Collections Compliance, Much Like Winning, Is a Habit
by Steve Levine | Chief Legal Officer
Vince Lombardi, one of our greatest football coaches and motivators, made a famous speech in which he said: “Winning is not a sometime thing. You don’t win once-in-a-while. You don’t do things right once-in-a-while. You do them right all the time. Winning is a habit”. So powerful is this message that almost fifty years later, coaches in all sports routinely use it, it’s been quoted in political speeches and motivational seminars, and large companies play audio or video of the great Lombardi as a call to arms to begin meetings.
In his first practice as coach of the Green Bay Packers, Lombardi started off by holding up the pigskin in front of his team and saying “This is a football”. His message was to get back to the basics, that you beat your opponent by blocking and tackling, by executing. My message is one in the same!
What are the basics of collections from a legal and compliance perspective? FIRST, it is imperative to have a collection POLICY AND PROCEDURE MANUAL to set forth both the operational expectations and the overall legal emphasis that each employee is responsible to know and follow the law. This goal sounds a lot simpler that it is because dealers can slip up on their compliance when they get too focused on their operational needs at the expense of their legal ones. To resolve this potential conflict, I used to meet directly with the top people over collections and have them tell me the key components of their strategies and practices.
I personally prefer a policy manual that is short, sweet and to the point. My logic is that a smaller manual is easier for employees to understand and follow, plus, in the event of litigation, it won’t be so cumbersome as to trip up employees. .
To summarize on this first point, the collections policies and procedures manual is your “get out of jail cheaper, if not free card” in the event of a legal challenge because you will be able to demonstrate that your stated company goal was to be compliant and follow the law and that any deviation from that goal was unintentional and a mistake. The problem can be limited to the failings of one employee in a particular instance rather than indicate a widespread company failing.
My SECOND key to collections compliance is TRAINING. In my experience, this is the area where companies most often fall short. You can have the best policies and procedures manual in the world, but it won’t do you a lick of good if it’s sitting in someone’s desk and has never been “rolled out” to the collections floor. Companies may have good intentions and spend the time and money to develop a great manual, but then daily events, month end goals, and employee attrition get in the way and pretty soon there is a climate where the policy manual is a fictitious aspiration rather than daily reality.
Instead, keep a written training calendar to serve as a record of when every collector receives training. In my humble opinion, a collector should go no more than a few months without some form of training and reinforcement. As a practical matter, a lot of training happens “one on one” on the collections floor, so the collections managers and supervisors must follow up and put a notation in the collector’s file to indicate that training was received. Even better, the collector should have to sign or initial such page to indicate that training was received. “If it isn’t written down it didn’t happen” is the approach that must be taken because you can be sure that plaintiff’s lawyers will make that argument.
Challenge your collection supervisors to develop training materials. One large client built its training into its monthly performance review meeting. You’d better believe that prioritized the issue in the minds of the employees. Similarly, a small car lot with only a few collectors chose to call attention to training by having a monthly brown bag lunch in which a different training topic was presented, either by me or by an employee chosen to present the material. The effect this had on the knowledge of the staff was tremendous.
THIRDLY, the last key piece is to REGULARY AUDIT COLLECTION LETTERS and any other communications, including text and email, both for accuracy and for purpose. It continually amazes me how businesses suffer what we at AutoStar call “document creep”, which we define as having more than one letter that purports to accomplish the same thing. This is not only wasteful and inefficient, but it could create risk if the content of the letter is incorrect.
Similar to the training calendar of which I spoke, a company should also keep track of every letter or other written communication it uses, when it was last reviewed and by whom. Be pro-active and challenge yourselves to honestly evaluate your various letters. Ask whether your approach is comprehensive? Does it take into account and compliment your call strategy and billing practices?
Make sure you have a lawyer or compliance professional review any of your “article 9” letters, which cover essentially everything having to do with repossession and its aftermath. There is nothing worse than “losing” twice, first when the customer doesn’t pay, and again when you’ve got to pay that customer damages due to a statutory violation. Be pro-active and seek regular review rather than taking the approach of “if it ain’t broke don’t fix it”.
So there you have it, I just provided the lawyer’s equivalent of “This is a football”.