upwork-business-case

Find out how Upwork partners with TrueAccord to resolve customer issues and retain lost relationships. Click here to read the case study

collections-strategy

It’s time to use the best tools technology can provide to design winning collection strategies.

resource-debt-frontier

Ever wonder what the numbers really look like for digital debt collection? As it turns out, pretty good. Click here to read more.

Fintech Companies Are Learning to Work with Regulators

TrueAccord Blog

This article, written by our In House Counsel Adam Gottlieb, first appeared in the RMA Insights Magazine

The word “startup” conjures images of stereotypical open offices, complete with ping pong tables, standing desks, and people in hoodies feverishly hammering at keyboards. Startups are often associated with high risk, scrappiness, and the ability to break things and move fast–all a stark contrast to the bureaucratic and highly-regulated environment that most debt buyers and collectors operate in. Yet, as startups begin venturing into the area of financial technology, they have had to adjust to new operating principles and new stakeholders, with the government chief among them.

Startups have not always been sophisticated about interacting with regulators. When Uber started expanding city by city in the US, it often took an aggressive approach with commissioners, undermining their authority and operating defiantly in the face of cease and desist letters. In debt collection, as we’re all painfully aware, the FDCPA and TCPA, as well as an army of plaintiff’s attorneys, guarantee that such behavior won’t go unpunished. Indeed, new players in fintech have had to take legal and regulatory frameworks into consideration as a first order of business. For example, my company, TrueAccord, hired a lawyer as our first employee and focused on policies and procedures as much as it did on writing code while building  our business.

Understanding and embracing the importance of regulation and the impact it has on our business forced us to adjust our view on how to deal with regulators. In the early days of fintech, startups relied on external compliance counsel and sporadic engagements with the CFPB and other regulatory bodies. This model was driven mostly by lack of experience in supporting policy decisions on the part of startup founders and their venture capital backers. In the past few years, however, fintech startups have started engaging with regulators significantly more often.

Startup founders and funders have begun participating in the Consumer Advisory Board; investors and founders such as Max Levchin have been part of the Bureau’s panels for the past two years. Project Catalyst, the CFPB’s outreach program for innovative financial products and services, has had a steady flow of fintech participants in both its East Coast and West Coast offices. Startups have also learned how to support policy development processes: small business lenders developed a code of ethics for lending with cooperation from the Obama Administration. The fintech firm Plaid and similar providers led the discussion on making consumers’ bank account data accessible to third-party applications, and small balance lenders led the commenting period on the CFPB’s proposed rule. (Many RMA member companies participated in the CFPB’s SBREFA panel for the new proposed debt collection rules.) We’re seeing tangible change in the industry’s relationship with government and we do not expect that trend to change. If anything, it will increase if the Trump administration takes a more “pro-business” approach as expected.

It took fintech startups several years to mature and understand the value of engaging with government, but now that they do, they approach this engagement the way they approach any aspect of their business: with rigor and focus on delivering a message of innovation through technology. We expect these efforts to yield tremendous progress in rules and regulations in 2017 and 2018.

How Tax Season Affects Debt Collection – and TrueAccord

TrueAccord Blog

By Roger Lai, TrueAccord’s Head of Analytics.

Tax Season in Debt Collection

Tax season is to debt collection as holiday season is to retail. According to the National Retail Federation, of the 66% of consumers who are expecting a tax refund this year, 35.5% plan to spend their refund on paying down debt. For this reason, mid-February through May is considered the most productive time of the year for debt collection by many in the industry.

Impact on TrueAccord

TrueAccord’s approach is unique in the debt collection world, so we were curious as to how tax season would impact our business compared to traditional collection methods. In the first half of February, collections growth was trending similarly to what we saw in previous months. As the first wave of tax refunds reached consumer bank accounts the second to last week of the month, we saw a dramatic spike in customer engagement and payments towards debts. Factoring in a seasonal adjustment, we’ve estimated that tax returns more than doubled our month-over-month collections growth in February.

