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Q&A: Code-Based Compliance for Collections

Just as technology has evolved leaps and bounds, so have consumer communication preferences, especially when it comes to debt collection. The Consumer Financial Protection Bureau (CFPB) recognized in Regulation F—rules updating the Fair Debt Collection Practices Act (FDCPA)—that consumers in debt want to communicate with debt collectors through digital channels, like email and SMS. Under the FDCPA, Regulation F, and other state laws, these digital channels have the same compliance requirements as calls, such as no harassment or abuse, no false or misleading representations, and no unfair practices. Even though these additional channels have the similar compliance requirements, businesses must still manage these requirements across all channels and have the capacity to update requirements as new laws are passed, new cases come out, and new guidance is released from regulators causing a need to change in a compliance practice. How can businesses ensure compliance through the evolving regulatory landscape? Code-based compliance is a critical component for the debt collection industry. We interviewed five key stakeholders in this process to get different perspectives on what code-based compliance is and how it benefits businesses, lenders, consumers, and auditors. Read below for insights from: Eric Nevels, Director Operational Excellence; Hal Eisen, VP Engineering; Kelly Knepper-Stephens, Chief Compliance Officer and General Counsel; Michael Lemoine, Director Client Success; and Milo Onken, Director Quality Assurance. What is Code-Based Compliance? Eric Nevels: When an algorithm is used to help make decisions on consumer communications in debt collection, a code-based compliance system would be coded into that algorithm or work side-by-side with the algorithm to ensure that all digital communications fall within federal and state laws and regulations. Michael Lemoine: Here’s an analogy to help explain code-based compliance: You lace up your new running shoes. You scoured all the online reviews and this pair provides the best ankle support. You ate a light but fuel packed breakfast, no mid run slump for you. You eyed the weather app on your phone, all clear and perfect temp. Hydrated, check. Headphones, check. Mood, great! You’ve got this, everything is under control and accounted for. Off…you… go! Even if you’re not a big runner this sounds like a safe and productive way to start a day. But what if instead of checking for rain and eating a little oatmeal to make sure you had a good jog, you had to manually complete a full body diagnostic and perform microsecond electrical and chemical adjustments to your body just so you didn’t become disabled or even die while getting a little exercise? Not so safe and productive now. Is the risk of immediate death worth the effort and small reward of a single run? Every second your body automatically, without thought or effort, reads your current condition and reviews thousands of risks and initiates controls, responses, and actions to keep you alive—called the autonomic nervous system. Code-based compliance is the autonomic nervous system of an organization’s risk and control program. Now, it’s not as dramatic as life and death, but code-based compliance can supercharge any compliance management system because once the code has been programmed and deployed the system always follows the programmed rules leading to consistency and accuracy. How is Code-Based Compliance Different From More Traditional Approaches to Compliance? Eric Nevels: In the absence of code, human beings would need to check against the various restrictions on communications. Anytime humans are involved, even with rules and procedures in place, it is possible for errors to occur. With a code-based system, it is impossible for that action to take place. Kelly Knepper-Stephens: Certainly it's better than manual compliance because with manual compliance you have an opportunity for human error. But it doesn't mean that code-based compliance is “code it and forget it.” Your coders need a process to quality check the code. And your compliance team or a front line control team needs to monitor to make sure the coded compliance rules are working as you intended them to work. How Does This Approach Benefit Collection Compliance Strategies? Hal Eisen: Code-based compliance is great because it never gets tired or distracted and is not subject to any of the other human frailties. Done correctly, it can be efficiently applied to a wide range of software products without needing additional investment. Most compliance rules were written for the benefit of consumers. The better we comply, the safer consumers are. Consumers should have accurate disclosures, fewer annoying interactions and feel better about the whole experience. Eric Nevels: Lowers operational risk and ensures compliance with regulations. Additionally, it is much easier to update the code when regulations are changed. It helps ensure that they are being treated within the bounds of the law, which is their benefit. Milo Onken: The code-based approach ensures accuracy and tangible evidence for compliance audits. Collaboration with different internal teams and Legal ensures we check, implement, and follow industry compliance directives. A Code-Driven Future for Debt Collection Code-based compliance offers predictable and consistent collections methods when coupled with digital platforms. New technology can be mistaken as a risky investment, but digital debt collection systems offer more compliance security and more transparency—for consumers and creditors. Digital collection solutions not only evolve to meet consumer needs, but they can also continually adapt to changing regulations and quickly meet compliance requirements. Beyond code-based compliance, what are compliance issues unique to collections that need to be front of mind when sending digital communications to effectively engage your customers? Join us Thursday September 29th at 1pm ET for our interactive webinar, The Future of Collections & Compliance, hosted by TrueAccord Associate General Counsel Lauren Valenzuela and Director User Experience Shannon Brown. Reserve your space now for an interactive discussion on: Cutting edge digital collection complianceThe role of the legal team in creating a digital collection strategyHow compliance drives collection revenueThe future of digital compliance Register now for the upcoming webinar»» *This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter.

