It’s already been a busy summer for the Consumer Financial Protection Bureau (CFPB)—Supreme Court rulings, fine print warnings, new registries, and more—all in the continued effort to better protect consumers’ financial health and wellbeing. 

Before we dive into the latest CFPB news, let’s have a refresher on what this bureau is and why it is so important:

The Consumer Financial Protection Bureau, or CFPB, was formed in the wake of the 2008 financial crisis, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, with a mission to implement and enforce federal consumer financial law by holding companies accountable from industries such as payday loans, credit cards, student loans and mortgages.

With this mission in mind, let’s take a closer look at the CFPB news round-up so far this summer and understand its impact for consumers, businesses, and the economic landscape.

Supreme Court Rules and “the CFPB is Here to Stay”

The long awaited United States Supreme Court decision on the CFPB came out May 16, 2024: the CFPB is constitutional.

This constitutionality case was brought by representative groups of the payday loan industry, the Community Financial Services Association of America and the Consumer Service Alliance of Texas, alleging that the CFPB’s funding mechanism is unconstitutional under the Appropriations Clause.

Pundits expected a different outcome from this conservative majority court. In a 7-2 decision, one of the most conservative, Justice Thomas, wrote the majority opinion for an alignment of liberal and conservative Justices (Thomas, Roberts, Sotomayor, Kagan, Kavanaugh, Barrett, and Jackson), stating that the CFPB’s funding mechanism is constitutional since the Bureau draws its budget through the Federal Reserve, rather than an annual appropriation by Congress.

Since the CFPB operates as a consumer watchdog agency funded by the Federal Reserve System, not Congress, the Bureau’s funding mechanism is meant to safeguard the agency’s funding against changes in the political climate, unlike most other federal agencies. Instead, it obtains its funds by making a request to the Federal Reserve, which may not exceed 12% of the Federal Reserve’s “total operating expenses.”

Upon receiving the news, the CFPB issued a statement: “The Court repudiated the arguments of the payday loan lobby and made it clear that the CFPB is here to stay.”

The Fine Print: CFPB Warns About Financial Services Contract Terms

Then on June 4, 2024, fresh off the Supreme Court victory, the CFPB issued a new circular on “unlawful and unenforceable contract terms and conditions in contracts for consumer financial products or services.” 

This latest warning now makes it clear that it is a UDAAP (Unfair, Deceptive, or Abusive Acts or Practice) to have an unlawful, unenforceable term in contracts with consumers. These types of consumer contracts can also be perceived as an attempt to confuse people about their rights—such as the general liability waiver, which claims to fully insulate companies from suits even though most states have enacted legal exemptions to these waivers. 

When financial institutions enact this fine print tactic to try to trick consumers into believing they have given up certain legal rights or protections, they now risk violating the Consumer Financial Protection Act.

“Federal and state laws ban a host of coercive contract clauses that censor and restrict individual freedoms and rights,” said CFPB Director Rohit Chopra. “The CFPB will take action against companies and individuals that deceptively slip these terms into their fine print.”

This latest warning is part of the CFPB’s broader efforts to “ensure freedom and fairness in people’s interactions with financial institutions.”

CFPB Creates Corporate Offender Registry 

In this continued effort, CFPB also finalized a new rule in June to establish a registry to detect and deter corporate offenders that have broken consumer laws and are subject to federal, state, or local government or court orders. 

Initially proposed in December 2022, the registry will also help the CFPB to identify repeat offenders and recidivism trends. Historically, nonbank entities faced inconsistent oversight, making it challenging for regulators to identify and address potential risks to consumers. The registry will help the CFPB and other law enforcement agencies monitor and track repeat offenders in order to better hold them accountable if they break the law again.

“Too many American families have been harmed by corporate repeat offenders in a rinse-and-repeat cycle of illegality, where bad actors see fines and penalties as the cost of doing business,” recounts CFPB Director Chopra. 