Change in Payment and Commitment Composition

When we look at the distribution between one time payments (paid or settled in full) and payment plan sign ups, payment plans as a percentage of total dollars have trended up over time as we continue to offer more consumers flexible payment options. As tax season hit, we saw a shift in composition where one-time payments as a percentage of total dollars increased by 2x.

Zeroing in on payment plans alone, we can further highlight the effect of tax refunds. The average installment amount per plan also increases with more people being able to afford shorter term plans. We see this trend across our client base with varying degrees of impact by client (from a few percentage points to over 300% month-over-month change).

Impact Compared to Traditional Collections

The first chart below shows cumulative collections rates for debts placed in January by one of our clients, comparing performance over time between TrueAccord and the client’s traditional collections agency partners.

Historically, collections rates for TrueAccord and traditional agencies start out relatively close (and sometimes with us trailing, as we are here) when competing head-to-head. Then about 50-60 days in, a typical shift in direction emerges where traditional agency curves begin to flatten while ours continue to trend linearly, creating an increased separation in performance over time.

In this particular case, the first wave of tax refunds hit before the 60 day mark, resulting in a sudden lift in collections on both groups. In less than two weeks, we start to see the gap widen substantially.  When we include committed dollars on top of payments (second chart), the effect is even greater as many customers continue to take advantage of flexible payment options.

The tax season impact is more pronounced with TrueAccord than with traditional agencies. While traditional collections methods can be effective, success is dependent on interactions between collectors and debtors. TrueAccord’s machine learning system creates a personalized communication and offer strategy for consumers at scale, enabling more of them to commit to paying down their debts.

Live from LendIt: TrueAccord on AI in FinTech

TrueAccord Blog

In case you missed it, our CEO Ohad Samet spoke in a panel at the LendIt Conference about the use of artificial intelligence in FinTech.

Joined by industry leaders in a propelling talk, this video is not to be missed.

 

Click here to listen to the discussion on how AI collects better than call centers (15:00), why targeting consumers in a voice that “speaks” to them is more important than ever (17:35), how machine learning personalizes consumer experience for optimal recovery rates (19:40, 36:10) and why a humanized approach works (46:00).

On American Banker: Real issue for debt collectors is the irrelevance of telephones

TrueAccord Blog

In a recent American Banker article, our team is saying: the regulatory discussion around phone calls in debt collection is rapidly becoming irrelevant for one very important reason: consumers don’t answer their phones.

In the past few years, the debate over limits on financial institutions’ electronic communications with consumers has focused on an outdated device: the telephone.

That is very well how the debate could continue under new leadership at the Federal Communications Commission, as industry supporters will likely urge the FCC to ease up on robo-calling restrictions.

To read more, click here.

It’s time to stop using commission-based compensation in collections

TrueAccord Blog

Many collection agencies and departments use commission-based compensation for their collection agents. This model is perceived as the only way to “make it” in collections: margins are slim to none, agencies themselves are compensated only for dollars collected, and commission-based compensation lets them hire cheap labor and have great performers rise to the top. In fact, this is a broken model, based on a flawed premise that only humans can collect from humans. It’s not only the Wells Fargo case that should alarm collectors and creditors who use them; it’s the conflict of interest that’s inherent to commissions in collections, and the legal and moral risks it introduces. With new technologies maturing and beating traditional call centers, it’s time to reconsider.

It’s not easy being a collector – commission or not

Even with commission payment, an average collector’s salary isn’t high. Coupled with a lower base, most collector job descriptions present no complex requirements. As a result, the average collector is an unskilled worker, sometimes with prior collections experience. These people are required to get on the phone, cold call hundreds of people, and get them to make a payment – a payment that determines the collector’s take home pay. It’s not uncommon for collectors to be debtors themselves. However you look at it, the industry is pitting low paid people against each other.

Subject to a stressful work environment, collectors are also expected to adhere to compliance guidelines or lose their job. But humans are fallible, deeply impacted by recent events. Debtors themselves can be very abusive. Collectors can be tired, jaded, or just worried about not making their numbers. These adverse conditions create the small, daily violations that lead to lawsuits and demand letters.

