jarman nickSince the inception of the Consumer Financial Protection Bureau, the word compliance has taken over the debt collection industry. Many years ago some organizations viewed compliance as a business decision that was made in a boardroom or on a golf course. Today whether you are dedicated to creating a culture of compliance decides whether you remain in business or not. Today’s debt collection environment can be summed up with this quote, “it’s all about compliance until it’s about performance and it’s all about performance until it’s about compliance.” Maximum performance with minimum compliance or maximum compliance with minimum performance are not sustainable business models, however finding the right balance between compliance and performance is a sustainable business model. In order to start finding that right balance, it is important to understand one of the most important driving factors, placement allocation determination.

Finding the balance between compliance and performance is heavily contingent upon how clients determine their placement allocation of the accounts they place with their collection agencies. The reason this is so critical is because how placement allocation is determined will ultimately be the primary driver on how collection agencies attempt to collect the accounts. In other words, the risks collection agencies are willing to take in order to meet the required expectations for getting business. Having accounts to work is the lifeline for collection agencies. Collection agencies will adapt their approach and strategies accordingly to ensure they continue to receive placements from their clients. Finding the right balance between compliance and performance is easiest when placement allocation drivers factor in compliance so the primary driver, such as performance, does not require collection agencies to compromise compliance in order to achieve the required results to continue receiving placements.

When the Fair Debt Collection Practices Act (FDCPA) was enacted in the late ‘70s, one of its focuses was to promote fair competition amongst those debt collectors who abided by the law. The FDCPA wanted to ensure law abiding debt collectors were not at a business disadvantage because of their decision to follow the rules and regulations while their competition ignored the laws and collected by any means necessary all in the name of getting more business. What the FDCPA wanted in this regard is exactly what all compliant collection agencies want today as well, a level playing field free from having to compromise compliance and the future of their organization in order to continue receiving placements. The reality is some collection agencies are ready and willing to cross the line when it comes to compliance. It’s important that those agencies that do not cross that line are not held at a disadvantage. The Consumer Financial Protection Bureau has also made it clear they want compliance integrated into every layer of the debt collection process; and thus it is only prudent compliance drivers become integrated equally to performance drivers when determining placement allocation.

In the past, the placement allocation method was quite simple and consistent across the industry. The collection agency that collected the most money received the most accounts placed. While some clients remained ahead of the curve in the 2000s, most metrics that were used in the placement allocation process remained performance centric. Completely performance-focused allocation strategies have generally fallen out of favor for most clients; and over the last couple years clients are now finding ways to genuinely integrate compliance into how they place accounts with collection agencies. Ultimately, how deeply compliance is integrated into the placement allocation strategy is where the rubber really meets with road when it comes to finding the delicate balance between compliance and performance.

Make no mistake about it, finding the balance between compliance and performance is not easy and the solutions are not simple but a major step to achieving this balance starts with the placement allocation determination. Especially when you keep in mind that debt collection is inherently driven by performance because of the nature of the business: collecting money. It is important to understand in today’s debt collection landscape. The principle of how money is collected is just as important as how much money is collected.

Nick Jarman is COO at Delta Outsource Group, Inc. He also serves on the Board of Directors for ACA International.