Compliance Blog Final

In September 1963, a young singer-songwriter-poet named Bob Dylan wrote an anthem for change. The last verse gave warning those who don’t keep up with the times and changes taking place:

“The line it is drawn the curse it is cast
The slow one now will later be fast
As the present now will later be past
The order is rapidly fadin’
And the first one now will later be last
For the times they are a’ changin’!”

Today, fifty plus years later, those words ring true for the auto finance industry, especially as it relates to their collection activity and the impact it has, or can have on consumers. This raises the question, is your house in order? Is it safe? Is it strong enough to withstand whats coming?

Most large companies have significantly increased their compliance staffs in recent years. One executive at a Top10 auto finance company recently told me when he started there eight years ago, the collector to compliance employee ratio was well over 100 to 1, but now it’s 1 to 1!

The financial institutions have been busy writing, rewriting and implementing policies and procedures in anticipation of the Consumer Financial Protection Bureau (CFPB) as well as a variety of State and Federal regulators examining their, and their vendors collection practices.

Now we’re starting to see the change-taking place.

The challenge lies in the expectation placed on vendors, especially smaller vendors who do not have the budgeting resources, or know-how to add compliance officers to keep up with the myriad of vendor requirements being thrown at them.

On April 13, 2012, the CFPB laid down the gauntlet when they said in a released statement, “financial institutions under Bureau supervision may be held responsible for the actions of the companies with which they contract. The Bureau will take a close look at service providers’ interactions with consumers. It will hold all appropriate companies accountable when legal violations occur.

http://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-to-hold-financial-institutions-and-their-service-providers-accountable/

“Consumers are at a real disadvantage because they do not get to choose the service providers they deal with—the financial institution does.” said CFPB Director Richard Cordray. “Consumers must not be hurt by unfair, deceptive, or abusive practices of service providers. Banks and nonbanks must manage these relationships carefully and can be held accountable if they break the law.”

2,258 of you read a blog I wrote last week about a repossession agent who was charged with manslaughter for chasing a woman in a vehicle he was trying to repossess.:

https://www.linkedin.com/pulse/senseless-tragedy-call-continuing-education-our-industry-john-lewis?trk=pulse_spock-articles

Now, new details make the story even more relevant when the discussion turns to compliance tracking and the responsibilities placed by regulators on financial institutions and their vendors.

http://www.deseretnews.com/article/865654947/Repo-man-charged-with-manslaughter-in-Pleasant-Grove-womans-death.html?pg=all

“a neighbor’s security camera video shows Mr. Drew forcing Mrs. Best to hug the curb on her right around the cul-de-sac as he tried to box her in with his tow truck and as both vehicles accelerated. Mrs. Best got around the tow truck and the video shows Mr. Drew speeding after the Navigator in very close pursuit as they leave the cul-de-sac and the camera’s view,” charging documents state….Mr. Drew drove the tow truck straight to pin Mrs. Best against the curb on the right. When she did not stop, the Navigator jumped the curb and hit the tree….Drew has a history of traffic-related offenses, according to state court records. He was convicted of unlawful conduct for a motor carrier in 2015, a class B misdemeanor, in a plea in abeyance. In 2013, Drew was convicted of misdemeanor DUI, and in 2012 pleaded no contest to disorderly conduct, a class C misdemeanor.”

Again, this raises the question of whether the repossessor had a background check, and did it uncover the above convictions? What are the restrictions placed on what violations a financial institution will accept.

On the other side of the coin, repossession fees have not increased in a manner consistent with the increase repossession agencies expenses have increased. To make things even more challenging for repossessors being able to afford to keep up with compliance, ancillary fees repossession companies used to receive for vehicle storage, close fees, personal property inventory and storage, delivery, and making keys have all but disappeared as other sources of income for repossession agencies. It’s also become more difficult to find quality employees to perform such a challenging and risky job as the pay does not seem to warrant the risk.

Sadly, none of this erases the fact Ashleigh Holloway Best was a wife, twin sister, daughter and a mom of three young children, leaving loved ones behind in a situation that should have been avoided, and the questions still linger…

Was the vendor property vetted, was their employee properly vetted and trained? If you are a financial institution and you are not asking those exact questions right now of your compliance department, you have risk.

While that’s the question, the real issue is how?

  • How do you manage a process as complex as knowing who exactly is seeing your customers personally identifiable information?
  • How do you know that person has had a legitimate background check, and not a cursory check through a public record provider that did not follow FCRA guidelines by manually checking the records at every county courthouse for every reported address for that person, for the past 7-10 years?
  • How are you making sure the training these vendors need is being properly drafted, implemented and tracked to make sure it is taking place in a manner that is showing meaningful results and a reduction or consistent and acceptable level in regard to compaints?
  • How is your vendor being compensated so they can afford to maintain the compliance requirements you’re being mandated by the regulators to enforce, or are you using the last expensive vendor on a contingent basis and compliance is only a word, and not a requirement your managing and tracking to insure situations like the above do not happen, and when they do, as they unfortunately will, you at least can say you did your best to prevent it?

It’s one thing to have a policy, but it’s another thing to have a policy that is actually being implemented, monitored, audited and tracked. To do this properly, you need compliance within your technology, as the volume is too high to track it manually, and the exceptions and nuances are too significant to have manual tracking as an acceptable “system” in the eyes of these regulators. They mean business, and they are carrying a big stick, as we’ve seen with the $5b in fines they’ve assessed to date, and they haven’t really pulled back the covers on collection activity yet.

Looking at your compliance policies as it relates to repossession, and your repossession vendors, has never been more critical, as evidenced by this very sad story. Verifying you have the proper systems in place to tie the compliance loop so everyone works in systems that talk to each other has never been an option as it now is due to technology advancements.

As Bob Dylan said, the slow one now will later be fast, especially after the fine or lawsuit hits.