TrueAccord Joins the Visa Fintech Partner Connect Program
LENEXA, Kan., Nov. 8, 2022 -- TrueAccord Corp, a debt collection company using machine learning-powered digital recovery solutions to improve consumer experience, today announced it joined the Visa Fintech Partner Connect program. Through Visa Fintech Partner Connect, TrueAccord is Visa Ready certified. This certification helps technology companies build and launch payment solutions that meet Visa's global standards around security and functionality. This distinction signals that TrueAccord’s debt collection solutions meet Visa standards and broader payments regulations. “Joining the Visa Fintech Partner Connect program allows TrueAccord to build on its value with existing and potential clients and partners,” said Mark Ravanesi, CEO of TrueAccord. “With Visa Ready certification, businesses working with TrueAccord benefit from the reliability and credibility that come with Visa Ready's seal of approval.” Visa Fintech Partner Connect provides companies like TrueAccord the ability to connect with digital-first, next-generation payments and banking platforms and solutions and open up new possibilities. In a rapidly and constantly evolving landscape of new and compelling financial services providers, connecting with Visa’s curated fintech partners can facilitate collaboration between emerging technologies to enhance digital innovation efforts. “TrueAccord focuses on delivering better, digital-first experiences for consumers facing financial challenges, which is an important consideration for companies providing financial services, and especially for fintechs,” added Ravanesi. “When a company has invested so much in customer acquisition, retaining those customers when they encounter a more difficult time and maintaining positive customer relationships is key to success. Our solutions enable companies to do that at scale with machine learning.” Powered by TrueAccord’s tech stack, the product suite includes Retain, a client-branded early-stage consumer engagement platform for managing pre-charge off debt, and Recover, a full-service debt collection solution. Key benefits of both products include a simple, intuitive and effortless-to-use digital platform leading to great user experience, constant A/B testing and optimization to reduce friction and boost conversion rate, infinite scalability, and second-to-none channel deliverability. To learn more about TrueAccord and its digital-first collection solutions, visit www.TrueAccord.com and follow on Twitter and LinkedIn. About TrueAccord TrueAccord is the intelligent, digital-first collection and recovery company that leaders across industries trust to drive breakthrough results while delivering a superior consumer experience. TrueAccord pioneered the industry's only adaptive intelligence: a patented machine learning engine, powered by engagement data from over 20 million consumer journeys, that dynamically personalizes every facet of the consumer experience – from channel to message to plan type and more – in real-time. Combined with code-based compliance and a self-serve digital experience, TrueAccord delivers liquidation and recovery rates 50-80% higher than industry benchmarks.
Using Regulation F to Maximize Recovery: Highlights from CBANC Webinar with Kelly Knepper-Stephens
Just as technology has evolved leaps and bounds, so have consumer communication preferences with that technology, especially when it comes to debt collection. So in 2021, the Consumer Financial Protection Bureau (CFPB) rolled out Regulation F under the existing Fair Debt Collection Practices Act (FDCPA). Regulation F seeks to provide additional clarity around the key FDCPA prohibitions covering everything from harassment, such as the 7-in-7 call caps, to sample language for the initial communication with enhanced disclosures and information to help consumers identify their accounts. Now, one year after Regulation F has gone into effect, some organizations and lenders still have questions about these new rules and how they can impact their business overall. To help elucidate the matter, TrueAccord’s Chief Compliance Officer and General Counsel, Kelly Knepper-Stephens, sat down with the CBANC Network to discuss Using Regulation F to Maximize Recovery. Below are just a few highlights from the in-depth discussion, but we encourage you to watch the full on-demand webinar to learn more about: Safe Harbors in Regulation F (and if they are worth it)Social Media communication best practicesRules on contacting consumers including from other laws like the TRACED ActState and municipal laws applicable to debt collectionand more! Watch the the full webinar Using Regulation F to Maximize Recovery here»» Highlights from “Using Regulation F to Maximize Recovery” with Kelly Knepper-Stephens* We have found at TrueAccord that maintaining strong compliance with Regulation F doesn't decrease your ability to recover defaulted debts from consumers. We know that consumers like digital collections, because we primarily communicate using digital channels. At TrueAccord, we find that 65% of consumers are opening at least one email—and 35% click on the link in the email that directs the customer to the webpages with information about the account settlement offers and payment plans, how to dispute, et cetera. For TrueAccord, 96% of consumers resolve their account without any human interaction whatsoever because they find the information that they need through the self-serve platform. The regulators understand the growing preference for digital and self-service methods, and have acknowledged in Regulation F that it is permissible for a debt collector to communicate with consumers via these digital channels, including adding rules about how to use social media in debt collection. TrueAccord was very active in the CFPB’s Regulation F rulemaking process for this reason. We served on the small entity review board business panel in order to provide feedback as to the potential impacts of the draft proposal on our small business. We also provided a lot of data and information on how we designed our digital communications, such as having unsubscribe links in all email communications. This was important because at the time TrueAccord was one of the only companies in the industry using digital. The end result actually mimicked some of our best-practices practices. Engaging the consumer is the fastest path to resolution, so no matter the channel—email, text message, phone calls, et cetera—using all channels compliantly to identify the right time, right channel, right message to engage the consumer is the ticket to success. https://www.youtube.com/watch?v=axJcK1C6ExE Watch the on-demand webinar, Using Regulation F to Maximize Recovery, to learn more»» *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.
