February 1994
Operational Reviews
A Performance Tool for Creditors and Agencies
The creditor has not only the right, but also the responsibility, to audit and review the agency performance. An operational review is an on-site evaluation of an agency's performance in key operational areas. It provides both an efficiency study and a compliance measurement that can be used by the creditor as a management tool.
When activity is below expectations, the creditor and agency can work out an improvement plan, resulting in increased results and a stronger agency/creditor relationship. Since measurable recovery results will lag from the actual activity necessary to generate those dollars, an active program of reviewing activity will provide the creditor with warning of the problem areas, or problem agencies, prior to seeing the effect of the problem, less dollars collected. When the operational review reveals that the agency meets or exceeds expectations, all parties are more comfortable.
Maintaining a presence at agencies is important to maximizing results. One agency said to their independent auditor, "We fight fires here. Now that I know you'll be coming in monthly to review the creditor's accounts, we'll be sure never to move your collectors to fight fires when another client complains about their recovery results!" She apparently didn't understand that her procedure of responding to the old "Squeaky wheel gets the grease theory" didn't provide a good comfort level to a manager who prefers a partnership rather than squeaky wheel approach to agency management. Another agency understood the value of the reviews, and used them appropriately. "We've really learned that people do what you inspect and not what you expect!" they said. "Come in anytime," they said, "we learn from your reviews too."
The advantages of conducting operational reviews of agencies are many.
- To Verify Agency Compliance to Expectations
- To Compare Fairly and Consistently
- To Understand How to Best Work Together
- To Increase Performance and Collection Results
With an objective review process, the creditor can also remove some of the subjectivity that easily crops up in evaluating agency performance on different portfolios, different regions, different volumes, etc. Putting together an effective and consistent operational review takes effort by the creditor. Some areas to consider are:
- Specific Collector Activity and Technique Review
- Verification of Creditor Work Standards and Contract Compliance
- Financial Procedure and Process Review
- Review of Policy and Procedures as Specified by the Creditor
- Interviews With Collection Staff
- Monitoring of the Actual Collector Calls and Verification of FDCPA Compliance
- Review of Handling of State Restrictions More Restrictive Than The FDCPA
One of the first steps to establishing an appropriate operational review for agencies is to look inside your own operation. By first understanding your own needs, you can then develop and communicate specific and detailed work standards to the agencies. Policy decisions, such as, settlement authorization amounts and procedures, are important issues to be communicated.
One part of the operational review should be reviewing specific work activity on individual accounts. Another part of the review looks at the agency's checks and balances. In addition, consider process and procedural questions for the agency. Some of those questions might include:
- Is interest being added and/or shared according to client policy?
- Are settlements being handled according to client policy?
- Is documentation for all settlements readily available?
- What are the sizes of the files worked by the collectors? Are other clients' accounts worked by the same collectors?
- Any overheard or noticeable infractions of the FDCPA?
- Do the work efforts match the contract and work standard requirements?
- Are credit bureaus requested and run?
- Are the debtors reported to credit bureaus?
- Are supervisor reviews heeded by the collectors?
- Does the agency require proof of hardship or financial information prior to PPA or closure of the account?
- Are the accounts "held in suspense" for a length of time?
- If legal costs are advanced by the client, are they being reimbursed promptly and completely prior to principal?
- Are accounts closed according to client policy?
- If closed accounts are reopened, is it with client knowledge?
- Are the proper contingency fees being charged?
- Are NSF check charges being paid prior to principal?
- Does the agency have a solid program for accounting checks and balances?
A solid program of reviewing the files, talking to the collectors and communicating with management will help the creditor work with the agency to maximize the potential return on these delinquent accounts. Collection dollars can be a misleading statistic, particularly when placements are inconsistent, or varied by region or product or other reasons for non-comparability. The operational review can help the creditor better understand the level of service provided by the agency, and insure that the accounts are being handled in a manner consistent with their standards and policies. Maintaining a presence and working with the agency are key factors for maximizing returns.
At Resource Management Services, we provide experienced auditors to evaluate your collection agencies. Or, if you prefer, we can teach you the best ways to evaluate fairly and efficiently.
Call us today at (562) 906-1101 for more details on how we might structure a program for your organization.
Note: The Agency Auditor Network changed its name to Recovery Management Networksm.
More information on the Recovery Management Network can be found at www.resourcemanagement.com/networking.html
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