management."

Preheating the Oven: Self-Reporting

The CFPB expects financial services companies to self-police for violations, report problems as they are identified, remediate any resulting harm and cooperate in any CFPB investigations.

"Self-reporting is seen as a positive thing by the bureau because it substantially advances their protection of consumers," Ciskey said. "It also reduces the amount of resources the bureau has to put forth to come into your office and find these things themselves."

Companies should carefully review their ability to be proactive about self-policing and detecting their own potential and confirmed violations. Ciskey noted the scope of the CFPB's self-reporting expectations is large. She used an example of a company sending out a collection letter that contained an error.

"Maybe something happened that caused a decimal point to move on the amount owed," Ciskey said. "So instead of sending out a collection letter for $176, you sent out a letter to a consumer asking for $17,600. It wasn't any particular person's fault, it was just something that happened in the system. In that situation, the CFPB would be looking at how much time it took you to uncover the problem, the processes you had in place to correct it, how you notified consumers affected and how you fixed it."

Collection agencies must shoulder a great deal of responsibility to document internal errors and how they were resolved.

"Don't cover up your mistake," Ciskey urged. "I think we'll find the more open and transparent we can be, the better we look with our enforcement bodies. I think that is what the CFPB is expecting."

Complaints that come through the portal can help companies refine their early-detection process. Some companies use technology, such as call recording or voice analytics, to enhance their self-policing efforts as well.

In a June 2013 bulletin, the CFPB offered a carrot for companies that prioritize self-detection, noting that companies that self-police, report violations, remediate harm and cooperate with consumers and the CFPB-which the bulletin refers to collectively as "responsible conduct"-may receive favorable resolutions during a bureau enforcement investigation.

In other words, companies that clearly work to identify and resolve complaints on their own may get credit from regulators if they decide to investigate further.

A company that demonstrates responsible conduct could lead the CFPB to:

* Resolve an investigation with no public enforcement action.

* Treat the conduct as a less severe type of violation.

* Reduce the number of violations pursued.

* Reduce the sanctions or penalties sought by the bureau in an enforcement action.

"The CFPB expects you to demonstrate that you can detect issues when they arise," Bender said. "The 'responsible conduct' it refers to would be, among other things, having activities and procedures in place to let you know when things are not going according to your plan."

The CFPB will review whether a company proactively reported an error or violation right away or if it waited until disclosure was likely to happen anyway, such as through an impending supervisory activity or the emergence of a whistleblower. It also expects the company to update affected consumers within a reasonable amount of time.

The CFPB's mission is to decrease the amount of consumer harm that exists in the financial services marketplace, and it will likely look at each investigation on a case-by-case basis and take action based on the potential for consumer harm in that case.

However, Ciskey noted that selfreporting will not necessarily eliminate the potential for the CFPB to take any enforcement action it feels is necessary under the circumstance.

"Notwithstanding any efforts we may make in regards to cooperation with the CFPB when an enforcement is ongoing, their view of how consumer protection should be implemented will trump anything we've done or actions that we've taken," she said.

Seasoning the Food: Policies and Procedures

Companies must take the complaints they receive seriously, no matter what the source. By establishing comprehensive policies and procedures for handling complaints, companies can improve their odds of a better working relationship with the CFPB.

A company has just 15 days to respond to a complaint, so it's crucial to create a solid internal process detailing the steps employees should follow as soon as a complaint rolls in.

Internal policies and procedures will help agencies demonstrate that their intention is to prevent harm to consumers. To do so, however, companies need to show that thenactions are consistent with their policies and procedures.

"We hear a lot of small agencies say they didn't feel like they needed written policies and procedures because their system drives how their activities occur," Ciskey said. "But it's time for us to realize that even if policies and procedures seem redundant, they are necessary and we need to take the time to put them in place."

To start, determine who will identify and track complaints against your company. The CFPB will send alerts when your company receives a complaint through the portal, but you should also designate an employee to monitor the portal as well as other databases, such as the Better Business Bureau and PACER.

"It is extraordinarily helpful to know about things before they come to light so you can prepare to deal with them," Bender said. "Whether we think there is validity or not to the complaint, we still track it. We go to CFPB portal every day to see if there's anything we need to know."

Designate another employee or group to monitor your internal processes and how they are enforced. Policies should be well-documented, and employee behavior must be consistent with those policies. Companies should view each complaint as a potential indication of a trend or broken process. Routinely test and retest to make sure anything you have tried to repair or correct is now working as it should.

"It's hard sometimes to develop, let alone implement, new policies and procedures and work instructions in your organization," Bender said. "Now the CFPB is taking things a step further to ask, 'How are you testing to make sure all of those roles you put in place are really working the way you expected them to? Do your policies have any unintended consequences that you might want to deal with?'"

