The Importance of a Credit Policy Review

credit-policy-reviewWe talked about the Consumer Financial Protection Bureau and their proposed rulemaking for the debt collection industry in an earlier post. It is important to note that this proposed rulemaking will affect not just debt collection agencies; it will also affect the original debt owner – the creditor. The CFPB is focusing on data integrity to make sure collection agencies are receiving accurate data from their clients before they begin the collection process.

The CFPB states that “the most common debt collection complaint received by the Bureau concerns collectors seeking to recover from the wrong consumer or in the wrong amount.” They further state that they believe this stems in large part from “substantial deficiencies in the quality and quantity of information collectors receive at placement of the debt.”

Before you send a debt to collection, the CFPB is now going to require that you be able to substantiate the debt. That means having complete billing information on all responsible parties, as well as an accurate description of charges. Backup documentation, such as any signed agreements or statements sent, also need to be carefully maintained. You need to make sure all of this information is complete and accurate before you turn the account over for collection.

CCS has always placed a big emphasis on the quality of information. Our onboarding process allows us to identify the type of data elements our clients are capturing and make sure these elements are being passed on at time of assignment.

We encourage all of our clients, from the outset of our relationship, to begin with a Credit Policy Review. If cash flow is the life blood of a business, an effective and up-to-date credit policy is the heart that keeps the blood pumping. CCS helps clients analyze the entire billing cycle and its effectiveness. We look at:

  • Risk areas
  • Credit terms
  • Credit agreements
  • Information systems
  • Collection methods
  • Follow-up procedures

A thorough review will allow a client to update their credit policy in order to make educated decisions on extending credit and enforcing credit policies. Equally important, in light of the CFPB proposed rulemaking, a review of the information systems will ensure that full and accurate data is being collected. And accurate data is the key to right party contact during the collection process.

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