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Friday, March 11, 2011

Process serving reform calls for renewed transparency, integrity and innovation

By Matt Massa - March 10, 2011

The last few months have been a distressing time for the mortgage service industry, partly due to some inexcusable and unacceptable process serving practices. While it is clear that some process servers have not lived up to the highest possible ethical standards in doing their jobs, the breakdown has been magnified as many process serving companies have washed their hands of indignities and claimed to have no responsibility for their errant, subcontracted process servers’ actions.


Yet where there is distress and disorder, there is opportunity for renewal. Substantive reform not only can correct both real and perceived problems, but also serve as an example for how service providers in diverse industries can better manage their vendor relationships.

Impact on housing economy

Allegations of sloppy and fraudulent practices have ranged from process servers lying about delivering foreclosure notices to homeowners, to legal documents used to seize homes that don’t even identify the lender claiming to hold the mortgage, to “robo-signers” approving documents without carefully reviewing them when foreclosing on homes. Such revelations dating back to late last year have led to a nationwide investigation by state attorneys general. While we don’t know the outcome of those investigations, even simple errors of omission in case detail from the bottom up could expose unhealthy processes to potential litigation, more bad press, and financial repercussions. The bottom line is that unethical practices will cost the industry in terms of reputation, revenues and continued chaos.

After alleged abuses made national headlines, major banks like JPMorgan Chase (JPM: 45.54 -2.19%) and Bank of America (BAC: 14.26 -2.26%) briefly halted their foreclosures to review their internal processes and those used by the law firms they hire. This hold – as well as any future interruptions during the course of ongoing investigations – impacts the daily costs that lenders have in carrying the default loan (lost interest, property maintenance, depreciation or risk, etc.). Operational overhead also adds pressure to the rest of the loan pipeline, including law firms and their vendors. Obviously, stalls in the process make it difficult to maintain economic balance.

When downstream vendors, of which process servers are just one example, cause a negative impact on upstream bottom line, it leads to a general breakdown in trust. The gut reaction is to replace vendors. In cases where a single vendor was used, the instinct is to replace it with several vendors to increase competitive innovation. Unfortunately, this typically requires more time for oversight and leads to greater inefficiency in performance (including learning curves), inconsistent communications and missed assumptions (toward potentially unexpressed expectations), and potentially more errors. Additional management time plus a greater number of vendors and processes naturally lead to increased total costs of sales for each case, therefore driving project overhead up and profit down for all parties involved.

Furthermore, the perception of malfeasance is contagious. When a mutual vendor, or even a client, is caught with their hand in the cookie jar, it is assumed to be a widespread issue. Similarly, when an industry colleague is accused of something, it is feared that all similar companies are engaging in the same behavior – adversely affecting the reputation of an entire industry.


Ensuring quality vendor relationships

Process serving companies – the majority of which are not guilty of malfeasance or responsible for this latest crisis – are wise to first volunteer transparency to help rebuild industry trust. But restoring integrity also must involve putting quantitative processes in place to ensure the RIGHT process serving professionals are hired. In addition, the remedy needs to include implementation of tangible systems to build confidence that those individuals are doing what they are supposed to do, even when no one is directly observing them on the job. Applicable systems and procedures include diligent screening of prospective process servers; implementing industry-standard quality control measures and processes; and ensuring that process servers possess sufficient knowledge about their profession and the proper licensing, as well as uphold personal, company and industry standards.

A quantitative approach to screening for people of character and integrity. If a company does not really, truly know who is handling its files, now is the time to find out. Our industry needs to ensure that only people of integrity who also greatly respect their trade are in the profession of serving documents. The way to do this is by adopting character-based processes for selecting candidates. It is imperative, for example, to ask potential employees and their references about dependability, honesty, thoroughness, discretion, creativity, flexibility and attentiveness. In addition, we must verify candidates’ track records for success, performance and loyalty, even through criminal or other background checks as appropriate.

Greater emphasis on preparing process servers for success. Ensuring success on the job starts with clearly establishing and communicating the standards, ethics and compliant conduct that define the profession. Next, it is vital to ensure, capture and leverage professional knowledge and experience through enhanced training. This involves proper use of technology, but also adherence to process serving laws, civil procedure codes, court-specific interpretations and requirements, shared best practices and standard operating procedures, as well as client-specific expectations.

To achieve unequivocal excellence and efficiency, without competitive bias, it is imperative that our industry adopt a universal certification/approval program for independent, professional process servers. The better trained and educated servers are, and the more standardized the material and knowledge, the less likely servers will stray from the standards of practice. Pay-for-perfection compensation systems also are a proven tool for helping workers stay invested in their work.

Implementing integrated, industry-standard quality control. At the bare minimum, process servers are supposed to make sure that the processes they follow are legitimate and executed in a manner according to set laws and regulations. But without proper checks and balances and quality control, the opportunities for cutting corners are magnified. Important to an overall strategy of restoring integrity to our industry is the use of technology that can help deter potential abuses. Readily available and proven tools include GPS, systematic flagging of multiple jobs at different addresses, suspicious time stamping protocols, and time tracking against distance projections. Process serving companies also should give 24-hour, unrestrained access to client files and real-time updates, as well as proactively invite client audits. Such tools and practices help to build much needed transparency into the process.

Using innovation to create a modern process serving environment. It’s time to reinvent the yardstick. Measuring process server success strictly on speed of service and completeness is outdated and irrelevant. Instead, law firms and their servicers should look for vendors dedicated to change and progression, as well as strive to bring diverse vendors together to help innovate and streamline processes. These forward-thinking companies are committed to creating lean environments including process improvement and innovation, continuously building better and more economic ways of getting the job done on target. Routinely matching – and sometimes surpassing – time and completeness goals is a byproduct of lean and efficient process execution. However, the real value of these progressive vendors is found in the little innovations – often aberrations – that improve the daily life of a case. These small enhancements ultimately provide economic efficiencies on total case costs, giving lift to firm/servicer profitability.

Our industry has surely suffered in the short term due to some callous mistakes by process serving agents who fall short of the high standards of professionalism and ethics that most of us in the industry continue to uphold. Now we must move forward by making tangible changes in how we hire, educate and train professionals who perform this critical function. We need a more enlightened climate of collaboration, transparency and integrity, as well as a renewed commitment to innovation. Those companies that resist the transition will be left behind and may risk keeping our entire industry under a cloud of suspicion filled with the sins of the past.

Matt Massa is the national operations director of Firefly Legal, a leading associate legal services company that specializes in process serving, traces and searches, face-to-face services, and court filing. With offices nationwide, the company partners with its clients to find solutions that are guided by collaboration, innovation and integrity.
 
Posted By Jeff Karotkin