Q3 Industry Insights: Economic Challenges, Compliance Considerations and a Silver Lining
As we roll toward the end of 2022, the economic landscape continues to weigh on consumers, and companies who lend to or service those consumers are preparing for what’s to come. Simultaneously, regulatory activity in the debt collection space has also been on a roll as organizations try to make sense of how technology can (and should) be used to innovate the industry. Read on for our take on what’s impacting consumer finances, how consumers are reacting, and what else you should be considering as it relates to debt collection in 2022 and beyond. What’s Impacting Consumers? It’s a no-brainer that inflation and higher interest rates are hard on consumer finances, and unfortunately, we’re not seeing them come back down to earth very quickly. These two factors compound to make it more expensive to be a consumer and harder to acquire credit needed to make ends meet. A report by Bank of America found that a large majority of workers (71%) feel their pay is not keeping up with the cost of living. And that cost keeps rising. The consumer price index rose 0.4% in September, up 8.2% from a year ago, driven by increases in food and shelter costs, and despite falling gas prices. This unrelenting upward-cost march brings the threat of financial instability to many Americans as their money doesn’t get them as far as it used to. According to a recent LendingClub report as of August, 60% of Americans were living paycheck to paycheck, up from 55% last year. Interest rates keep going up, and they haven’t hit the top yet. In September, the Federal Reserve announced the third consecutive rate hike of 75 basis points (the fifth rate hike of the year) and signaled additional aggressive hikes ahead, landing the federal interest rate at 3-3.25%. These interest rates can cause economic pain for millions of Americans by increasing the cost of borrowing for things like homes, cars and credit cards. Household net worth, which was previously holding steady, proved to be a lagging indicator that has now corrected and caught up with the market. The value of equity holdings dropped $7.7 trillion and the value of real estate held by households only increased $1.4 trillion, softer than recent increases as higher borrowing costs suppress demand. The Fed's Financial Accounts data issued in September reflected the largest quarterly loss in household net worth ever at a staggering $6.1 trillion in the second quarter. This comes after falling $147 billion in the first quarter, but the second consecutive drop was much more telling. According to the New York Fed’s Quarterly Report on Household Debt and Credit, total household debt increased by $312 billion (or 2%) during the second quarter of 2022, and balances are now more than $2 trillion higher than they were before the pandemic. Indicators and a Silver Lining With prices increasing faster than income can keep up, consumers are covering the delta by pulling money from savings or putting expenses on credit cards, and it’s showing - consumer debt, including credit cards, is at an all-time high for the bottom 90% of US households. Credit card balances saw their largest year-over-year percentage increase in more than 20 years, adding $46 billion in the second quarter. High interest rates make credit cards a slippery slope for debt balances, and the latest interest rates have been over 20% for those with “good” or “fair” credit (FICO labels “good” credit scores between 670-739 and “fair” between 580-669). Rising credit card balances aren’t the only thing to watch. Looking at month over month delinquency rates shows that consumers’ ability to repay is diminishing and they may be losing control over their debt. According to Experian’s Ascend Market Insights Dashboard from August, the end of Q2 saw 0.91% of consumer accounts rolling into higher stages of delinquency in July 2022, an increase from the month prior. There was also an uptick in 30+ delinquency rates in July, with 30+ day past due accounts increasing 7.33% month over month. And, collections and charge off rates for auto leases, personal loans and bank cards are higher than pre-pandemic. Amidst all the economic gloom, there was a silver lining for many borrowers in the form of student loan forgiveness. In August, President Biden announced a student loan forgiveness of up to $10,000 for borrowers (or up