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What Makes an Effective Compliance Strategy for Collections?

Creating an effective compliance strategy is a crucial component of a business’s chance of success. Debt collection is highly regulated and must adhere to different regulations and laws like the FDCPA, Regulation F, and unique state laws—including regulations that may not be specifically focused on debt collection but still apply to the practice. Noncompliance with laws and regulations that govern or even parallel an industry can result in unhappy customers, litigation, reputational risks and/or enforcement actions. Using a high-level overview of what an effective compliance strategy can look like, this article will help outline how to create a compliance management system to help your business mitigate risk and keep your customers happy. What are the key elements to create a compliance strategy for collections? Some of the key elements to an effective collections compliance strategy may seem like no-brainers but can be more complex than you realize. Being aware of what laws and regulations apply to your specific business, industry, state, and even local jurisdictions is a critical element. Equally, internal audits to make sure your business’ processes are working as intended is a great way to get a temperature check on your compliance’s health. Internal audits should be conducted on a routine basis. Additionally, due diligence should be conducted on any third-party servicers you may work with for debt collection and recovery purposes: make sure they are legitimate, law-abiding, consumer-respecting businesses. For example, a great way to verify you’re working with a reputable debt collector is by searching the Receivables Management Association (RMAi) database. If a company is RMAi certified, that means they have passed and/or comply with the organization’s rigorous background checks, industry standards and best practices guidelines. Beyond what can feel like the no-brainers of compliance strategy, another key element is having a Compliance Management System. What is a Compliance Management System and what does it cover? From a high-level view, a compliance management system (CMS) is how a company sets, monitors, and oversees its compliance responsibilities. The CFPB describes a CMS as how an institution: Establishes its compliance responsibilitiesCommunicates those responsibilities to employeesEnsures that responsibilities for meeting legal requirements and internal policies and procedures are incorporated into business processesReviews operations to ensure responsibilities are carried out and legal requirements are metTakes corrective action and updates tools, systems, and materials as necessary What are the components of a Compliance Management System? Board Management and OversightAllocate the right resources to compliance and risk managementRegular Board of Directors reportingPolicies and ProceduresDocumented and updated at least annually by the business ownerDetect and minimize potential for consumer harmReviewed by Audit and Compliance to ensure followed and meeting requirementsRisk Assessment - Controls & Corrective ActionDocumented and evaluated regularly by the business ownerReviewed by Audit & Compliance to ensure mitigating risks and control gapsDeficiencies remediated by business owner through corrective action plansTrainingConsistent with policies and proceduresReady before a change or roll-outConsumer Complaint ResponseRecorded and categorized - used to improve processesInvestigated, prompt responses provided, corrective actionMonitoring & AuditAligned with risksIndependent - reporting shared with top management Why is a Compliance Management System important? A compliance management system is important because it's the checks and balances of the business you're operating. One of the most important parts of a CMS are the policies and procedures—these help to manage risk by setting a framework and infrastructure to proactively and reactively respond to incidents, issues, and change, such as: Changing product and service offeringsNew legislation, regulation, interpretations, court decisions, etc. that address developments in the marketplace and are relevant to the product and service offerings of the organizationUnexpected incidents (data breach, global pandemic, etc.) How can you ensure your compliance strategy is effective? A compliance strategy is not “set it and forget it”—the strategy needs to be tied to the evolving consumer preferences and corresponding new compliance requirements to be effective. This helps businesses be proactive versus reactive. Ensuring checks and balances are in place helps establish proactive stance in case normal policy fails, gaps are discovered, or other unforeseen issues arise. What can you do to ensure compliance strategy is effective for the future? Want to learn more about the different facets of what makes a compliance strategy effective in collections? Join us Thursday September 29th at 1pm ET for our interactive webinar, The Future of Collections & Compliance, hosted by TrueAccord Associate General Counsel Lauren Valenzuela and Director User Experience Shannon Brown. Reserve your space now for an interactive discussion on: Cutting edge digital collection complianceThe role of the legal team in creating a digital collection strategyHow compliance drives collection revenueThe future of digital compliance Register now for the upcoming webinar»» *Leana serves as TrueAccord’s Paralegal Operations Analyst II. This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter.

