Collection Compliance Concerns for Financial institutions
With the net interest margins for major banks quickly shrinking, collections has become increasingly more important for banks looking to ensure a stable income. There has been a slew of regulations at all levels regarding banking collection compliance that has kept financial institutions on their toes in terms of meeting their requirements as guarantors as well as staying out of legal trouble.
What is the Potential Cost of Collection Compliance Mistakes?
With the sluggish growth of the economy overall, there has been an increase in the number of calls and collections letters to debtors. The stagnation in wages and increase in the total amount of debt owed by each consumer have created a situation in which financial institutions are forced to go into overdrive to collect as much on overdue balances as possible.
Difficulty in collecting overdue loan payments from debtors creates a human resources burden on financial institutions as well as a greater likelihood that an employee will engage in behavior that violates collection compliance laws. Without the proper safeguards in place to monitor employee behavior on these collections matters, a financial institution can quickly find itself in hot water with a long list of regulators. It can be frustratingly simple to violate collection laws and regulations in an environment where more communications in shorter intervals are sent directly to debtors. If there is not clear documentation of how the creditor communicated with the debtor and exchanged information about the overdue balance, there is potential for fines and penalties from regulators, which could result in a loss of the underlying asset as well as further liability on the part of the financial institution.
Capitalizing on Regulation as an Opportunity for Innovation
The banks that best survive the onslaught of regulations on collection compliance will be those that view regulation as a chance to improve their internal processes. One of the best ways to approach these new challenges is to embrace automation to ensure that all components of the same institution’s collections process are working in harmony. Technology is available that would allow a simple solution to this.
How Can Technology Address Collection Compliance Concerns for Financial institutions?
A financial institution will benefit from increased efficiency and better risk management by implementing a system that automates and tracks regulatory compliance for all loan collection matters. With a few simple clicks, employees will be able to check the current status of any loan as well as the exact steps that have already been taken to collect on that debt. This takes all of the guessing games out of managing loan collections and gives the compliance department peace of mind that every department is working under a centralized system at all times.
Another advantage of implementing technology solutions for your financial institution’s collection compliance is that you can prevent certain human errors that are sure to occur throughout the process. For example, instead of having to verify a date that a phone call was placed to a debtor on a particular loan, an integrated system would have recorded a date as soon as the call was placed along with requiring the caller to enter any details about the call in order to close out the window.
Finally, an early investment in technological compliance solutions for your financial institution will put you ahead of your competitors. It will give you a leg up as well as provide you with a safety net of many years to continue to benefit from a relatively small investment in compliance solutions. With cloud technology, compliance programs can be updated remotely to ensure your institution is accurately tracking and handling all collections matters. This means that you never have to fear that your program is outdated or not taking into account the latest developments in collections compliance laws.
You might also like
Confidential, efficient bookkeeping is an essential part of any company – small or large. A well-organised accounting system can help all other processes within an organisation to run smoothly. For
Businesses across the United Kingdom are struggling to maintain cost savings that improve competitiveness in the market, while remaining mindful of the operational impact on the environment. Green initiatives are
Several multinational companies and corporations have become so large that they control many of the global economic parameters. However, when it comes to counting down the top five largest grossing