Regulation F and Debt Collection Practices

What is Regulation F and How It Impacts Debt Collection Practices?

The Consumer Financial Protection Bureau (CFPB) has recently finalized two rules, known together as Debt Collection Practices (Regulation F), which impacts the Fair Debt Collection Practices Act (FDCPA). This is the biggest change to the debt collection industry since the inception of the FDCPA back in 1978 and went into effect back on November 30, 2021. To help you understand these changes and the impact it has on your current debt collection practices we have provided five key aspects on the new debt collection rule.

1) The debt collection validation notice

When a debt collector first communicates with a consumer, or shortly thereafter, they’re generally required to provide certain information about the debt. When the information is provided in writing or electronically, it is called a validation notice, and it will generally include information like:

  • Name and mailing information of the debt collector
  • Name of the creditor to whom the debt is owed
  • Account number (if any) associated with the debt
  • An itemization of the current amount of the debt that reflects interest, fees, payments, and credits since a particular date that you may be able to recognize or verify with records
  • The current amount of the debt as of when the validation notice is provided
  • Information about the consumers debt collection rights including how to dispute the debt

2) How often can a debt collector call a consumer?

The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from repeatedly or continuously calling consumers with the intent to harass, oppress, or abuse consumers. Under the Debt Collection Rule, collectors are presumed to violate the law if they place a telephone call to consumers about a particular debt more than seven times within a seven-day period, or within seven days after engaging in a phone conversation with a consumer about a particular debt. These call frequency presumptions only apply to calls placed by the collector to the consumer. It is important to note that they don’t apply to text messages, emails, and other types of media.

3) Reporting a consumer’s debt to a credit reporting company

There are certain steps debt collectors must take before they can report a debt to a credit reporting company. They must do any of the following:

  • Speak to the consumer by telephone or in person about the debt
  • Mail a letter or send an electronic communication about the debt and wait for a reasonable amount of time, generally 14 days, in case it is returned as undeliverable

If the debt collector sends a consumer a validation notice, it means that they’ve satisfied their requirement to contact the consumer and, in general, can begin reporting the debt to credit reporting companies, provided they follow other laws about credit reporting.

4) Contacting a consumer on social media about a debt

Debt collectors must follow certain rules if they contact consumers through social media, including:

  • Keeping the messages private – Their messages to consumers must be private and not viewable by the general public or by the consumer’s friends, contacts, or followers.
  • Identifying themselves as a debt collector – If a debt collector attempts to send a consumer a private message requesting to add the consumer as a friend or contact, the debt collector must identify themself as a debt collector.
  • Providing a way for the consumer to opt out of their communications – They must also provide the consumer, in each message, a simple way to opt out of receiving further communications from them on that social media platform.

5) What is a limited-content message?

A limited-content message is a type of voicemail that a debt collector may leave for the consumer that must include specific information. Limited-content messages must include:

  • A business name that does not indicate the caller is a debt collector
  • Telephone number(s) the consumer can use to return the call
  • A request that the consumer reply and the name(s) of who the consumer can contact to reply

There is also some optional information they can include, including suggested dates and time for the consumer to reply. Voicemails that do not follow these rules are not considered limited-content messages.

Importance Of Working with a Compliant Collection Agency

Now more than ever it is important to work with a complaint third party collection agency partner like Integral Recoveries that is well versed with all of the changes that had gone in effect with Regulation F. Integral Recoveries has been providing effective accounts receivable management solutions since 1995. Our mission is to resolve past due accounts utilizing state of the art information gathering, effective negotiations and persistence. We take a strategic approach to debt recovery and every account is researched thoroughly by experienced professionals in order to take the most effective course of action. Contact us if you would like to learn more about our services.

 

 

 

 

Mistakes to Avoid When Putting Together an RFP

Selecting the right third-party vendor is critical for any organization. Making the wrong decision can led to many long-term negative consequences for your firm. The contracts or agreements that you will enter into with these service providers can last several years and will often require a long-term commitment on your part. This makes the selection process especially important. So how can your organization make sure the procurement process is an open and transparent process? How can you ensure your selection process will lead to a positive outcome?

 

Most industries will make purchasing decisions by issuing a Request for Proposal (RFP). There are many benefits of using an RFP process.

  • Offers a level playing field.
  • Enables focus on specific criteria
  • Offers the potential to discover new vendors.

 

Using an RFP process also allows the procurement process to limit interactions with vendors prior to their submissions and typically any vendor is allowed to submit a proposal. This helps create a competitive and open evaluation process of potential service provider for your organization. While this is a standard procurement practice for many different industries, when writing an RFP, the challenge is knowing what items or value-added services you will need to focus on and gather in the evaluation process. For example, in the collection industry where it is a service-based offering and not a commodity, solely looking at lowest price can often lead to picking the wrong vendor. In many cases it is not an apples-to-apples comparison when only comparing cost.

 

As a resource to assist with the process, Integral Recoveries has identified some specific mistakes that your organization should avoid when putting together an RFP.