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Debunked! Four Compliance Myths and Misconceptions for Collections

Trying to keep up with regulations in debt collection can feel overwhelming especially with new cases and federal guidance coming out regularly interpreting the law and states actively amending or creating new laws that impact debt collectors, original creditors, and current creditors. Here are four common compliance myths and misconceptions for collections debunked (no detective work needed)! Myth #1: Under Regulation F consumers are not protected from harassment False! The Fair Debt Collection Practices Act (FDCPA) absolutely prohibits harassment of consumers see 15 USC 1692d. No matter how a debt collector reaches out to a consumer, by phone call, email, SMS, voicemail, even social media—a debt collector cannot harass a consumer through one channel or through a combination of channels. Regulation F made clear that harassment is the totality of the circumstances, “the cumulative effect of all [communications - calls, emails, text messages] may constitute a violation of the harassment provision.” Email and cell phone providers offer additional built in protections for their customers to help with rogue actors who fail to abide by the harassment provisions in the FDCPA. These service providers have their own rules and will prevent or block companies who try to harass consumers. In fact, collectors or marketers who use emails to harass will experience a less than 5% chance of their email reaching the consumer’s inbox (“inboxing rate”) essentially barring them from using email to reach consumers. Consumers have the power to not only unsubscribe (as required in Regulation F from these digital channels) but also have the power to mark inbound messages as spam which will impact the inboxing rate essentially barring abusers from the ability to deliver messages at all. As a result, digital channels offer consumers significantly better protection from unwanted or harassing communications. Digital communications allow consumers to quickly register their preferences by clicking on an unsubscribe link or replying stop to opt out. Digital communications also offer search and archiving options, automatically creating a paper trail of communications between the consumer and the collector. There is no unsubscribe or reply stop option for calls or letters. Myth #2: Debt collection requirements are only governed by federal laws False! Individual states and even cities or municipalities have been implementing their own more restrictive laws governing debt collection. For example, New York law requires a debt collector to obtain consent to email a consumer about their debt, a requirement that does not exist in the federal FDCPA or Regulation F. Washington, DC just revamped their debt collection rules with new restrictions on calls, emails, texts and social media including communication caps for each of these methods that take effect on January 1, 2023 when the temporary ban on collections (implemented during the pandemic) end. In addition to state and local debt collection rules, other regulations can apply as well, even if they aren’t specific to the industry. Some of the most anticipated regulations rolling out state-by-state focus on information security and data privacy, which greatly affect debt collection information security practices despite not being named outright. Even if debt collection regulations are followed meticulously, businesses can still fail to meet compliance requirements if they don't perform due diligence on other laws applicable to their operations. Myth #3: Business must send the initial communication by letter False! The FDCPA spells out that a debt collector must provide the validation notice in the initial communication or in writing within 5 days of that initial communication see 15 USC 1692g(a). This means that when the full validation notice is provided over the phone in the initial conversation or in the initial communication by email (as confirmed in Regulation F), a debt collector satisfied their obligation. The requirement to send the disclosure in writing is only triggered if the disclosure is not provided in the initial communication. Fortunately, the CFPB provided a model disclosure notice in Regulation F that can be adopted to send by email and permits the use of hyperlinks. The ability to use hyperlinks in the model debt validation notice allows for consumers to communicate their preferences immediately and more effectively than when using the disclosure by US mail. For example, a consumer can use the dispute flow links in the email to explain why they are disputing the debt while looking at the additional details about the account that are visible in an online portal whereas the check boxes on the model validation letter do not allow for this flow of information and must be mailed back to the debt collector for processing. This is another example of the advantages of digital communications over letters and calls. Myth #4: Meeting compliance obligations is more difficult for digital debt collection practices False! As long as you have a solid team of legal compliance advisors and a mature compliance management system, digital communications actually make it easier to comply. Digital is faster (making it easier for consumers to respond or opt-out by just replying to an email or text. Digital provides a written history of communications between the consumer and the collector that can be archived automatically through existing features in email cell phone services. Digital communications are easily controlled by consumer and more tightly managed by providers, with built in mechanisms to discourage and blacklist harassers. Plus, there are a growing number of federal court cases highlighting best-practices in digital compliance: The Northern District of California confirmed that the FDCPA permits providing the validation disclosures in the body of the initial communication by emailThe District of New Mexico held that whether a webpage is confusing to the least sophisticated consumer is evaluated by the totality of all linked pages in the flowThe Eastern District of Illinois held that a reply to an email notifying the debt collector of attorney representation only applied to the specific account. Read the full case summary and key takeaways in a new write-up by TrueAccord Associate General Counsel Steve Zahn»» The Future of Collections & Compliance Compliance can get complex quickly, especially for debt collectors and any lender trying to recover delinquent funds—and that complexity will only continue to grow over time as technology and consumer preferences evolve. How can your business keep up today and tomorrow? Join us Thursday September 29th at 1pm ET for our interactive webinar, The Future of Collections & Compliance, hosted by TrueAccord Associate General Counsel Lauren Valenzuela and Director User Experience Shannon Brown. Reserve your space now for an interactive discussion on: Cutting edge digital collection complianceThe role of the legal team in creating a digital collection strategyHow compliance drives collection revenueThe future of digital compliance Register now for the upcoming webinar»» *Kelly serves as TrueAccord’s Chief Compliance Officer and General Counsel. This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter.