to $20,000 for Pell Grant recipients). The New York Fed estimated that forgiving $10,000 per borrower would eliminate student debt for 11.8 million borrowers, or 31% of the total number. While this forgiveness may impact those borrowers significantly through credit score increases or stronger balance sheets, it likely won’t have as much impact on borrowers with higher balances as monthly obligations will remain. This is an ongoing initiative that is subject to change, and in the meantime, the COVID-19 pandemic-related program that paused federal student loan payments will end at the end of this year. Any borrowers with remaining balances after debt forgiveness must start making payments again in January. Increased Regulatory Activity In addition to announcing that they are mobile-first to align with consumer use trends, the Consumer Financial Protection Bureau (CFPB) has been busy this quarter with initiatives to protect consumers including around the Unfair and Deceptive Acts and Practices Act (UDAAP), credit reporting, and a closer look at Buy Now, Pay Later (BNPL). Data and tech are a key focus. In August, the CFPB first announced that digital marketers who are materially involved in developing content strategies for businesses subject to CFPB regulation can face UDAAP liability for unfair, deceptive acts or practices and other violations. The very same day, they took action against a financial company for using a faulty algorithm that caused consumers to overdraft their accounts - underscoring their interest in “black box” algorithm decisioning. The next day, the CFPB published a circular about requirements to safeguard consumer data, specifically citing practices that “are likely to cause” substantial injury like inadequate data security measures. And data concerns extend into BNPL. After first opening an inquiry into BNPL in December 2021, the CFPB in September issued a report that identified several competitive benefits of BNPL loans over legacy credit products, but also identified potential consumer risks: discrete consumer harms (i.e., a requirement to use autopay), data harvesting (i.e., lenders’ use of consumer data to increase the likelihood of incremental sales), and borrower overextension. While the CFPB supports innovation in financial services that benefits consumers, their recent announcements make it clear that organizations that do not protect consumer data and use it fairly will be in violation of the UDAAP. Lenders and debt collectors should keep an eye on this area as the CFPB continues to examine and form opinions on data and tech in consumer financial services. Also noteworthy in debt collection regulations: In September, the U.S. Court of Appeals for the Eleventh Circuit dismissed the Hunstein opinion, which is big news for the industry. While debt collectors initially breathed a sigh of relief, there might be more to come here in state courts. Debt collectors should proceed cautiously when changing their policies, processes and procedures in light of this ruling. What Can You Do? So here we go into Q4, or as many consumers see it, the spending season. Will holiday spending take a huge blow from the challenging financial landscape? Will consumers rely even more on credit cards or BNPL to help cash flow and spend just as much? We’ll soon find out, but as a lender or collector, there are steps you can take to prepare: Make sure your practices are compliant. Compliance in debt collection is a huge undertaking and will continue to evolve, and the patchwork of federal, state and regional guidelines may get messier. For a good snapshot of what compliance looks like today, check out our Collections & Compliance page. Cater to the distressed borrower in collections. Cash-strapped consumers will need affordable options if you hope to recover past-due debt. This could be options for longer payment plans for more affordable installments, deeper settlements for payment plans, ability to “pay what you can” toward your debt, or removing minimum payment requirements. Remember that consumers are humans. With feelings, problems, lives and a whole lot of other financial obligations. Engaging with distressed borrowers can be difficult, especially when they aren’t able to pay. Kindness, patience and understanding will go a long way in these efforts. Consider a humane, digital-first approach to align with their preferences. TrueAccord can show you how.