Larger non-bank participants will be among the first block of registrations due January 14, 2025, with other companies under the umbrella having until April 14, 2025, followed by July 14, 2025 to register if they have been caught violating consumer law previously. 

A Bureau news release on June 3, 2024 emphasized that “reining in repeat offenders is a priority for the CFPB,” as they introduced not only the new rule and registry, but also the establishment of the new Repeat Offenders Unit.

“In the United States, it is common practice to establish registries of offenders to protect the public and to help prevent repeat offenses,” explains Director Chopra. “The CFPB’s registry will enable the agency to more effectively monitor the marketplace for companies that pose particular risk to consumers.”

Upholding Its Designation as the “Consumer Watchdog” 

All of these announcements and actions over the last few weeks prove that the CFPB is still upholding the Bureau’s mission of protecting consumers and ensuring that all Americans are treated fairly by banks, lenders, and other financial institutions. Its reputation as the “Consumer Watchdog” continues to be well-earned as the economic landscape evolves. 

Sources:

• https://www.consumerfinance.gov/ 
• https://www.supremecourt.gov/opinions/23pdf/22-448_o7jp.pdf
• https://www.consumerfinance.gov/about-us/newsroom/statement-on-supreme-court-decision-in-cfpb-v-cfsa/ 
• https://files.consumerfinance.gov/f/documents/cfpb_circular-2024-03.pdf 
• https://www.acainternational.org/news/cfpb-releases-warning-on-financial-services-contract-terms/
• https://www.consumerfinance.gov/rules-policy/final-rules/registry-of-nonbank-covered-persons-subject-to-certain-agency-and-court-orders/ 
• https://thehill.com/business/4700536-consumer-watchdog-creates-corporate-repeat-offender-registry

It’s not easy to make customers happy when you are trying to collect a debt from them, but customer satisfaction is an important component when servicing consumers, even in debt collection. Low customer satisfaction reduces collection rates, increases complaints, and adds to legal exposure. The old days of hitting consumers over the head, metaphorically, with aggressive phone calls is over. There are a few key ways you can turn around customer satisfaction in your collections business to see better results.

Why Is Consumer Satisfaction So Low?

Within the collections industry, most consumers are angry, frustrated, and even downright unhappy with the service they get from collections companies. Initially, this can seem that these individuals just do not want to pay the bill. Yet, more than often, it is the result of being unable to communicate their needs. Or, they feel as though the person on the other line isn’t listening to them. Sometimes, repetitive phone calls or a lack of information between two parties calling the customer leads to this type of turmoil. Pitting collectors with aggressive quotas against consumers in debt isn’t helping, either – and evidently, most compliance violations and complaints come in at the end of the month, when collectors are most stressed out.

First, Consider What’s Happening Around Them

You cannot make excuses for your customers. You cannot look the other way because they are having a financially tough month. However, it is important to understand what is happening around the customer that could be making hardship difficult. For example, are they struggling due to economic factors in their community or the country as a whole? Understanding why they are where they are can be valuable in helping you to offer a solution that fits their situation.

Improve Your Platform

Are you using the latest technology and resources to help you connect and remain connected with your customers? It is very common to find yourself unable to provide for the needs of the consumer if you have not done this. And, this can help to improve not just how satisfied your customers are, but also the company’s bottom line.

For example, are you able to offer a customized collection process that fits the needs and the behaviors of your clients? Do you need to update your solutions so you can allow your customers more flexibility, more insight, or even the ability to make a payment online? Does your system limit the amount of information that can be shared between parties, making it hard for you to meet your customer’s goals of being able to speak to someone who understands their situation every time? What could more data do to help improve your business and give your team better insight into your customers?

Take the time to consider what changes could help improve customer satisfaction within your organization. In many situations, making a change in the way you empathize with your customers as well as understand their needs, can help to improve the experiences you are having.