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District Court Rules In Favor of TrueAccord

A reply email with notice of attorney representation applies only to the individual account A new District Court opinion weighs in on digital debt collection efforts, making clear that a notice of attorney representation provided in reply to an email about an account only applies to that specific account. In Tamika Gilbert v. TrueAccord Corp., Case No.: 1:21-cv-00486, the United States District Court for the Eastern District of Illinois, dismissed the case in favor of TrueAccord. This is another in a small line of cases relating to digital collection of debt. See, for example, the case of Greene v. TrueAccord, in which the court upheld TrueAccord’s use of email for the initial notification, also codified in Regulation F. The Case Ms. Gilbert sued TrueAccord alleging (1) TrueAccord made a false or misleading statement when it failed to inform her that an account was past the statute of limitations and (2) TrueAccord had contacted her after being informed that she was represented by counsel. After conducting discovery, both Gilbert and TrueAccord filed motions seeking summary judgment – a decision by the court without the need for trial that will be granted only if there are undisputed facts that permit a judgment under the law. The parties agreed that: TrueAccord emailed Gilbert on January 10, 2021 regarding Creditor A’s account;TrueAccord emailed Gilbert by email on January 19, 2021 regarding Creditor B’s Account;Gilbert’s attorney forwarded to TrueAccord a copy of the collection email regarding Creditor B’s account, stating, “I am representing this consumer. Do not contact her again.”TrueAccord emailed Gilbert on January 24, 2021 regarding Creditor A’s account. The Ruling The court ruled in TrueAccord’s favor on two grounds. First, the court found that Gilbert did experience harm when she said that the emails caused her to “shake with rage.” The Court ruled that these allegations of physical manifestations of harm were sufficient harm to confer standing to bring the lawsuit. While annoyance, stress, or anger are not sufficient harms without more, an alleged physical reaction to the emotion is sufficient harm for Gilbert to have standing to pursue the second claim. On the merits of the communication-after-notice of attorney representation claim, the Court ruled in favor of TrueAccord and dismissed the claim. The Court found that Section 1692c(a) of the Fair Debt Collection Practices Act prohibits a collector from communicating with a consumer whom it knows to be represented by counsel with respect to such debt. The Court noted that the communication by Gilbert’s attorney was regarding the specific Creditor B account. Absent an express intent to represent a consumer regarding all accounts or a list of specific accounts, TrueAccord’s knowledge was limited to her representation with regard to the Creditor B account only. As the subsequent communication was regarding another account owed to a different creditor where TrueAccord had no knowledge of attorney representation, no violation occurred. TrueAccord did not send any further communications with respect to Creditor B’s account on which TrueAccord knew Gilbert to have counsel. Second, with respect to the claim that Gilbert was confused by the notice stating that the account had passed the statute of limitations for the purpose of filing a lawsuit (a requirement of law), the court found that Gilbert had not alleged sufficient harm to have standing to bring the first claim. The court noted that Gilbert’s damages were the time lost allegedly contacting an attorney regarding the Out Of Statute (OOS) language. While lost time can be an injury that supports a claim, here the time allegedly lost was time was solely time spent consulting an attorney as doing so would permit anyone to create standing by retaining counsel. Key Takeaways This case is important because it reaffirms that attorney representation must be clear to be account specific, not consumer specific. It also adds another in a line of cases finding that a plaintiff must have sufficient harm to have the standing to bring a claim in federal court. These key takeaways from the ruling help further clarify the parameters of digital debt collection communication for both creditors, collectors, and consumers. This wasn’t just a win for TrueAccord, but for the industry as well. Want to learn more about the different facets of compliance in collections? Join us Thursday September 29th at 1pm ET for our interactive webinar, The Future of Collections & Compliance, hosted by TrueAccord Associate General Counsel Lauren Valenzuela and Director User Experience Shannon Brown. Reserve your space now for an interactive discussion on: Cutting edge digital collection complianceThe role of the legal team in creating a digital collection strategyHow cutting edge compliance drives collection revenueThe future of digital compliance Register now for the upcoming webinar»» *Steve Zahn serves as TrueAccord’s Associate General Counsel. This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter.