 

1) Evaluating Potential Vendors Solely on Price – While price is an important differentiator, it should not be the main factor in selecting a collection vendor. Why? In the collection industry, low price often leads to low rate of return. Integral Recoveries has put together a detailed explanation of “Net Back Dollars” and why it is important in selecting the right collection agency partner. It can be found on our website Learn More About Net Back. It might be in the organizations best interest to set the price they would like to pay for this service in the RFP. With price being constant, this will allow you to focus on other important value-added services that a collection agency can provide to your organization.

 

2) Don’t Disqualify Potentially Good Vendors Based on their Size – Avoid setting stringent qualifications or requirements that can not be met by many vendors. Why potentially disqualify good candidates from the RFP process? For example, only looking at vendors who have a certain annual revenue or a minimum employee head count. A large firm does not always equate to superior performance as well as customer service. In fact, many smaller firms that have fewer clients to service and maintain could provide you with better customer service and a higher rate of return. Integral Recoveries has put together a list of items to help you find the right collection agency that can be found on our website. Finding the Right Collection Agency

 

3)  Limiting Potential Vendors Based on their Location – Location of the collection agency should not be a primary factor that is used for consideration and selection. Most collection agencies do have the ability to operate in other states. Ask if they are licensed and able to collection nationally. Limiting vendors solely based on location can often disqualify potentially good candidates. Remember the goal of an RFP is to create an open and competitive process.

 

4) Implications of Subcontracting or Having Off-Shore Centers – Firms subcontract or have off-shore call centers to reduce overhead costs. If you use a vendor that often utilizes a subcontractor, you have no direct control over the quality of subcontractors’ work which might lead to inferior performance. Does the vendor operate any call centers that are located outside the county? If so, this could create potential issues for your organization such as bad customer service, increasing number of customer complaints or lack of accountability.

 

5) Not Focusing on a Vendors Compliance and Client Retention Policies – It is important to find out if the potential vendor operates in a complaint manner. Will their services be performed in accordance with all federal and state laws and regulations? Does the collection agency maintain an “A+” rating and is an accredited member of the Better Business Bureau? Are they committed to resolve customer complaints or disputes in a timely manner? Have they had any court-litigated actions filed against them or have they had any clients terminate their services early? These are all factors that should be considered when looking at different collection agencies and part of any RFP selection process.

 

Integral Recoveries has been providing effective accounts receivable management solutions since 1995. Our mission is to resolve past due accounts utilizing state of the art information gathering, effective negotiations and persistence. We take a strategic approach to debt recovery and every account is researched thoroughly by experienced professionals in order to take the most effective course of action. Contact us if you would like to learn more about our services.

 

 

Finding the Right Collection Agency

According to a report from TransUnion, a national credit reporting agency, at the end of 2021 over 77.6 million consumers had at least one debt in collections with 188 billion in outstanding balances. In every sector, people are failing to make payments on their debt.

Unpaid obligations can be detrimental to any organization. It can negatively affect your cash flow, impact your operating margins, and have a detrimental impact on your overall bottom line. Perhaps you need to consider working with a collection agency that will serve your best interest all while protecting your good reputation. The following items must be considered when making that decision.

Importance of Customer Service

It is essential to work with a company that provides both clients and consumers with good customer service. This includes quick and responsive turnaround of requests by having experienced Account Representatives who answer the phone and handle any ongoing needs or issues. Things to consider or ask a prospective collection agency might include: what is your average hold time, what is your typical timeframe to follow up on voicemail or e-mail requests, what are your hours of operations, do you have bi-lingual Account Representatives and are consumer complaints handled properly. While the Fair Debt Collection Practices Act outlaws any threating or abusive behavior by Account Representatives to consumers, there are many important aspects of customer service overlooked by some collection agencies due to lack of training or the overall experience of their staff.

Why Recovery Rates Matter More Than Price

When looking for the right collection agency for your organization, don’t just compare and go with the lowest collection fee. In fact, you should focus on the overall recovery in actual dollars they collect on your behalf which translates into more money back to our organization or more “net back” dollars. In fact, industry surveys have found that higher contingency fees charged by collection agencies typically produce a higher overall recovery rate and thus increases your bottom-line revenue or overall rate of return (ROI). Choosing the lowest cost provider is not the best criteria to use when selecting a collection agency since this will often result in a poor recovery rate. The main reason for this is that as agencies charge a low or unsustainable fee, they are not able to put the necessary resources in place to maximize collections for you. So, when comparing agencies, it is important to focus on over net back dollars they return for you and not a collection fee they might charge. Integral Recoveries has created an in-depth explanation on maximizing your organizations net back dollars and provides examples of how the lowest cost provider typically produces the least amount of return to you. Click Here to Learn More