Learn more about the options and opportunities available to you today. When you do, you are sure to find a wide range of opportunities available to make small improvements that can create a better outcome for every customer.

Has your organization made the move to digital? It’s one of the most important transitions you can make today within any business and any industry. In the collections industry, digitalizing your company means a lot of change in the way you do things, but also in the tools, you can provide.

You may understand what digital collections mean for your business – it means more data and more managed control over your operations. What does it mean for your customers, then?

Your Customers Want a Digital Collection Agency

Be realistic here. How much money do you spend having people call and speak to voicemail? How many frustrating conversations happen that could be resolved with just a bit of a better method to improve communication? One of the things today’s consumers want is the ability to be reached digitally. How many of your customers appreciate threatening phone calls? Even if you consider how valuable this type of conversation can be, you know it doesn’t always lead to results.

Now, think about your consumer a bit closer. You have a large and growing base of millennials, in most cases. This group of people uses phones for anything they can handle online. Imagine, for a moment, the millennial. With money in his pocket, he is able to make a payment. Then he finds out he needs to write a check and mail it. Or, the person on the phone wants routing numbers and account numbers. Most millennials don’t have these on hand to simply offer. That person simply doesn’t make the payment because making the payment isn’t easy to do.

What Does This Mean for Your Organization?

In short, by making a few key changes, you can learn to communicate more fully with your customer base. First, allow them to have numerous ways to connect with your company. This includes making payments online, but may also mean using chatbots as well as text messaging for communication. You also want them to be able to handle all of these transactions and needs on their mobile phone – do not rely on them to make time while they are on their phone.

Also, consider the importance of building more empathy into your collections efforts. Having an empathy-based collection outreach program ensures you are providing your customers with respect and dignity. Many customers do not respect threats. They do not respond well to them, especially millennials. However, they are more willing to have a short conversation, talk about themselves and their needs, and to produce results for you. This type of approach benefits your customer but also your business.

It does not have to be difficult to make the switch to a digital collections system. Rather, simply invest the time in learning more about the ways you can improve the methods of communication you offer to your customer base. You may also want to consider the opportunities you have for creating an outreach program that helps to ensure your collections business is working for your customer.

We use machine learning in many ways – to automate our contact strategy, to optimize our offer strategy, and to automate processes. In this podcast, our senior data scientist Aviv Peretz and senior manager of data Sophie Benbenek talk about one example: an algorithm that uses a combination of debt and semantic features to classify and respond to emails we get from consumers.

Business owners and CEOs live and die by top-line growth. Acquiring customers, hitting scale and paying attention to unit economics are all actions that lead to positive cash flow and sustainable business growth. On the other hand, focusing obsessively on your top line and acquisition, while often correct, can leave a lot to be desired on the back end.

Read more from TrueAccord on Entrepreneur.com.

Our CEO, Ohad Samet, spoke to Tearsheet’s Zack Miller about our origin, differentiation, and our priorities for 2019 and beyond. You can listen to the interview on Soundcloud.

A new report from Hiya, a call blocking app, is out and it is grim.

The company says:

As our phones continue to be inundated by robocalls, many people no longer want to pick up the phone at all. Unfortunately, this has led to important calls being missed, such as those from your doctor, your child’s school, the bank, and others. In Hiya’s first State of the Call report, we provide insight into how Americans use their mobile phones on a monthly basis given the rise in robocalls. For example, we discovered that only 52 percent of calls Americans receive on their phones are picked up, which also means that almost half of calls are unanswered. Key findings from the analysis, include phone call behavior, call pick-up rates, call duration, and top business industries calling mobile phones.

The report, which can be found here, goes on to elaborate:

• 70% of calls that are “saved in contacts” are picked up
• 53% of calls identified as a business are picked up
• 38% of calls that are “not saved to contacts” are picked up
• 24% of calls that are not identified are picked up
• 9% of calls identified as spam are picked up

What do these numbers mean for your call and collect strategy? Our clients are calling it a “crisis”. What does your data say?