Top Five Compliance Questions Answered by TrueAccord Compliance & Collections Professionals
Whether you’re a startup or an established organization, understanding the laws and regulations that apply to debt collection can be overwhelming. Compliance is always evolving as new laws and regulations are passed, new technology is introduced, consumer preferences shift, and court decisions or regulatory guidance suggest modifications to best practices. Fortunately, the knowledgeable team at TrueAccord is here to help break down some of the top questions around compliance in the collections industry. The Questions: What are the major regulations lenders need to know about?What are the consequences of non-compliance?What kinds of businesses need to comply with these regulations?What are the top challenges that you see ahead for compliance in collection?What keeps a legal or compliance professional in collections up at night? We asked some of the TrueAccord compliance professionals to provide insight to these top questions.* *This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter 1. What are the major laws and regulations lenders need to know that govern debt collection (and debt collection service providers)? Steve Zahn [SZ]: Right off the bat, obviously the Fair Debt Collection Practices Act, or the FDCPA, is the major law lenders need to know about for debt collection. There are also some similar state laws, but the FDCPA is the big one that governs debt collection activity. Kelly Knepper-Stephens [KKS]: The CFPB just finished a rulemaking in 2021 related to the FDCPA, referred to as Regulation F, in an effort to modernize and work through some of the issues that occurred and played out in the courts over the last 45 years since the FDCPA took effect. The TCPA—the Telephone Consumer Protection Act—is another law that impacts debt collection. It doesn't just regulate phone calls. It also regulates text messaging and it regulates leaving pre-recorded messages for consumers. So it's important to be aware of how that impacts the types of consumer communications that a business will be using. Lauren Valenzuela [LV]: One of the most important laws that sometimes gets overlooked is the Dodd-Frank Wall Street Reform and Consumer Protection Act. This is what created the Consumer Financial Protection Bureau, the CFPB. It's also what created what we know as UDAAP—Unfair, Deceptive, or Abusive Acts or Practices. The CFPB gets its UDAAP authority from that particular law, and it also gave the CFPB authority to interpret and make rules for the Fair Debt Collection Practices Act.There are other laws that impact our work as well, such as the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, Electronic Signatures in Global and National Commerce Act, known as the E-Sign Act, among others. Leana Lares [LL]: Additionally, if a business is working with consumer personally identifiable information, private information, then they should definitely know about all of the different federal and state privacy and data security laws. 2. What are the consequences of non-compliance? LV: Consequences of non-compliance are very vast. Non-compliance can lead to increased consumer complaints. It could also lead to enforcement by state or federal regulators, which could result in fines and penalties. It could result in consumer litigation. Non-compliance can also jeopardize an agency's collection license and ability to conduct business in a particular state or locality. But most importantly, the consequences of non-compliance is erosion of consumer trust and also your client's trust. So compliance is incredibly important for everybody and especially for us here at TrueAccord. SZ: In litigation, penalties can include: (a) statutory damages, e.g., up to $1,000 for the FDCPA or $500-$1,500 per violation for TCPA; (b) actual damages, e.g., physical manifestations that are the result of emotional distress; and/or (c) punitive damages, if the conduct is so outrageous or intentional that it gives rise to addition damages designed to punish. In addition, the court or regulatory agency can award costs and attorney fees to the prevailing party and can also enter an order prohibiting or requiring certain conduct in the future. Finally, regulatory agencies have the ability to order disgorgement of funds collected and/or an award of damages to the agency itself. 3. What kinds of businesses need to comply with these regulations? LV: Third party debt collectors need to comply with these laws and regulations, and sometimes so do servicers and first party debt collectors in some form or fashion. For example, creditors are exempt from some of the laws, such as the federal FDCPA, and sometimes they're not (such as the case with some state debt collection laws). So it really just depends on the specific law, but needless to say, everyone should really be aware of the laws and regulations that apply to this particular type of line of business. Because even if you don't have to follow it, sometimes there's a lot of best practices that can be found in these laws and regulations as well. KKS: Not just debt collectors. It really depends on the type of work that a particular business conducts and whether or not a statute covers that conduct. For example, the TCPA governs entities making phone calls, sending text messages, or leaving pre-recorded messages for consumers, so it regulates any entity, public or private, using these forms of communication. For the FDCPA, it regulates the collection of a debt, so a business needs to look at what is the definition of “debt” and are these accounts “debts” under that definition. As well as, whether the activities of the business fall under the statute's definition of a “debt collector” or any of the exemptions? 