When it comes to oversight of third-party collection vendors, most creditors naturally focus on the standards: compliance, data security, and proper payment processing. These are critical boxes to checkāno question. But while compliance ensures safety, it doesnāt guarantee success.
To truly understand whether your collection partner is working effectively on your behalf, you need to look beyond compliance. You need to evaluate performance.Ā
Beyond Compliance: Measuring What MattersĀ
A vendor can be fully compliant and still underperform. A compliance audit may confirm that data is secure and consumer protection rules are being followed, but it wonāt answer questions like:Ā
- How are consumers actually being treated in real interactions?Ā
- Is your agency prioritizing your accountsāor someone elseās?Ā
- Are collectors making the best possible effort, or just doing enough to get by?Ā
- Are settlements offered only after a thoughtful review of the consumerās financial situation, or rushed as a quick solution?Ā
- Are payments structured to genuinely fit the consumerās situation, or just minimized to keep the account active?Ā
- Is documentation on the file accurate and appropriate?Ā
- Are hard-to-reach consumers being located and engaged?Ā
These are performance questions, not compliance questions. And theyāre central to whether youāre realizing the full potential of your recoveries.Ā
Commission Structures: Getting What You Pay ForĀ
Most creditors pay collection agencies on commission. That structure creates both opportunity and risk.Ā
- Pay too little, and your agency may not invest the time, talent, or resources your accounts deserve.Ā
- Pay more, and you expect higher service and better resultsābut does it always work that way?Ā
In one performance audit for a large financial institution that bragged about negotiating a rock-bottom commission rate, I found 65 collectors assigned to the account. The catch? Every single one had been hired within the last 60 daysāwith no prior experience. Even the supervisors were new. Imagine the results if top collectors had been assigned instead.Ā
On the other side, Iāve seen creditors agree to higher rates only to discover the agency hadnāt updated its coding, so the old rates were still applied. And in another case, even with a generous commission rate, the agency was simply too busy to work new placements for nearly 60 days.Ā
Itās not just about the rate. Higher fees donāt always guarantee higher recoveries. The true measure is whether your collection recovery rate is as strong as it can be for your portfolio. That canāt be guessedāit requires analysis and oversight.Ā
The Power of Performance AuditsĀ
Performance audits provide that oversight. Unlike compliance reviews, they focus on activity and outcomes, helping you answer questions such as:Ā
- Are the right calls, texts, and emails being made at the right time, to the right people?Ā
- Are the messages being delivered persuasive, respectful, and effective in prompting repayment?Ā
- Are skilled, experienced collectors assigned to your accountsāor are your placements being used to train rookies?Ā
Performance audits also help you evaluate whether training, supervision, and coaching are in place to ensure collectors grow into their roles and perform at their best. By reviewing actual collection strategies and results, you can verify that your agency is maximizing your placementsānot just checking the boxes.Ā
Why It Matters for CreditorsĀ
At the end of the day, your business depends not only on staying compliant but also on getting results. Compliance and security must always be confirmed, but performance is what ultimately drives success. Performance audits help you:Ā
- Ensure youāre paying the right commission rate for the value youāre receiving.Ā
- Confirm that consumer treatment aligns with your brand and regulatory expectations.Ā
- Maximize recoveries by making sure your agency is prioritizing and executing effectively.Ā
Compliance audits keep you safe.
Performance audits make you successful.
Creditors who overlook this second layer of oversight risk leaving recoveriesāand reputationāon the table.Ā
Bottom line: Donāt just audit for compliance.
Also – Audit for performance.
Because it isnāt just how your vendors operateāitās how well they deliver.Ā
Author:Ā Judy Hammond
judy.hammond@resourcemanagement.com
Judy Hammond is founder and President of Resource Management Services, Inc. The corporation was founded in 1986 and specializes in auditing and consulting, serving the collection and recoveryĀ industry.Ā As President of Resource Management Services, Inc., she has more than 35 years ofĀ experience with an emphasis on operational reviews for compliance and operational eļ¬ectiveness ofĀ collection operations, both for creditorsā internal collection and recovery operations as well asĀ collection agencies and attorneys.Ā She has worked with top banks and financial institutions, utilities, credit unions and telcoms, (and their vendors) and has conducted many BestĀ Practices projects.Ā She is author of various industry publications: āComprehensive Agency/AttorneyĀ Usage Study,ā āComprehensive Agency/ Attorney Usage Study IIā and āCollect More From CollectionĀ Agenciesā. Her work with creditors who were looking to sell debt for the first time, and subsequentĀ Buyer/Seller research was the foundation for the second corporation, The Debt Marketplace, Inc.Ā Ā SheĀ worked with Dennis Hammond as co-founders of the Debt Buyersā Association, (now RMAi), building theĀ foundations for industry standards, as well as the original code of ethics. She developed andĀ produced two industry conferences, Collection and Recovery Solutions and Debt Connection SymposiumĀ & Expo, from their inception in 2002 and 2006, respectively, to 2022.Ā Prior to starting her ownĀ company, she worked with twoĀ large collection agencies.
