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The audit trail of a partnership

Why Audit DCAs?

When outsourcing debt, the right to collect is being transferred to a third party but the responsibility for the conduct of the agent remains with the orginator. Therefore the outsourcing company needs the reassurance an agent is operating compliantly, adhering to all legal, regulatory, operational and best practice standards. Regular auditing can provide the insight to the operational processes and confirm that compliance standards are being met.

What about the money?

Clearly outsourcing collections to an agent and auditing agents necessitates financial governance, controls and planning. An auditor can review a sufficient number of accounts to identify trends, anomalies, and financial issues as well as adherence to data accuracy. Operationally, negotiating the right commission rate for the quality of debt is key. Nevertheless if auditing is not conducted adequately, the compliance and operational risk increases therefore increasing the risk of regultory sanction.

Who gains?

The outsourcing company gains the advantage from the differing collection techniques adopted by agencies, especially if that agency works in a niche market area, utilising their expertise they would find difficult to create for themselves. On the flip side, an auditor can share best practices and other opinions to improve standards. Auditing provides further reassurance following a portfolio purchase where the “in situ” agency retains the accounts for collection. In these circumstances a due diligence audit can be key to the success of that purchase.

Key concerns!

The main concern is the loss of direct control of the accounts. Plainly where we as a purchaser acquire accounts placed with a legacy agency we need to be comfortable that we are not at risk financially, as well as from a legal and regulatory perspective. Where a debt purchaser decides to instruct a new agency the due diligence process is key and should always be undertaken in advance.  

What’s involved?

Preparation, planning, keeping up-to-date with operational and regulatory requirements. We have a tried and tested audit format to ensure agencies are collecting on accounts adequately. Agencies need to be aware that detailed scrutiny is a recurring process and, using the RAG status, provides evidence of deficiences and what improvements are required. Providing all involved recognise the relationship as a “partnership” and work closely together it can lead to a long and fruitful relationship.


June 2012

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