4. What are the top challenges that you see ahead for compliance in collection? LL: Some of the top challenges that we see ahead in compliance definitely has to do with the ever-changing landscape of our industry. For example, consumer privacy laws are popping up everywhere. Here in the United States, many of the privacy laws borrow aspects of the GDPR. California adapted their privacy law, the California Consumer Privacy Act (CCPA), to mirror the concept of transparency and granting individuals new rights over their personal information. We are seeing many different states implement privacy laws and all the different states have different rules (e.g., California, Virginia, Utah, Colorado, Connecticut). Some of them parallel each other, some of them are drastically different. So it's very important to keep up with all of these things, and TrueAccord does a great job of that. LV: We're seeing compliance professionals have to partner more and more with information security. It's not a challenge so much as an area where I think compliance professionals in the industry are really going to have to increase their knowledge and competencies in the information security discipline. Also, making sure that they're just staying ahead of the curve when it comes to best practices with cybersecurity and data privacy. We need information in order to conduct our business and to do it effectively;so making sure that you have all the necessary safeguards in place is of paramount importance. Another top challenge for the collections industry at large is figuring out how to best use machine learning (a subset of AI)—not only learning how to use it, but also how to mature your compliance management system (CMS) so that it accounts for your use of it. If you're using any type of analytics or algorithms, or if your service providers are using any type of analytics or algorithms, you need to evaluate your CMS to make sure you have proper oversight of that technology. 5. What keeps a legal or compliance professional in collections up at night? KKS: Uncertainty with changing regulatory rules. It’s relatively easy to provide legal and compliance advice when you have clear rules of the road. But when there are statutes with different interpretations, regulators with different approaches, or a patchwork of differing court opinions on a given topic it is more challenging. LV: The ability for a company to stay nimble while avoiding compliance fatigue. You have to be a cheerleader for compliance and keep up the energy, make sure everybody understands their compliance obligations so that they can adapt to it and operationalize it. Sometimes there can be ambiguity in the application of a certain law or a regulation to a particular set of facts or a particular technology or system. We often need to create clarity from ambiguity, while also doing what is best for consumers, what's best for business, and lead the way in creating best practices when there may be ambiguity. SZ: As an Associate General Counsel at TrueAccord, not much keeps me up at night. We have a tremendous system, compliance program, and corporate culture of compliance and striving to be polite and friendly with consumers. Learn more in Compliance & Collections Resource Center or schedule a consultation today!
The Future of Collections & Compliance: A Conversation with TrueAccord’s Associate General Counsel and Director of User Experience
Delivering communications to your customers has always been a compliance challenge with the plethora of laws, regulations, court decisions, and regulatory guidance in the debt collection space. Today with more communication channels available and regular communication from debt collection regulators—via consent orders, compliance bulletins, supervisory highlights, and even press releases—your compliance management systems and design must be flexible and easy to update. To get expert insights on the newest compliance issues and opportunities that need to be front of mind when sending digital communications to effectively engage your customers, Associate General Counsel Lauren Valenzuela and Director of User Experience Shannon Brown teamed up to discuss the Future of Collections & Compliance in TrueAccord’s latest webinar. Watch the full webinar on-demand here»» Below are some of the key takeaways from their discussion, plus attendee poll results on top compliance questions. *This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter. The Current State of Compliance Lauren Valenzuela [LV]: Needless to say, over the last 10 years the CFPB has fundamentally changed how we think about and approach compliance. That has really influenced our industry and how we think about communications in debt collection. LV: Over the last decade the CFPB has taught us that compliance is an evolving thing. It's not something that you can set and forget. It is something that is dynamic and that must constantly evolve and mature in order to be effective, because our environment is constantly changing. Attendee Poll Question: What is the biggest compliance issue you face when trying to engage with your customers? Changing Consumer Preferences for Collection Communications LV: The CFPB recently published a blog and shared that it is a “mobile first” agency, meaning that most people who visit its website are using mobile devices or smartphones. Here at TrueAccord, what does our information show about mobile usage? Shannon Brown [SB]: Consumer mobile use has skyrocketed. In 2016, about a quarter of our consumers were using their phones to read emails and visit our website—and that number has increased to consistently above 80%. We've put a lot of effort into making sure our emails and website are responsive to make sure we're meeting the needs of our consumers who are overwhelmingly on mobile. We've made sure our pages are able to load faster for consumers that have less stable cell connections and really made sure our interactive elements are big and optimized for tapping with a finger instead of clicking with a mouse. As far as communications, our consumer research has really shown that most consumers don't answer the phone and want to be contacted through digital channels—they want a multi-channel experience. LV: So we're seeing consumers increase use in mobile phones. Even the Bureau has seen that, and we're seeing banks increase their use of digital technologies to communicate and facilitate transactions and engage with their consumers as well. What’s the Role of the Legal Team in Your Collections Strategy? LV: There needs to be a partnership between compliance and pretty much all core functions, and especially at a fintech company like TrueAccord