It’s time to stop using commission-based compensation

Moving away from commission-based compensation is a tough transition, but it’s possible. It requires a change in mindset, and upfront investment. At TrueAccord, we built our small service team to be expert operators of a highly automated system. The team is compensated with a reasonable salary, sets a higher hiring bar, and handles more than 40,000 cases per agent. We reach these numbers thanks to our machine learning based engine, Heartbeat, and a team of engineers and data scientists focused on process and decision automation.

Eliminating commission-based compensation is incredibly important. Sophisticated creditors who control all facets of their vendors’ business should demand that from their collection agency partners. No amount of scripting and quality assurance can compensate for the impossible situation those collectors have to deal with. It’s only investment in technology and scale, and high quality of service teams, that can hit collection goals while improving consumers’ perception of the collection process.

Why batch-sending emails aren’t all there is for debt collection

TrueAccord Blog

Though historically resistant to innovation, the collection industry feels pressured to make changes. Consumer preference, requirements from clients and mounting costs dictate increased use of technology – a welcome trend. Among those new tools, we are starting to see increasing adoption of emails for collections. Agencies have a small selection of vendors to blast out an email. Agencies with large call centers view this as a cost reduction exercise, and another way to get consumers to call in and talk to their agents.

We think differently about emails at TrueAccord. Since we built a machine learning based, integrated multi-channel system, our use of emails is very different than the rest of the industry. We see huge potential in emails, significantly beyond a collection letter’s cheaper cousin. Here are three ways we use email differently.

Targeted emails

Our system personalizes every phone call, letter, text or email. Emails, in particular, give us an incredible set of personalization tools. While we stick to FDCPA hours when sending proactive emails, we also control the day and time we send each email – to the minute – in order to increase response rates (our emails are regularly opened by 15-20% of consumers, with 1.5-2% click rates). Since every consumer gets their own email, we can personalize their content to their specific situation. The system knows whether they made a payment, recently broke a promise, or are staying in constant contact. Targeted emails increase response rates and eventually liquidation.

Real time activity data

Each email contains links that allow consumers to respond to our communication, from making a payment to submitting a dispute. Our system tracks consumer behavior in real time – the emails they opened, the links they clicked, and the pages they visited on our website. It then uses this data, in real time, to continue personalizing the experience so consumers can find what they need to make a payment.

Cross channel integration

Adding a batch email service to an already established call center creates a data integration hell. It can be challenging to let an agent know that the consumer they are talking to just received an email. Since the TrueAccord system was build with integration in mind, emails are integrated with all other channels. The system can trigger a phone call if a consumer’s response to our email matches a certain pattern, and the agent will have all activity data available to them while on the call. It can decide to follow up with a text message instead of another email or call, harvesting the added engagement thanks to alternating channels. Alternating effectively between channels means that the system doesn’t need to blast consumers with contacts. It contacts consumers an average of three times per week, rather than several times per day. This almost eliminates consumer complaints and legal risk, and improves consumer satisfaction.

Bottom line

Technology has a lot to offer to creditors and collectors. We’re seeing great returns from using digital – and other – channels in an integrated, machine learning-based system. Our clients see that upside too: in head to head testing, our system beats traditional collection services by 30% and more.

Self service portal vs. machine learning-based collections

TrueAccord Blog

Consumer behavior is changing. As more of us are glued to our mobile phones, emails, and social media accounts, it’s clear that the old ways of collecting debt are quickly becoming irrelevant. Still, the market doesn’t offer a multitude of collection solutions aimed at responding to the digital consumer. When we present our machine learning-based solution to prospective customers, we’re often asked about the difference between our solution and a self service portal. Although both solutions are digital, they cannot be less alike.

