Recent regulatory activity makes it clear: regulators care as much about consumer preference in debt collection as creditors. In this blog post, Kelly Knepper-Stephens, TrueAccord’s VP Legal & Compliance, highlights the recent laws and regulations designed to protect consumer preferences in debt collection.
At a time when consumers’ power to impact a lender has increased dramatically, Klarna made the decision to outsource 1,005 of its debt collection activities. Jan Hansson, Vice President Debt Collection for Klarna, recently explained the reasoning behind that decision in TrueAccord’s recent webinar, Digital Debt Collections 101.
Jan explained how Klarna manages brand image with its collection partners, using “soft value metrics” to evaluate success, such as the number of consumers who return to use Klarna after having been in debt collection on a Klarna product. The fact that consumers return to Klarna after being in debt collection demonstrates that collections can be a positive process. Jan emphasized the importance of ensuring that debt collection is aligned with your total customer journey “so that any debt collection continues to build on your positive brand image.”
Honoring a customer’s debt collection preferences is the key. As Ohad Samet, founder of TrueAccord stated in Digital Debt Collections 101, “customers want to be contacted at the time and place and channel that is convenient to them…they would like to be in control of that.”
Federal and state lawmakers, who continue to pass laws and regulations designed to protect consumer preferences in debt collection, share the same consumer preference mindset of creditors like Klarna. A quick look at the most recent federal activity showcases this fact.
The CFPB’s Debt Collection Rule
On November 30, 2020, the Consumer Financial Protection Bureau (CFPB), published Regulation F, the first attempt to refresh the Fair Debt Collection Practices Act for modern communications. Debt collectors and creditors have until November 2021 to align their processes to these new rules, which are chock-full of efforts to protect consumer preference including:
• Requirements to uphold and pass on consumer requests to stop calls, not be contacted at certain times, and not be communicated with at particular locations (home, work, etc.)
• Steps to identify a consumer’s location to ensure communications occur between 8AM – 9PM, including when a consumer’s zip code and area code suggest different time zones
• Requirements for clear and conspicuous ways to unsubscribe from text messaging, emails, and other forms of digital communications
• Frequency restrictions, not just for calls, but for the frequency of contact efforts in the entire outbound communication strategy.
Fortunately for TrueAccord, our digital debt collection strategy was built for consumer preference and already meets most of the rule’s new requirements. As Ohad mentioned in the webinar, 96% of all TrueAccord communications are automated, and the other 4% are inbound communications, which makes our Customer Engagement team a customer care center.
The TRACED Act
In response to continued consumer complaints and pressure over unwanted robocalls, Congress passed the Pallone-Thune TRACED Act in 2019 to deter and punish robocall abuse. The law required the FCC to adopt and publish regulations that “help protect a subscriber from receiving unwanted calls or text messages from a caller using an unauthenticated number,” which the agency did in late 2020. The provisions of the TRACED Act and its implementing FCC regulations ultimately aim to increase consumer choice options mostly around the ability to identify and block unwanted calls by:
• Requiring carriers to implement the call authentication framework of STIR/SHAKEN which allows the consumer to identify the identity of an inbound caller;
• Requiring carriers to implement a reassigned number database so that companies can determine, in advance of calling, whether a given phone number for a consumer has been reassigned to a different person.
We are just now beginning to see companies, including telephone carriers, announce their compliance practices to implement these FCC Orders. For example, contact center platform service provider Twilio, headquartered in San Francisco, recently announced updates to their terms of service and acceptable use policy. At least one carrier, T-Mobile, has gone as far as to ban debt collection text messages as reported by InsideARM.
As lawmakers and lenders focus on consumer preference, successful debt collection compliance programs must incorporate consumer preferences into their practices not only to meet the new regulatory requirements, but also to provide a positive customer experience that consumers expect.