top of page



By Steve Levine, Chief Legal and Compliance Officer, Sigma Payment Solutions, Inc.


One of my hardest cases defending car dealers came when a client had to produce its collection policies and procedures manual in a lawsuit.  My client proudly presented me with a manual that was several inches thick.  “Collection Department Policy Manual of XXY Finance” appeared right on the cover.  So far so good, right?  Well you can’t judge a book by its cover. When I read through the manual I noticed that the front cover was the last time “XYZ Finance” appeared.  Instead, the rest of the manual referred to “ABC Finance”, which was its apparent author.  When I confronted my client with this regrettable fact, he admitted that he pilfered the manual when leaving an old job and meekly asked “that’s not a problem, is it”?  After spending lots of money in attorney’s fees and a less than favorable settlement, he learned the hard way that it sure was a problem.

Car dealers are being constantly lectured about the importance of having strong written collection policies and procedures.  Having them demonstrates an intent to do business the “right way” and allows the dealer to argue that any failure in following these policies are the result of carelessness.  It’s easy enough for lawyers and other compliance experts and consultants to preach, but it’s a lot harder to actually accomplish.  After all, car dealers are in the business of selling cars, not writing policy manuals.  Luckily, I’ve read and drafted lots of them so here are my suggestions on how to get started:

Sources to Find One:            The best way to create an effective policy manual is to work with experts that create these for a living.  They will ask the right questions, learn your operations, and craft a product that fits your business while taking into account the important legal and compliance issues.  That can cost a lot of money, though, and not everyone is in a position to make that kind of investment. 

Therefore, I bet a lot of folks reading this column have done what my client did.  They either got their policy manual from another company, or they became “internet lawyers” and searched Google until they found something that’s “close enough”. In truth, there is plenty of good content on the internet.  The trick is to use it as a starting point and not just slap your name on it and think you are finished.  Read through a few manuals and see how they are organized and what topics are covered.  Then ask yourself how it fits your business and make it adapt. 

Once a solid draft has been created, share it with managers or other leaders in the company and see whether it is close to the “realities” of your business.  Finally, bounce it off a consultant, lawyer, or other professional before it’s published.  It’s a lot cheaper to have a lawyer proofread it and make suggestions in certain areas than to have them start from scratch, and you’ll gain their perspective and guidance on how to make sure the manual doesn’t fly in the face of relevant laws.

Length:           There is a pretty good debate among experts about whether more is better or less is more.  I tend to lean on the “less is more” approach.  The manual should be thorough enough to cover all of relevant business processes, but not so large that an employee can’t possibly grasp all of the content.  I’ve seen more than one witness tripped up during a deposition or trial examination because there was simply too much content to remember.  Remember, these are “best practice” guidelines, not an intricate instruction manual covering every last duty an employee may have.  Those are job descriptions, which is a column for another day.

Content:         It’s important to strike a balance between practicality and the law.  It’s insufficient to simply say “We will follow the Fair Debt Collection Practices Act.”  That’s a worthwhile aspiration, but it gives the reader no direction on how to do it.  Likewise, I’ve seen manuals that recite the relevant laws and statutes, but don’t provide instructions on how to apply the law to day to day business operations.  I prefer a technique that says something like “We strive to follow the Fair Debt Collection Practices Act in our work environment.  To do this we have our employees follow the following rules regarding communicating with customers…..”. 

How to Decide What’s Included:     There is a limitless amount of information available about an area as broad as collections.  How does one decide what to include and what to keep out?  My best advice is to tailor the content to your business practices.  For instance, Article Nine of the Uniform Commercial Code deals with repossessions, and includes self-help repossession and also addresses “strict foreclosure”, where the creditor accepts the return of the collateral in full satisfaction of the debt.  Unless you actually allow your customers the option of utilizing strict foreclosure, it has no place in your manual.  I’ve seen collectors get glassy eyed trying to remember a litany of rules that have no practical application to their business.  This is where passing the manual around as a draft, as I suggested above, has a lot of value because your employees that perform these tasks will point out where the proposed language deviates from reality.

Your employees are a key resource in this exercise.  Ask them for guidance on how accounts are handled.  Create flow charts that follow your various processes.  Only then should you attempt to document each of the various stops along the path.  I’ve seen many companies make the mistake of over-valuing consultants and under-valuing their own subject matter experts, often with unfortunate results.

Training and Testing:           Your policy and procedures manual should work in concert with training and testing initiatives.  It isn’t enough to publish the material or put it on a shelf.  The sophisticated company will then implement it through training and then have the employees take short tests to demonstrate their mastery of the information.  This should then be put in each employees’ personnel folder.  These tests should be given at least once a year.  They don’t have to be too fancy, maybe ten or fifteen questions to make sure the employees have made the effort.  This makes a powerful statement to your employees that these policies are part of your company culture.  

bottom of page