Passive or active? Proactive and reactive strategies in collections

A self service portal is a passive asset, available for consumers to use when they choose to. Often, consumers choose not to use the portal since they would rather not deal with their debt conundrum. It’s only human to do so. Since the portal is passive, the consumers who find it are those who look for a way to pay online, without talking to an agent. They are a minority, and their liquidation is far from worth the price of implementation. In fact, many or the collectors and creditors who use online portals have accepted that less than 10% of their paid dollars may come from their self service portal. Others have given up completely. Compare that with TrueAccord’s whopping >90% paid through our online portal.

A machine learning-based system is an active one. Our collection engine creates collection strategies that are both proactive and reactive. The system proactively reaches out to the customer, automatically and using pre-written content, across multiple channels, to get them to engage online. Every communication has a link to the online and mobile-optimized portal, and phone calls are aimed at supporting this strategy rather than the only tool for contacting the consumer. Once the consumer interacts with our communication and browses the website, the system tracks their behavior so it can react to it – personalizing follow up flows based on emails they opened, pages they visited or words they said to agents on the phone.

Cross channel integration and halo effect

Using a machine learning based collection system has another advantage over passive a self service portal: it is integrated across all channels. Self service portals are often an add-on, their data is separate from the main collection system and dialer. They exist to supplement the main dialing strategy, often giving consumers the feeling that they are “fleeing” the collectors to use the online portal. It’s a wasteful strategy that also yields consumer complaints.

A machine learning based system harvests the halo effect, that causes consumers to react better when they are contacted across multiple channels. For example, for some groups, following up on an email with a single call attempt at the right time and number is twice as effective in getting a response as sending another email. For others, calling within five minutes of a consumer browsing through payment options without paying increases liquidation significantly. Shifting between channels increases effectiveness but also increases efficiency, reducing outbound call volume by up to 95%.

Bottom line

Machine learning based solutions are significantly more effective than a passive, stand alone self service portal. More than 90% of paying accounts in the TrueAccord system are resolved using the online service – and liquidation beats traditional agency performance by 30% and more. Using data and the maturing world of machine learning algorithms is the future of debt collection – and we’re happy to help.

 

Debt collection and President Trump: not much will change

TrueAccord Blog

We’ve heard varying sentiments about the November 8th election results. Behind the scenes, many in the debt collection industry are excited and happy for them. They believe a Trump presidency will put an end to regulation in debt collection, and put the industry “back in business”. This is a short sighted view, focused on the wrong drivers of change for the industry. Debt collection and President Trump may not be the great allies some believe they will be.

No administration can side with debt collectors

First, to put the industry back in business, debt collectors’ well being has to be on the new administration’s mind. Doing so will put it at odds with consumer advocates across the nation. It isn’t just about complying; the industry isn’t measured by its average, law abiding debt collector but by the most horrendous abuse stories one can dig up – and digging those up is still too easy. On the list of battles to take and industries to fight for, debt collection will easily take a back seat.

Deregulation is a rocky road

Second, undoing regulatory impact on the debt collection industry is a complex process. It will require not only dismantling the CFPB and halting all regulatory and supervisory activity, but also reversing the FCC’s TCPA ruling. While handing the FCC ruling might be doable, assuming public sentiment is amenable, it will take a while to implement. The CFPB is much trickier: as the CFPB is asking for a rehearing in the PHH decision, it is unclear whether Trump will be able to impact the identity of the head of the agency until 2018. This means that the debt collection rule will materialize – not the least since debt collectors themselves want clarifications regarding using technology in debt collection. Even if all of the above happens without any roadblocks, CFPB supervisory activity won’t go away; consumer protection is an important goal for every administration.

Compliance isn’t the most important factor

Finally, although regulation gets all the attention, it is far from the most impactful factor in the future of debt collectors. No regulation will reverse the shift in consumer behavior. Consumers will keep disregarding phone calls and letters. They will continue preferring online and self-service portals. Their behavior will continue to shift away from the industry’s standard mode of operation, calls and letters. It is this reality that creditors and collectors must grapple with, instead of fixating on speculation about the future of the CFPB. It’s a generational shift like no other, and it is stronger than any government agency or wishful thinking. Ignore it at your own peril.