where our technology and our digital communications platform are the center of what we do to help consumers. It's really neat to see compliance interwoven, and I think that's reflective of its compliance management system and company culture. Compliance Management System Evolution LV: Ten years ago, many collection agencies were likely in the undisciplined stage, where there was some type of compliance ongoing, but it didn't have much structure—processes may be undocumented, potential exposure to vulnerabilities that expose themselves on lawsuits, for example. The next iteration is reactive, meaning there is development of some policies and procedures, controls are identified, and the company is responding to issues and incidents reactively. The next level is calculative. At this level, leadership is actively engaging the organization in compliance, risk assessment processes are maturing, corrective action plans are being developed and executed to remediate deficiencies. This next level is proactive, meaning employees are trained and following clear policies and procedures, and such procedures have built in intentional redundancies. The organization is being proactive in identifying and responding to issues and incidents and is self-identifying deficiencies and essentially executing on comprehensive corrective action plans. Generative means that there's continuous improvement towards challenging goals, which are driven by data analysis. There's critical evaluation of policies and procedures and controls, and risk is integrated in operations. Issues and incidents resolutions are driven by stakeholders and really enhanced controls. Attendee Poll Question: Which category does your Compliance Management System (CMS) fall under today? LV: So no matter where you're at within your compliance management system and no matter what maturity level, the important thing to remember is that you don't have to stay there—you can evolve. We can't stress this enough. Compliance is an evolving and dynamic thing, and should be constantly evolving to stay effective in whatever environment it is in. The fact that TrueAccord has a well-oiled compliance management system allows us to study that climate and then figure out how to translate it and make tangible improvements in our consumers’ experience. That's something we encourage everyone to do: think about the consumer experience and the environment you’re collecting in, because it looks remarkably different than it did five years ago for example, and we should all be evolving. The Product Perspective LV: How has the CFPB influenced how we develop our products here at TrueAccord? SB: Compliance has been built into our product development life cycle. Besides frequent meetings with our compliance team for feedback and approvals throughout the life cycle, we've designed and built our product so we can be nimble in responding to regulatory changes, which we know happen a lot. LV: There are numerous federal, state, and local laws. Can you give some insight into how we at TrueAccord keep up with all of that? SB: One of the ways we efficiently keep up with the requirements is through our code-driven approach. But what does that mean practically? It means, for example, that for any phone call coming in, our agent knows exactly what disclosures need to be given to that consumer via our system, and then gives them an opportunity to log it. It means that any email that goes out has all the necessary disclosures appended, such as out of statute disclosures, state disclosures, et cetera, and these are all kept in our code base. Not only does it take the guesswork out of the equation for our agents and our content team that's sending communication, it reduces human error. It also means that anytime anything needs to be updated, for example, a wording in a disclosure or when a new disclosure needs to be added, we can do it in one place instead of across a variety of templates and areas of the website. We can do it in one place and then that change propagates throughout the system. This helps us to react to changes really quickly. Our compliance team is involved in every aspect of the process. They start as educators for the whole product team—we're all aware of regulatory considerations and know where and when we need to ask for feedback and approvals from our compliance team. So they aren’t just making sure that agents are acting compliantly, but that the product team has that knowledge as well. And as a product team, we have this wonderful research function that's constantly talking to consumers and trying to understand their needs and asking for feedback, which we share with our compliance team so that they can go and advocate for consumers when they are talking with regulators and legislators Future Forecast: Where is Compliance Heading in the Collections Industry? LV: The next iteration of compliance can be seen in some of the recent CFPB and FTC activity. Last year in 2021 for example, the CFPB published a new section of its supervision and examination manual, specifically an information technology focused compliance management review section. The Bureau is looking at any type of technologies that you may employ, like machine learning models, algorithms, or analytics. If you're using any kind of algorithms or machine learning to help inform any aspect of your collection strategy—or if any of your service providers are using any type of algorithms or machine learning to help provide a service to you—you must pay attention to this section of the manual because it's incredibly informative. We're seeing the CFPB and the FTC addressing companies’ use of data and technology, wanting to make sure that companies have proper governance and oversight of it. All of this recent activity shows how compliance within any company, more than ever before, must really take a cross functional approach to its work in order to keep up with the evolving environment. The compliance function should not be siloed. It really needs to be in partnership with all different disciplines and functions within the organization. We're seeing right here and now and into the future, your information technology professionals, your information security professionals, your