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Compliance & Collections: 22 Essential Terms to Know

The world of regulatory compliance can be a complicated place, especially when it comes to debt collection. It can be tricky for non-security and compliance professionals. To help quickly get you up to speed on what auditors are referring to, we’ve put together a glossary, covering some of the most important compliance terms and acronyms. Action Plan: A plan to identify and facilitate remediation steps of current operating practices. Audit: An unbiased and comprehensive examination of an organization’s compliance and adherence to regulatory guidelines. Benchmarking: The process of analyzing an organization's performance data and comparing it against the industry standard. Used to see the effectiveness of a compliance program and if there are any areas that need improvement. Best Practices: When law and/or regulation is unclear, a “best practice” policy may be implemented to safeguard a business’s compliance.Bona Fide Error Defense: An unintentional mistake or violation that occurred despite the maintenance of procedures reasonably adapted to avoid the mistake/violation. A debt collector may be able to assert a “Bona Fide Error Defense” in a lawsuit alleging violations of the federal Fair Debt Collection Practices Act (FDCPA). CCPA: The California Consumer Privacy Act (CCPA) gives consumers in California rights over the personal information that businesses collect and process about them.CFPB: The Consumer Financial Protection Bureau (CFPB) is an agency of the United States government responsible for consumer protection in the financial sector.Code of Ethics: A document or guide that is composed of an organization’s values, standards commitments, and a set of principles. Compliance: The state of adhering to established guidelines or specifications such as a policy, standard, specification, or law.Compliance Management System: A series of integrated policies, processes, tools, internal controls, and functions designed to help an organization manage, monitor, and test  compliance with applicable laws and regulations (e.g., federal, state, local/municipal). A fully functioning compliance management system is designed to continuously minimize risk, prevent consumer harm and limit financial or reputational harm to the organization. An essential in the modern business world.Compliance Risk: Captures the legal, financial, and reputational dangers for failing to act in compliance with laws and regulations.Conflict of Interest: A conflict that happens in a decision-making situation in which an individual or organization is unable to remain impartial and where serving an interest would harm another.Controls: A checks put in place to ensure compliance with a policy and procedure. A control could be automated or manual.  Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act is a US federal law that governs the financial industry by enforcing transparency and accountability with rules for consumer protection, such as its Unfair Deceptive Acts and Practices provision. FDCPA: The Fair Debt Collection Practices Act (FDCPA) is a consumer protection law passed by Congress in 1977 to eliminate abusive debt collection practices and insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.Fraud: The act of intentionally lying and cheating in order to obtain an unauthorized benefit. Governance: A formal framework made up of policy rules, processes, procedures and controls used to control risk and ensure accountability and transparency. Gray Area: A situation where the rules are not clear and can be open to interpretation.Regulation F: A rule implemented by the Consumer Financial Protection Bureau (CFPB)  providing rules governing activities covered by the Fair Debt Collection Practices Act (FDCPA). It seeks to clarify and expand on the FDCPA, including requiring  collection agencies to provide additional information to consumers as part of the validation disclosure and clarifies rules for the use of digital communications. Remediation: The process of recognizing a compliance issue or deficiency and implementing an action plan to correct the deficiency or enhance/strengthen an area of compliance.  For remediation to be successful, the new or revised policies, processes or controls must address the deficiency or issue and to minimize risk. Risk Assessment: The process of identifying and analyzing all potential risks that an organization can face in relation to its legal and regulatory obligations. The results of risk assessments are prioritized based on severity and then used to determine areas of focus for risk mitigation.Safe Harbor: A provision in a statute or regulation that protects against legal or regulatory liability in situations where the safe harbor provision conditions are met.Transparency: The act of being open and honest while disclosing as much information about policies, procedures, and activities as possible. Now armed with your glossary of terms, get ready to investigate the world of compliance in collections further in our upcoming webinar. Join us Thursday, September 29th at 1pm ET for our interactive webinar, The Future of Collections & Compliance, hosted by TrueAccord Associate General Counsel Lauren Valenzuela and Director User Experience Shannon Brown.   Reserve your space now for an interactive discussion on: Cutting edge digital collection complianceThe role of the legal team in creating a digital collection strategyHow cutting edge compliance drives collection revenueThe future of digital compliance Register now for the upcoming webinar»»

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Who’s on First (and Who’s on Third) for Your Debt Collection?