Companies should conduct a thorough review of the nature, extent, origins and consequences of the misconduct. If a violation occurs within a company, the CFPB will look at what corrective measures the company has put in place to deal with the issue- for example, whether you fired the employee responsible for the violation, retrained the employee or simply found a different position for that person within the company.

Your policies and procedures should document plans for consumer remediation and how remediation occurred after each violation, if applicable. The CFPB will look at what the company did upon learning of the misconduct, when it stopped the misconduct and how and when it implemented a response. Your policies should enable the truth to come to light quickly and completely.

"You can't sweep things under the rug when you're dealing with the CFPB," Ciskey said. "But simply being transparent and cooperative at a basic level isn't going to get you any extra credit. Based on what it has said in bulletins, we have to make sure we're offering things that aren't asked for."

Incentivize your employees to be problem solvers for consumers, and analyze how your current systems affect employees' communication with consumers.

Your employees should also feel empowered to report policy violations they observe in your office. Establish programs that not only deputize employees to be clients' eyes and ears, but incentivize them to either work with each other to correct a problem or let you know an issue exists.

Set up convenient ways for employees to discretely report violations or errors they've observed in the workplace. Some companies set up anonymous e-mail addresses or voicemail boxes that route directly to the human resources department.

If the CFPB decides to pursue an investigation against your company, it will expect complete cooperation. Be prepared to provide the results of your complaint review to the CFPB as well as sufficient documentation and a report of your response to the situation.

"We need to document processes so we have evidence to provide," Ciskey said.

Voluntarily reporting violations and errors can reflect well on your company. Your policies should spell out the frequency and method you will use to self-report complaint information to your governing bodies.

"If your governing body is large, find out if there is a consumer experience committee or similar with whom your compliance team can interact between board reporting events," Bender said. "It's good to work all these things out long before you have any issues."

Bender also recommended preparing periodic reports on legal and regulatory developments to keep governing bodies aware of key issues within the collection industry.

When you receive a complaint through the portal, your response will be sent to the consumer. While your response should address the consumer direcdy, keep in mind the CFPB does monitor all communications within the portal. Decide who within your company will review your response before it is sent: the CEO, the board of governors, etc.

'Who in your company needs to see what you are about to report to all your state regulators and potentially Congress as well?" Bender asked. "You want to have a process in place so your decision makers can see the result you're about to put in the portal."

The Farmer and the Chef: Compliance Starts at the Top

Your company should have a culture of compliance that starts at the top. When setting policies and procedures to handle complaints, one of the most important issues to consider is the tone at the highest level your organization.

"If someone at the top says, 'We've created this compliance department and they need to make sure everything is fine-nobody else needs to worry about it,' I don't think that's a very successful model," Bender said.

Companies should ensure their top brass is setting an expectation for a compliant corporate culture in every department. Supervisors must convey the importance of self-reporting errors and following up with even the smallest consumer complaint.

A compliance department can't function on its own-it needs the cooperation of the entire organization.

"As cooks, we don't grow all the veggies or raise the meat-other people are experts in that," Ciskey said. "But we are responsible for putting it all in the pot and tasting the gravy to make sure it all works well together."

Be proactive about involving management, owners and CEOs in the complaint management process. Give them frequent reports detailing current complaint data and recent remediation processes, and solicit their input.

Enjoy the Meal: The Result of a Comprehensive Compliance Plan

While the CFPB's complaint management expectations will undoubtedly create a fair amount of work for many collection agencies at the outset, the result will be a more harmonious relationship with clients, consumers and state and federal regulating bodies.

A comprehensive complaint management strategy can also yield a number of other benefits. Many collection companies will likely reduce the number of violations that occur within their company, reduce the sanctions and penalties imposed upon them by regulators and perhaps even improve their collection rates.

"The bottom line for any agency is always going to be whether you are operating from a consumer-centric standpoint," Bender said, cm

Register for the CFPR's Complaint Portal

ACA International encourages all companies that have not yet registered for the CFPB's complaint portal to do so at www.c0nsu7nerfinance.gov/ comp any-signup. Once a company signs up, the CFPB will follow up with a phone call to validate the information provided.

CFPB officials have said many of the consumer complaints the CFPB considers "unresponded" are the result of agencies having not signed up for the complaint portal. Because of a limited 15-day timeline for response, it's important for the CFPB to be able to forward the complaint to the appropriate contact at collection agencies. Avoiding sign-up does not prevent the CFPB from acting on the complaint nor does it let the agency off the hook for providing a response.

The CFPB considers the number of complaints against a company, as well as the company's performance in resolving complaints, when exercising its supervisory and enforcement powers.

"It's time for us to realize that even If policies and procedures seem redundant, they are necessary and we need to take the time to put them In place."

Anne Rosso is associate editor of Collector magazine.