May 2017 > Compliance Departments in Debt Collection Law Firms – What Works and What Doesn’t

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Compliance Departments in Debt Collection Law Firms – What Works and What Doesn’t

 Maria N. Lewis, Shareholder/Compliance Manager 

In a traditional law firm, the existence of a department or specific staff focused solely on internal compliance is not common. However, because of the regulatory environment surrounding debt collection and litigation, firms that practice in this area must devote staff and resources to actively monitor their internal practices and procedures for compliance with all applicable legal and regulatory requirements. This has been a “new normal” for debt collection firms ever since the publication of the Consumer Financial Protection Bureau’s (CFPB) Supervision and Examination Manual in 2012, as well as the many recent Consent Orders the agency has entered into with credit issuers, debt buyers, and law firms. 

                In adjusting to this new reality, it is important that debt collection law firms learn what works in terms of structuring their internal compliance system and what does not work in order to efficiently devote resources towards the effective monitoring of internal processes and procedures. Compliance staff should have a role in call monitoring, procedure development and approval, complaint and dispute review and reporting, and communication with clients as well as implementation of client requirements. So, what works when developing a compliance department? First, it is often helpful to have compliance staff members that have previously held positions in other departments within the firm. For example, having compliance attorneys who previously litigated collection cases creates a level of credibility in the eyes of the attorneys who are actively litigating cases. The litigation attorneys can rest assured that even though the compliance attorney may be dictating a client or legal requirement that affects the practice of law, the compliance attorney understands how that requirement will affect their practice. 

Additionally, employing former collectors in a compliance department can be beneficial both from the standpoint of rolling out new requirements such as voice mail or disclosure scripts, as well as call monitoring. Having a staff member who has previously sat in the place of collectors on the phone on a daily basis again lends credibility to the compliance department’s work, especially in the area of call monitoring. Importantly, having compliance staff who worked in other areas of the firm opens the lines of communication between departments because staff already has a relationship with each other. 

It is also very important to get input from other departments before changing a procedure or rolling out a new process. Again, this allows for buy-in and opens the lines of communication firm wide.  Lastly, and perhaps most importantly, shareholder/partner involvement is crucial when structuring a compliance department within a debt collection law firm. Compliance staff should report directly to a shareholder or partner who is not directly involved in managing or directing the firm’s revenue-generating functions on a daily basis. This allows for independence from other departments and operations to ensure that the compliance department has the freedom to properly implement procedures and monitor those procedures. 

While the above ideas are important to consider, it is equally important to take into consideration what may not work when structuring a compliance department. Operating in a silo between departments and between tasks definitely does not work well for a compliance department in a debt collection law firm. Other firm departments, including collections, litigation, IT and other support staff, need to feel comfortable bringing potential problems or questions to compliance attorneys and staff. If a problem or even a potential process improvement is not communicated between departments, it cannot be implemented successfully. This must include involvement of the firm’s compliance staff to ensure any changes in firm process and procedures comply with all legal and client requirements. What is more, operating in a silo between departments can cause an “us versus them” mentality.  For example, collectors may feel like internal auditors are “out to get them” during call monitoring if defects are identified. Opening the lines of communication between departments allows staff to identify training opportunities, rather than just focusing on and pointing out the problems. This will ensure the firm’s collection procedures are strong going forward. 

                Although the allocation of specific staff to focus on compliance within a debt collection law firm is extremely important, it is also necessary to remember that it is not solely the compliance department that is responsible for compliance. Every employee of a debt collection law firm must play a role in compliance. And hopefully with the above concepts of what can work and what may not, debt collection law firms can build a culture of compliance.


Posted: 5/9/2017 9:01:19 AM by Tom Connor | with 0 comments

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