product professionals, your engineers, your data scientists, anybody who looks, touches, thinks about data and technology should all be working with compliance Attendee Poll Question: Which of the following are you most interested in for the future of compliance and collections? Three Key Takeaways LV: Compliance is more than a department, it's more than a program, it's more than a system. It should be part of an organization's cultural DNA. So when you think about compliance, wherever you are within an organization, think about how you can make it part of your organization's DNA. SB: Concentrate on building your tools to be nimble to the regulatory changes. Things like the design systems and the component libraries that allow you to make those changes quickly and easily, and make sure that they're made everywhere across the system so you don't have those older disclosures hanging out somewhere that someone forgot to change. Build your tools so you can make changes in one place efficiently. LV: As our environments get more sophisticated around us, compliance professionals need to collaborate cross functionally more and more with other disciplines within a company to be effective and stay ahead of the evolution.The more the industry uses data and technology, we have a responsibility to make sure that it is being used in accordance with the law and best practices. Have more questions about compliance in collections? Schedule a consultation with TrueAccord to learn more»»
Patchwork of Compliance Regulations
Anyone working in the collections space should be familiar with the federal Fair Debt Collection Practices Act (“FDCPA”) and its regulation, Regulation F; but did you know that there are multiple debt collection laws and regulations at the state and local level too? State and local laws and regulations often mirror aspects of the FDCPA, however, there are a handful which are remarkably different from the FDCPA. In fact, the FDCPA makes clear that it is not designed to “annul, alter, or affect, or exempt any person” from “complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of [the FDCPA], and then only to the extent of the inconsistency” (refer to 15 USC § 1692n). The FDCPA goes on to clarify that “a State law is not inconsistent with [the FDCPA] if the protection such law affords any consumer is greater than the protection provided by [the FDCPA].” Therefore, debt collectors collecting nationally have to grapple with and reconcile a patchwork of federal, state, and municipal debt collection laws and regulations when collecting in multiple states. It is no simple feat to build and maintain a compliance program which keeps a debt collector in compliance with this patchwork of differing and competing debt collections laws and regulations. Debt collectors take different approaches to stay in compliance—from training their collectors on each and every state law and regulation, to deciding not to collect all together in a particular state/locality. Ten years ago when I first started in the industry, I remember compiling a job aid of all the state and local laws debt collectors had to remember and abide by—it was long and nuanced. For example, the FDCPA explicitly permits debt collectors to speak to a consumer’s spouse without such communication resulting in a third party disclosure (see 15 USC § 1692c(d)), whereas some states such as Arizona and Connecticut are silent on this issue and other states, such as Iowa, consider spouses as third parties. In those states, a consumer must provide their consent in order for a debt collector to speak with their spouse. Another example is communication frequency limitations. While Regulation F provides parameters for call frequency (i.e., calls made in excess of 7 times in a 7 day consecutive period, and calls within 7 days of having had a phone conversation, are presumed harassing), Massachusetts has an entirely different call frequency regime. Massachusetts outright prohibits debt collectors from engaging any consumer in a communication by phone (i.e., calls and texts) more than twice in a 7 day period. While these phone restrictions are similar, they are nuanced nonetheless (e.g., one applies only to calls while the other applies to calls and texts; one in a presumption of harassment and the other is an outright prohibition, etc.) These are just a few examples to illustrate how there may be little distinctions and differences between the FDCPA/Regulation F and state/local laws. In an effort to simplify how many rules debt collectors have to learn and abide by, some debt collectors design and adopt policies which reconcile as many of the laws and regulations as it can for a particular topic. For example, choosing to adopt the strictest law/regulation as a company policy so that it applies across the board is one strategy some companies may adopt. While this approach will help a debt collector meet or exceed a state law requirement, this approach can unnecessarily limit a debt collector’s ability to communicate and/or collect in more places than necessary, thereby undermining those state economies that have no such restrictions. While the patchwork may seem daunting, this is an area ripe for compliance innovation—where technology can be leveraged to automate controls and guardrails. For example, instead of requiring debt collectors to memorize multiple state laws/regulations, controls can be designed to automate guardrails for state laws in a collection system. Here at TrueAccord, compliance has a close partnership with its product and engineering teams, to help leverage technology when laws and regulations are introduced or changed. While technology will not replace a compliance monitoring team, it has the potential to increase the efficiency and efficacy of any human monitoring by helping front line agents understand their state by state requirements and compliance teams focus their auditing and monitoring efforts. *Lauren 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.
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.
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.
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.
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.