In December 2017 Bloomberg posted this infuriating story about a man who was hounded by phantom debt, and how his crusade took down a Bad Guy (recently sentenced to almost 17 years in prison). It’s a captivating story with a happy ending, but one quote really caught my eye:
Therrien says he paid back the debt promptly. He was offended by the Lakefront woman’s suggestion that he was a deadbeat. “I’m a person who believes in personal friggin’ responsibility,” Therrien tells me. “I signed an agreement. And I fulfilled my obligation.”
This quote demonstrates one of several key misperceptions of consumers in debt. It’s something I like to call “subprime blindness”, a deep seated lack of understanding of and empathy for the consumer’s experience, motivations, and psyche, and it has wide ranging effects on our ability to start, fund, and scale solutions for the debilitating debt problem in developed markets.
Subprime blindness usually takes one of two forms: on one hand the condescending “it would never happen to me” approach, looking down on people in debt. This group thinks of debtors as morally inferior, deficient people choosing to remain in debt. The other is complete disregard of the reason most people are in debt, assuming everyone can afford to pay their debts if they were only afforded a convenient way to do so. Many investors I talk to have a story about debt, usually missed copay or some lingering internet subscription. To the well off it’s clear that they, and everyone they know, would pay if they just got a polite message.
Neither approach is correct. The majority of consumers end up in debt because they lost a job, had a medical emergency, or experienced another significant life event. These are not careless spenders or malicious consumers who couldn’t care less about their debt. They are often trapped and are doing the best they can given dire circumstances. Subprime blindness stigmatizes being in debt and hampers any ability to offer long term solutions that improve financial health and build equity.
This is what TrueAccord is solving. Radically changing debt collection is just step one. Our product relies on a radical—yet simple—alternative to Subprime Blindness: that consumers in debt are experiencing a temporary difficulty, and treating them like valuable customers will not only lead to better debt collection results, but will also help them build equity to eventually exit the cycle of debt.