What is your core business? It probably isn’t chasing down delinquent accounts—and it shouldn’t be. Attention, resources, and bandwidth should be dedicated to what drives revenue and pushes your company’s goals forward. But delinquencies are a reality for any business that handles payments. And when a customer misses a payment on the due date, you shouldn’t let their delinquency slide for too long, otherwise before you know it, that delinquent account will eventually get charged off and considered a loss. While charge offs aren’t completely unavoidable, ineffective recovery efforts on those defaulted, post-charge off accounts (typically handled by a third-party partner) are completely avoidable. Effective pre-charge off (also known as first-party) collection efforts are just as important as well. For today’s consumers, that means engaging with them in more innovative ways outside the traditional call-and-collect methods and moving into a more digital approach. But without a consumer-centric strategy for both pre- and post-charge off accounts, digital outreach can stumble just as easily as an inexperienced call center rep on their first day—ineffective or even damaging to customer relations. So what do effective strategies look like for first-party and for third-party debt collection? Let’s first take a look at the nuances to consider between first-party and third-party collections. First-Party vs Third-Party Collections—What’s the Difference? First-PartyFirst-party refers to using the creditor’s brand in customer communications. The focus is on remediation of newly delinquent accounts and getting the customer back on track. The communications address the part of the loan that is late, which is often not the whole amount, and refer the customers back to the creditor’s call center, payment portal, or online account system. Third-PartyThird-party refers to outsourcing collections through a third-party partner on the entire balance of the account. At this point, many creditors believe the customer relationship has been lost—but this does not have to be the case with the right digital strategy! First or Third—Customer Engagement is Key to a Homerun in CollectionsFor both first- and third-party collections, success hangs on reaching each customer with the right message, through the right channel at the right time. This can be no small feat for smaller in-house teams attempting to recoup pre-charge off debts. And how can you trust that your third-party partner is actually engaging with customers in the best way possible? So Who’s on First and Who’s on Third for Your Debt Collection? It may seem like a silly question: who is on top of your first-party, early delinquency collection communications? Many companies assume that they must handle pre-charge off collection efforts completely by themselves or by outsourcing with a first-party company, but there are communication alternatives such as TrueAccord’s Retain. Retain is the client-branded pre-charge off digital engagement product, directing customers back to you enabling your customers to choose the right time, place and channel to contact you. Improve your cash flow, reducing losses and allowing you to spend more time and energy on core business objectives. Learn more about first-party communications, including the top 10 questions to evaluate your current strategy, in our new eBook the Buyer’s Guide to Digitally Engage Your Past-Due Customers»» While third-party, post-charge off collections may feel more “out of sight, out of mind” than first-party since organizations outsource to third-party vendors, it’s still crucial to have a comprehensive digital communication strategy that aligns with individual business standards. TrueAccord goes above and beyond with Recover, our late-stage collection solution that proves digital-first delivers: 96% of consumers who resolve with Recover do so using only self-serve digital tools. Learn how to evaluate your third-party collection partners, including the top 10 questions to ask vendors, in our new eBook the Buyer’s Guide to Effective Third-Party Collections»» TrueAccord’s mission to help organizations recover more (from happier consumers) is comprehensive for both first-party, pre-charge off and third-party, post-charge off, whether using one or both intelligent digital-first solutions together.

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How Buy Now, Pay Later is Transforming Online Shopping With Gen Z

