How do you overcome the monetary cost of compliance in todays ARM industry?

a) Do the minimum required

b) Just do your best to keep up with client requests

c) Try to keep up while forecasting what is next and moving to get there first

d) Use Technology to bridge the gap

If you answered a –Well I hope you are NOT taking this course of action as it will likely not produce good results over time. Chances are that you will make it out the other side if you have a diverse client base and can you can continue to meet the minimum requirements of your clients. But you will lose clients and volume over time and the more aggressive competitors will eat into your clients as well.
If you answered b –This is what most people are doing from my perspective as a consultant but it is not the best answer. The reason most people are taking this option is to hold onto as much profit as possible as other options may actually require a capital infusion to complete.
To make major improvements in process, staff or technology will usually have a cost to not only the the pocketbook, time but also in process improvements.
If you answered c –This is the best choice as it provides a proactive stance as opposed to a reactive one. But this is also the hardest one as it requires you to evaluate your firm and the industry and make decisions on where there are opportunities to make the firm more consumer friendly and yet profitable and effective. What I find is this choice also leads you to choosing d as an answer.
If you answered d –This is also a great answer as it will require that you review and improve your processes before you try to automate them. As with the people who answer c you will find that c and d rate the real answer as technology is the direction that the industry will go in the future.
There are many opportunities to use technology these days to reduce staffing and automate processes. Many of the technology opportunities will be cost savers in the long run but all require significant investment in time and money upfront.
If you need help with making these decisions give Lighthouse Consulting a call.

Round Up the Usual Suspects

“Round Up the Usual Suspects”
How a quote from Casablanca relates to the CFPB

“Round up the usual suspects” is a line from the movie Casablanca but does it also describe what’s going on in the ARM industry today by the CFPB? It seems as if that is what they are beginning to do. With the recent news regarding the Law Firm of Frederick J. Hanna in Atlanta, GA, it seems as maybe that’s what the CFPB is doing. In my opinion it seems that Hanna was targeted just because of the volume of this firm’s business and this firm’s national legal forwarding business.

“The Hanna Law Firm relies on deception and faulty evidence to drag consumers to court and collect millions,” said CFPB Director Richard Cordray. “We believe they are taking advantage of consumers’ lack of legal expertise to intimidate them into paying debts they may not even owe. Today we are taking action to put a stop to these illegal debt collection practices.”

Did you catch that last part…the operative phrase being “…may not even owe.” That sounds a lot like guilty until proven innocent to me. The Director of the CFPB in that statement takes the outright position that the agency is not totally sure these consumers actually do or not carry an obligation for these debts, but they seem intent to just go ahead and file suit and try to figure out that little detail later…after damage has been done.

And here is what the CFPB alleges:

“ Since January 1, 2009, Defendants have collected or attempted to collect debts for credit-card issuers such as JP Morgan Chase, Bank of America, Capital One, and Discover, and debt buyers such as Portfolio Recovery Associates and Midland Funding, LLC. The alleged debts were incurred by consumers primarily for personal, family, or household purposes.”
“ To collect these debts, the Firm frequently turns to litigation. In Georgia alone, the Firm sued about 78,000 consumers in 2009; about 84,000 in 2010; about 71,000 in 2011; about 57,000 in 2012; and about 60,000 in 2013. In sum, the Firm filed more than 350,000 collection suits from 2009 through 2013 (the “Georgia Collection Suits”).”
As you continue to read the complaint from the CFPB you will see they assume that if you are working large volumes of cases you must be sloppy. In addition they claim a lack of “proper attorney oversight” which is a statement that has needed to be clarified for years.

But is it fair to just round up the usual or suspected suspects? I say no because the disruption to business and the perception to the issuers is detrimental to the firm or agency. But the CFPB acts more like a grand jury in its function in that the bar for bringing litigation against companies appears to be set very low here. Furthermore, there is no way to fight back until you’re attacked. Finally, the CFPB seems to have no interest in helping to educate the industry or to provide transparent guidance; rather, they seem intent on trying to make examples of larger market participants through nuanced interpretations of vague laws and regulations and are focused on enforcement and punishment rather than a mutually beneficial cooperative effort to raise standards and practices.

So what do we do? Truly, I’m asking you for your input and guidance here on what we should. I am open to suggestions to share with the industry or to share some of my ideas with you at Feel free to email me or comment at the end of this blog post.

Ready for My Closeup

“All Right, Mr. DeMille, I’m Ready for my Close-Up.”

Is your agency or law firm ready for your close-up?  The CFPB may be at your door sooner than you think.
This quote from the movie Sunset Blvd. is a portrayal of the scene playing out on the ARM industry stage instead of the theatrical stage. As the regulations become more burdensome and the agencies like the CFPB expand their scope, will you be ready for your close up?

Are you making moves today to be ready tomorrow? Playing Norma Desmond in the movie, Gloria Swanson made the line famous “All right, Mr. DeMille, I’m ready for my close-up.”  But Norma was disillusioned when she said this in the 1950 movie and in fact was not even sure who or where she was.

Is this you?  Are you also in denial that you’re ready for the regulators or disillusioned that they might even show up at your door?

It is my opinion that they will likely show up at the doors of small law firms and agencies in 2015 as they follow the trail of inventory from the big debt buyers and banks down to the smaller companies, adjunct organizations and even vendors to the large market participants.  Many people believe they are too small to be a bother to the regulators but as the industry tightens we will all come under more scrutiny. The vendors are now subject to audits and review with a fine tooth comb and the smaller servicers will be next.

As the regulators investigate a bank our debt buyer they will be following the trail of money and collections.  The debt buyer may have inventory placed at 20 agencies and law firms or 50, or maybe 100. The regulators will be interested in how those vendors are doing the job for the bank or debt buyer and they will be investigating them to find out.

So what do you need to do to be ready? Achieve certifications, develop and maintain SOP’s, and develop a compliance team with a holistic view and reach into every area of your business.  This is just the beginning and there will be more hoops created for you to jump through each year for the foreseeable future.  In truth there is much too much to do to mention in a short blog but you better get started now.  This is a moving target and it takes a lot a work to keep up.  And if you’re starting behind the rest of field, you may never make up the gap.

If you desire some help finding the harbor safely Lighthouse can help you just give us a call at 904-687-1687 and ask for Mr. Phillip W. Duff the CEO.