What Does it Mean to be Compliant in Today’s ARM Industry?
Back in 1964, the Supreme Court heard arguments in the case of Jacobellis v. Ohio. The case, which centered around the First Amendment, involved the manager of a theater in Cleveland Heights, Ohio, who wanted to show a film, “The Lovers.” The state of Ohio had deemed the film to be obscene and Nico Jacobellis was fined $2,500 for showing it. The fine was upheld by an Appeals Court in Ohio and the Supreme Court of Ohio before it was overturned by the Supreme Court of the United States.
Not many people know about the case, but many will recognize a very popular saying that came from Justice Potter Stewart, who, with the majority, said the manager was protected by the First Amendment and should be allowed to show the film.
“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so,” Justice Stewart wrote. “But I know it when I see it, and the motion picture involved in this case is not that.”
“I know it when I see it” has become a common expression used by people to indicate the ability to define or categorize something even though the something may not have a definition or category.
“I know it when I see it” can be used in the ARM industry today, as it pertains to compliance. Ask 10 different people to define what it means to be compliant in today’s ARM industry and you will get 10 different answers. How do we know? Because we did just that. We asked a number of executives and compliance professionals in the ARM industry, “What does it mean to be compliant” and every answer was its own snowflake. Every answer was right, and every answer was different.
Compliance has never been more important in the ARM industry and it has never been so ambiguous. Compliance has become a catch-all term that is used to ensure that collection agencies and their employees are following all of the federal, state, and local rules and laws related to collections, to encompass lawsuits filed by individuals or professional plaintiffs agains collection agencies, and to oversee all of the policies and procedures within an organization to make sure that things are being done the right way.
Compliance “means constantly swimming, and never arriving on the shore,” said Alicia McKeighan, the chief compliance officer at Afni, Inc. “It ultimately means having a true passion for what you do because you will never reach the end.”
Knowing compliance when you see it is not nearly good enough for collection agencies today. While someone might be able to look at how an agency operates and get a sense of whether it is compliant, the agencies have to be incredibly thorough and comprehensive in how they approach compliance. There are too many moving parts for anything to be left unnoticed.
The basics of compliance in the ARM industry start with the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, and the Fair Credit Reporting Act. Those three laws dictate much of what collection agencies can, and can not do, on a daily basis.
“The process begins with knowing the law,” said John Bedard of The Bedard Law Group. “A company must have a deep and broad understanding of all federal, state, and local legal obligations regulating the business.”
But those laws are just the tip of a very big iceberg. And like icebergs, much of what really matters lies beneath the surface.
Every aspect of a collection agency operation has to be looked at through a lens of compliance. Every policy, every procedure, everything that happens needs to be run through the compliance management system. A compliance management system has become the central nervous system of a collection agency; it controls all of the activities within the organization. In asking ARM industry executives about compliance, most of them mentioned, in some way, shape, or form, the importance of a robust compliance management system.
“At the highest level, to be compliant in today’s ARM Industry, one must have a robust compliance management system complete with policies and procedures, training for all staff related to the policies and procedures, processes in place to determine the extent to which the company is following the policies and procedures, processes in place to correct deviations from those policies and procedures, and further processes in place to ensure that the corrections are effective,” said one agency’s chief compliance officer. “That’s the answer you would get from Mr. Spock. In the real world, doing all of the above is like herding cats.”
What makes being compliant such a challenge in today’s environment is that compliance is not a static situation. With every court ruling, what it takes to be compliant changes. Collection agencies need to be regimented in how they approach being compliant, but agile enough to immediately react to any changes that need to be made. A court ruling, especially one in your jurisdiction, needs to be studied and decisions need to be made about possible changes to policies and procedures.
“Compliance, if done properly, allows you to be nimble and to adapt to necessary changes that occur in the marketplace,” said Joann Needleman, leader of the Consumer Financial Services Regulatory & Compliance group at Clark Hill. “Compliance should equal excellence and best in class. It should be considered an investment and not an expense.”
Considering compliance as an investment and not an expense is a difficult concept for many agency executives to grasp. But when you see compliance permeating through every aspect of the business, and what can happen if a lawsuit is filed or a regulator starts an examination, that is when the real problems begin. “You think education is expensive?” a popular saying asks. “Try ignorance.”
Making that investment starts from the moment that an employee walks through the door, whether it is his or her first day on the job or the 10,000th day on the job.
Compliance needs to be ingrained into the culture of an organization. It has to be not just an important part of the decision-making process, but a value that is carried through every interaction with debtors and with clients. Compliance is training and education. Compliance is a mindset, a foundation onto which successful collection agencies are built and allowed to thrive.
It should be noted that Justice Stewart did not think up “I know it when I see it” all on his own. His clerk, Alan Novak, helped coin the phrase. The parallels in collection are similar. Compliance can not be left to just one person inside a collection agency. It takes everyone on the team, being aware of its importance, to ensure that an agency is doing its best to be compliant.
“Compliance is nothing more than: (a) protecting our company; (b) protecting our client; (c) protecting the patient/consumer and (4) protecting our employees,” said Samuel Shannon, the chief compliance officer at AMCOL Systems. “Compliance is one of the jobs in the company that is never finished.”