Buy Now, Pay Later (BNPL) plans have taken over as a popular financing option for consumers, partly due to an increase in online shopping demands during the pandemic. In 2021, Americans spent more than $20 billion through BNPL services, taking up a bigger part of the $870 billion-a-year online shopping market. From laptops and airline flights to clothing and furniture, BNPLs make it simple to pay for almost anything in small installments. Since the start of the pandemic, millions of international consumers, especially Gen Z (10-25 years old), have gravitated toward using this service. According to a study by Forbes, BNPL use among Gen Z has grown 600% since 2019. The rise of interest in BNPL is also likely influenced by increased financial uncertainty, high-interest rates and a downward trend in credit card approval. As consumers show preference for digital financial services, BNPL continues to grow and become available at more retailers.  Why are BNPLs Popular with Gen Z? Services like Afterpay, Klarna, Affirm and others have gained a lot of popularity in recent years, especially among younger generations who may struggle with cash flow. With BNPL, the first payment is due at the time of purchase, with subsequent interest-free payments usually due within a few weeks or months.  More and more, BNPL providers are reaching these younger audiences through influencers and brands on TikTok, and the variety of goods and services you can purchase with the service continues to expand. Some popular buy now, pay later items include clothing, concert tickets, cosmetics, electronics, furniture, groceries, hotels and flights. But, like credit cards, missing payments can result in late fees and other penalties. With Gen Z, there’s already a pattern of missing payments. A survey conducted by Piplsay showed that 43% of Gen Zers missed at least one BNPL payment in 2021.  Gen Z Favors BNPL More Than Other Generations Debt types and payment preferences constantly change along with technology. The traditional credit card debt is being replaced by BNPL, specifically when we look at Gen Z. For one, it’s easier to be approved for a BNPL application since the process only requires a soft credit check, unlike a hard credit check that most credit card issuers require. When looking for an alternative to high-interest credit cards, BNPL installment payment plans are a popular option. BNPL consumers know upfront what will be expected of them, and the possibility for large debt build-up is replaced with a finite number of payment installments. This transparency and manageability make it easier to understand. And it’s one that has the potential to continue to evolve for the better by providing consumers with more inclusive credit and payments options. When it comes to both luxury and essential purchases, younger consumers are more likely to take advantage of BNPL to afford them. A survey from TrustPilot found that 45% of consumers between the ages of 18 and 34 were likely to use such services for basic essentials while 54% would use them for luxury items. For those aged between 34 and 54, these results were 33% and 38% respectively. And for people aged 55 and up, the results were 16% and 24%.  Since it’s quite easy to sign up for one or more BNPL loans, the likelihood of losing track of payments or overspending is real, especially for Gen Z. According to a report from J.D. Power, about one-third of younger consumers said they spent more than their budget allows with BNPL. And since different retailers offer financing through various BNPL services, it can also be a challenge to track multiple accounts at once. This isn’t surprising as some of the younger generations do not have the financial literacy or experience that older generations have and they’re more likely to face consequences and penalties like missing a payment. Meet Gen Z Where They Are to Effectively Recover More The good news is that the outlook for Gen Z BNPL customers that end up with accounts in collection is different than for those who default on credit card debt. On average, BNPL debts see higher and faster repayment rates than similar-sized credit card debts. Higher engagement leads to better repayment rates. According to TrueAccord data, the percent of BNPL customers who make a payment is more than double the like-size credit card accounts at 30 days post placement and 50% higher at 90 days.  As a debt collection platform that engages digital-native consumers where they are and with a priority on customer experience, many leading BNPL providers partner with TrueAccord to address both early delinquencies and charged-off accounts. After these BNPL customers repay their loans and have a positive experience, they're able and likely to use the service again, and this time with some experience about how it works. By using this information, TrueAccord can help find the most optimal ways to reach the younger audience and help them pay off their debt from BNPL.  Want to learn more about how to engage with consumers of any generation in whatever stage of collection they might be in? Schedule a consultation to see what TrueAccord’s digital solutions can do for your debt recovery strategy.  Further Reading:  TrueAccord Report: Buy Now, Pay Later, Consumer Preference and Collections OutlookKlarna Report: https://www.klarna.com/us/blog/category/mindful-money/ Dave Ramsey: https://www.ramseysolutions.com/dave-ramsey-7-baby-steps

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What do the CFPB’s Updates to the Regulation F Electronic Communications FAQs Mean for Your Debt Collection Strategy?

The Consumer Financial Protection Bureau (CFPB) quietly published on its website additional frequently asked questions (FAQs) on the Debt Collection Rule (i.e. Regulation F) relating to electronic communications and communicating during unusual or inconvenient times or places. The FAQ answers multiple questions, ranging from “is a debt collector required to honor a consumer’s request to opt out of electronic communications if the request does not conform to the debt collector’s opt-out instructions?” to “does an automatically generated electronic communication (such as a payment confirmation) sent at a time the debt collector knows or should know is inconvenient to the consumer, which is sent in response to a consumer action (such as a payment), meet the limited exception for responding to consumer-initiated contact?” While many of the responses to the FAQs can be found in the Official Interpretation section of Regulation F, there are some points worth highlighting: A consumer is not required to use the debt collector’s preferred or stated opt-out method. This means, for example, an email opt-out can come from a non-email channel, an SMS opt-out can from a non-SMS channel, etc.A consumer does not need to use specific terms contained in a debt collector’s opt-out instructions in order for their opt out to be effective. For example, if the instructions tell a consumer to reply with “stop” to opt-out, and the consumer replies with “quit” instead of “stop,” the debt collector must still honor that opt-out.Email addresses and mobile telephone numbers are not necessarily associated with a “place.” This means that the prohibition on communicating or attempting to communicate at unusual or inconvenient places does not prohibit a debt collector from communicating or attempting to communicate with a consumer through email or mobile phone. However, if the debt collector knows, or should know, that the consumer is at an unusual or inconvenient place, then the prohibition still kicks in. What should creditors look for in their debt collection partners? Creditors should check to see if their debt collection agencies train their staff and design their processes so that they promptly and effectively identify and process opt-out requests. Since opt-out requests can come in various forms and fashions, debt collectors need dynamic procedures to capture any and all opt-outs. Debt collection agencies also need processes and technologies to help them implement controls for inconvenient time and place restrictions - which may be a little tricky when applied to email and mobile phone numbers. What is TrueAccord’s take? At TrueAccord, our goal is to make the debt collection experience friendly and easy for consumers. That is why we engage consumers on their preferred communication channels and make it easy to opt-out of electronic communications. We take a broad approach to honoring a consumer's opt-out request no matter how we get it or what specific words they use. While the new FAQs clarified that the Debt Collection Rule does not require debt collectors to communicate electronically with consumers, we pose this question back: If a consumer reaches out to you electronically, why wouldn’t you want to communicate with them on the channel they prefer? Start evolving your consumer engagement and communication strategy to meet your customers where they will be most receptive. Schedule a consultation to learn how TrueAccord can help you get started»

