Years ago, the financial services industry looked much different than it does today; there were no documentation requirements, it was routine for debt collectors to charge post-charge off interest, chain of title documentation was required in only one or two states and requirements for post-charge off itemization were very limited. Data on the accrual of interest was often stored as a single number and it was hard to tell what payments had been made and what impact that had on accrual of interest.  

With no chain of title requirements, it was also not unheard of for unscrupulous or careless debt buyers or brokers to sell that same account to more than one debt buyer downstream. All these attributes, along with limited due diligence prior to reselling accounts created situations that often led to accounts not receiving proper attention, putting the consumer in a bad position. The OCC started to question the safety and soundness aspects of banks selling any debts to debt buyers who are known to later resell those debts. Due to the lack of structure, issuers and regulators alike started to have data integrity and consumer experience concerns, thereby prohibiting the ability to resell accounts through contract requirements and consent orders.

So here we are in 2019. Enough time has passed to where debt buyers are savvier and more educated on what it means to have a well-functioning compliance management system. In our industry, whether we are talking about purchasing or selling, we are focused on both data integrity and documentation. And with all the evolution in the marketplace, it has created a much more stable, certain environment so that, when and if a debt is disputed that has been resold, the purchase will have documentation, chain of title, and post-charge off itemization.

Our industry associations have also stepped up to support our industry as we all navigate through these complex issues. The Receivables Management Association (RMA) Certification Program is an industry self-regulatory program administered by RMA that is designed to provide enhanced consumer protections through rigorous and uniform industry standards of best practices. Through the program, certified companies are subject to sale restrictions that preserve data integrity. Those restrictions include not selling accounts: without access to Original Account Level Documentation; when a consumer communicates a dispute of validity or accuracy; when an account has been settled or paid; when the account is a result of identity theft or fraud; and to a non-certified company without terms and conditions contained in the sales agreement requiring the purchaser of the accounts to meet or exceed the standards of a Certified Company.

We know about these positive changes in our industry, but we also need to let our regulators know. This is true now more than ever before, with the Consumer Financial Protection Bureau (CFPB) set to issue a Notice of Proposed Rulemaking (NPRM) in March 2019, and a brand new Director, Kathy Kraninger, leading the CFPB. Director Kraninger is now getting up to speed on our industry and we have a prime opportunity to educate and advocate on why a robust resale market is so critical for the continued growth of our industry, as well as the consumers we serve.  We should also be advocating forcefully on why the new CFPB rules cannot be so burdensome that smaller companies without large compliance departments will simply be unable to comply.

With a forthcoming NPRM and a new CFPB Director, this is a critical juncture for our industry and the future of the resale market. Let’s make the most of it.

Note about Doris Hektor:

Doris is the Chief Compliance Officer at Encore Capital Group, and has over two decades experience in banking and financial services, including serving in senior compliance roles at American Express and JP Morgan Chase. She is a frequent presenter in the RMA Chief Compliance Officer (CCO) Forum, and is a candidate on the 2019 ballot for the RMA Board of Directors.

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