Protecting Your Reputation

Your reputation or brand can be positively or negatively affected by the actions of a third-party business partner. A collection agency will contact customers on your behalf and act as an extension of your organization. The way they treat your customers could have an impact on your organizations brand or image. That is why it is vital to choose a collection agency that is both reputable and professional. In many cases it often starts with the collection approach they use when dealing with your customers or consumers. For example, the importance of a consultative collection approach where the Account Representative reviews the individual’s situation and goes over payment options to assist with account resolution. This approach has shown to lead to more phone conversations and a higher correspondence rate. Effective communication with consumers is the key to provide clients with a higher recovery rate. It is also important to find out if the collection agency operates in a complaint manner. Will their services be performed in accordance with all federal and state laws and regulations? Many states have specific laws or regulations, and it is important that a collection agency is familiar with all of them. Does the collection agency maintain an “A+” rating and is an accredited member of the Better Business Bureau? Are they committed to resolve customer complaints or disputes? Have they had any court-litigated actions filed against them or have they had any clients terminate their services early? These are all factors that should be considered when looking at different agencies.

Technological Benefits Offered to Clients

It is important to ask what type of skip tracing technology a collection agency uses to help locate hard to find consumers. Having good contact information will allow more conversations with consumers which ultimately leads to greater payments. This is critical if the agency is going to be successful collecting on delinquent accounts. Does the agency provide an online payment portal that consumers can access securely 24/7 to enhance the ease of making payments? A recent industry survey has shown that 73% of consumers prefer to make payments on-line versus over the phone or via mail. Does the agency provide clients on-line access to their accounts? This allows for full for transparency and an accounting of activities and provides the client with real time account status on placed accounts. Are they able to produce standard or customized reports for clients that will provide performance, activity, and statistical information? This will provide the client with overall performance indicators so you will see if they are doing a good job for you.

Other Factors to Consider

Ask if the agency takes ownership of the entire collection process from beginning to end. Many larger agencies either outsource parts or all their services to third parties and will sometime have offshore call centers located abroad. Ask what measures they have in place to operate securely and protect your confidential data. A data breach or a database hack could have devastating consequences to your organization. Does the agency have the ability to collect nationally? Being licensed and able to collect out of state is important especially now post pandemic since a large percentage of people have been relocating.

Integral Recoveries has been providing effective accounts receivable management solutions since 1995. Our mission is to resolve past due accounts utilizing state of the art information gathering, effective negotiations and persistence. We take a strategic approach to debt recovery and every account is researched thoroughly by experienced professionals in order to take the most effective course of action. Contact us if you would like to learn more about our services.

Net Back Dollars versus Price What is Best for Clients?

An old saying tells us that you get what you pay for. This is also true in the collection industry as well. Receiving debt collection services at the lowest contingency fee or cost might not be the best way to ensure the highest performance or overall debt recovery for your organization. While there are many factors to consider when selecting or evaluating collection agencies, in our opinion the most important factor is the overall net back dollars (net back) an agency will return to the client. The definition of net back is the amount of money, or dollars that is returned to the client after the collection agency takes or nets out their collection fee. This amount is the actual return a collection agency provides to the client. Too often an organizations selection criterion or their RFP/RFQ’s are weighted heavily towards contingency fee or cost. On the surface this makes sense because overall external collection costs to an organization could be less using an agency with a lower contingency fee. This school of thought has led many decision makers to look at account receivable management services as a commodity in the sense that all debt collection services provided are the same or interchangeable and that the agency offering the lowest cost should be the main determining factor for selection. However, in many cases a low contingency fee comes with negative consequences as well.

What are some the implications of an agency charging a lower fee?

Collection agencies are often quoting low rates to get initial business or help them break into a new market. Charging a lower fee does not allow for a collection agency to spend a lot of money or put enough resources to adequately collect your delinquent accounts while still turning a profit. Less resources will prohibit an agency to fully work your accounts. This will force them to cut corners or reduce overall expenses in order to make money from a client. In many cases this means ignoring certain segments of older or lower balance accounts, assigning larger number of accounts to each account representative or utilizing less technology platforms such as skiptracing to locate delinquent consumers. None of these actions will ultimately benefit the client.

Higher Fee = Higher Recovery Rate

Higher contingency fee usually means higher recovery rate since more resources are assigned to the accounts. Agency A charging a 25% fee and getting their customer a 15% recovery rate is better than an Agency B charging a 15% fee and getting their customer a 10% recovery rate.  Using an example of a delinquent portfolio of $1,000,000 would yield the following results:

Agency A

$150,000 Dollars Collected

$37,500 Collection Fee Paid

$112,500 Remitted Back to the Client

Agency B

$100,000 Dollars Collected

$15,000 Collection Fee Paid

$85,000 Remitted Back to the Client

When reviewing or evaluating collection agencies consider net back rather than just price as an important factor for selection. In many states, legislation allows for the collection fee to be added on to certain types of government accounts. The fee is included in the outstanding balance and ultimately paid for by the consumer not the client. Add-on collection fees or costs makes the case of going with a lower fee of even less of importance in the selection process. Why shortchange the amount of work and resources a collection agency will put on your delinquent accounts? Start using net back as a true measurement of how well a collection agency is performing for your organization.