Mock Assessments Offer Opportunity To Correct Errors, Before CFPB Comes Knocking

As in all things, practice makes perfect. So, it should come as no surprise to anyone, that many collection agencies are paying for the process of finding out what it’s like to be examined by the Consumer Financial Protection Bureau so that, should that day ever come, they can be prepared.

The process of a mock assessment can be an invaluable tool to collection agencies, to show them possible weak spots in their compliance and risk management processes while also training management for the rigors of an examination.

“Our team was exhausted by the end of it, we had gone over all of our processes by the end of it,” said Nikki Dickherber, the director of internal audit at Client Services, a St. Charles, Missouri-based collection agency. “They were asking intricate questions and it got us thinking how the CFPB is going to think.”

Client Services used a service offered by the Bedard Law Group and Ontario Systems for its mock assessment.

“We had clients coming to use wanting to avoid a survive a knock on the door,” said John Bedard. “There is a growing understanding in the industry that the bar has been raised and the compliance bar is as high as it’s ever been.”

The assessment provided by Bedard’s team is a three-step process. The first step is a GAP assessment that analyzes and assesses the collection agency’s risk across 300 data points. Following the assessment is the remediation phase, where the agency is presented with a proposal for addressing any of the shortcomings found in the GAP assessment. The third – and final – phase is an ongoing review of the agency’s compliance management system to make sure it is functioning properly.

When performing the GAP assessment, a team of examiners will spend at least two full days on site, conducting interviews with managers and executives, reviewing documents, and learning everything that can be learned about the business, Bedard said.

For Client Services, this was the second time that the company had undergone a mock assessment and the first time it had used the services of Bedard and Ontario Systems. Having different assessments conducted by different firms provided the agency with an even more diverse view of the company’s compliance and risk management operations, Dickherber said.

“Any agency planning on being in business for the next 10 years needs to plan on doing this,” she said. “It’s crucial for any agencies who are susceptible to a CFPB audit.”

The issue for many agencies is trying to understand what the CFPB is going to be looking for, how they are going to look for it, and what they are going to do if they find it or don’t find it. While the agency provides some guidelines for its assessments in its manuals, the live version of the process is likely to be more invasive than what people read on paper.

“Many aren’t sure where the bare is and those who do know, don’t know how to get there,” Bedard said. “The clients demands, higher expectations, of processes and controls – agencies need to demonstrate they can do what they need to do to meet the standard.”



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