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National Financial Awareness Day: Why Financial Literacy is Beneficial For Everyone

August 14 is National Financial Awareness Day, making it an appropriate time to shine a spotlight on initiatives that can help improve consumer financial awareness in the collections space. Financial literacy is an essential life skill that benefits people throughout their lives, but is often overlooked when it comes to what happens if a payment is late or missed. Financial literacy during delinquency is just as important as planning for the future—and can even play a big part in financial future-planning. Whether it’s taking out a loan, buying a house, saving for retirement or purchasing goods on a credit card,, people are constantly being asked to make decisions that affect their personal finances. As reported by the Milken Institute, only about 57% of the American population is considered financially literate. In order to address this gap, lenders are in a unique position to help provide customers with educational content that not only improves customers’ financial literacy but helps with their own retention and acquisition strategies by building and maintaining customer trust and loyalty. Providing consistent outreach—especially in early delinquency—will give customers more opportunities to engage, understand, and resolve debt. Debt levels are on the rise again: according to the New York Federal Reserve, between the national student loan debt topping $1.6 trillion in 2022 and household credit card debt also climbing, we’re seeing the largest quarterly increase in 22 years at $860 billion. And individuals become more susceptible to going further into debt if they don’t have a solid foundational understanding of what happens when they first fall behind. Overall, lower levels of financial literacy end up contributing to increased rates of bankruptcy, defaults, and foreclosures. As financial services leaders know, maintaining customer relationships—including accounts in early delinquency—is more profitable than writing off bad debt due to ongoing loan and credit losses, and then having to start the acquisition process for a new customer all over again. The Receivables Management Association International (RMAI), a non-profit trade association for businesses in the financial services industry, understands this gap and the need for increased literacy created a website with many useful literacy resources for consumers offering free education on topics like managing personal finance, money, and investing. By sharing tools like this or taking on an array of education initiatives and implementing financial literacy as a component of your debt recovery strategy, businesses can help their customers regain their financial health. TrueAccord is a certified business through RMAI’s Certification Program requiring an independent audit to confirm compliance with a set of rigorous uniform industry standards of best practice which focus on the protection of the consumer. Interested in learning how TrueAccord can help create a customizable user-beneficial experience for your customers? Schedule a consultation to see what TrueAccord’s digital solutions can do for your debt recovery and education strategy»»

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What are We Seeing in Consumer Credit Trends Today? A Video Interview with Ohad Samet

The financial landscape for both consumers and businesses is particularly uncertain right now. Many new fintechs and neobanks are experiencing their first delinquency surge and others soon to follow. This year, the challenges of managing delinquencies and navigating an uncertain economy will compound, making it imperative for companies to critically think about their strategy to collect from consumers in debt. But from the perspective of a seasoned veteran of the financial services industry, what are we really seeing in consumer credit trends today? And what should businesses really be preparing for tomorrow? We sat down with TrueAccord co-founder Ohad Samet to get his insights on what we’re seeing in consumer credit trends today, managing delinquencies, and how to navigate in this economy. Watch our interview or read the transcript below»» https://youtu.be/cRWbiIECQcI What are we seeing in consumer credit trends today? OHAD SAMET, TrueAccord co-founder:I think we all notice that we're dealing with a lot of lagging indicators in terms of consumer capacity to pay. Of course, one leading indicator is demand for credit. But in terms of what consumers are able to do—meaning their sentiment—are they willing to pay? Are they able to pay? Do they have enough disposable income? So many of these numbers are trailing indicators.However, consumer net worth is still high. Why is that? It's because stocks in primary, the value of primary residences, is calculated in the net worth of consumers. And so if you believe there was a bubble or just a run up in prices because of a lot of demand and very low supply, then that would artificially inflate the net value or net assets of consumers, and we will only discover how consumers are faring realistically in a few months.Even if from a trailing indicator perspective, meaning delinquencies, net worth and so on, we are not seeing a drop yet. We're only seeing banks increase their loss reserves in anticipation for losses.We are definitely seeing a change in consumer sentiment. It can be because they're running out of money. It can be because of general sentiment in the market. Inflation is up, risk is up, consumers start saving more—but we are definitely seeing that. And that, to me, is a leading indicator that we all need to be aware of. Interested in learning how you can get ahead and prepare for delinquencies before they happen? Schedule a consultation to learn how TrueAccord can help you get started on your collection strategy»

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