This is a second post in a series from our in house counsel, Adam Gottlieb.

A couple weeks ago I posted about the three main themes I heard in the public comment forum from consumer advocates, businesses, and trade groups on the new California Consumer Privacy Act (CCPA). I heard from a number of ARM compliance professionals that the themes highlighted provoked discussion on how this law might impact our industry in particular. Today I want to take the discussion further and talk a bit about some of my concerns for how this law will likely add significant complications to your compliance platform.

The California Attorney General’s Office has been hosting a number of public comment forums around the state to hear from consumer advocates, business, and trade groups about the new California Consumer Privacy Act. The Act will require that businesses inventory and map personal data, provide consumers rights to see what data a business has collected, and allow consumers to opt out of data selling or transmission.  If you have a website and interact with any consumers in California, you need to be concerned about the potential impacts of the CCPA to your business.

This law conflicts with state licensing requirements or industry best practices.

Section 1798.105 requires companies to delete a consumer’s information upon request.  In the ARM space collections agencies have both data provided by their clients on consumer accounts placed for collection and data they collect throughout the collections process.  Businesses in the consumer finance space, for example, need to keep this information to demonstrate how they handled the consumer’s account, to prove they followed the various laws regulating the industry, maintain accurate records for their finance departments, and to improve the collections process for consumers and clients.   There is a list of exceptions to the requirement to delete a consumer’s information upon request, in section 1798.105(d). Subsection (d)(7) says you may keep information “To enable solely internal uses that are reasonably aligned with the expectations of the consumer based on the consumer’s relationship with the business” and Subsection (d)(8) says you may keep information to “Comply with a legal obligation.” These provisions are extremely broad and ambiguous. What might be “reasonably aligned” with how a collection agency would use consumer information will result in differences of opinion.  Would a consumer expect an agency to keep a record for state or federal regulators? What about being able to provide a receipt for the consumer months or years later to prove payment on an account? Would a consumer, or even California regulators, agree that another state’s licensing rules that require an agency to keep that consumer’s records for a period of time trump the consumer’s request to delete that information? Without reliable guidance, definitions, or safe harbors this provision will result in disharmony, divergent expectations and likely legal battles.

A new opportunity for bad actors and for corporate espionage

Section 1798.140(c) states that the law applies to any business who 1) Has annual gross revenues in excess of $25,000,000, or 2) Alone or in combination, annually buys, receives for the business’ commercial purposes, sells, or shares for commercial purposes, alone or in combination, the personal information of 50,000 or more consumers, households, or devices, or 3) Derives 50 percent or more of its annual revenues from selling consumers’ personal information.  This provision alarms information security officers in large and small businesses alike.  On nearly every website, each time you visit a site and browse around your IP address is logged by the administrative system for the web page. As written, merely collecting an IP address could count towards the 50,000 threshold to trigger compliance with this law.

A Distributed Denial of Service attack (“DDOS”) is an increasingly common method for bad actors to try and hack into a business database by bombarding the company’s website with hundreds of thousands of web site visits, overwhelming the system and causing it to crash and distracting the company’s administrators and allowing the hacker to get easy access. This creates a scenario where any hacker going after valuable consumer records can add the headache of complying with CCPA. Another unpleasant possibility would be for an unhappy consumer or a competing business to launch a DDOS attack and then sending dozens or hundreds of information requests under the CCPA. Simply search online for “how to do a DDOS attack” and you will find dozens of articles and videos that explain just how easy it is for the average person with minimal technical knowledge to start their own DDOS attack. If your company does any business in California and any IP addresses used in this attack are from a California resident, your company will have to comply with the CCPA for all of your California consumers. These albeit too common scenarios are yet unaddressed in the law.

Client information? Agency information? Who is responsible for what?

Collection agencies must keep detailed records of how and when we communicate with consumers. Whether agents are calling, responding to letters, emailing, or texting, we must know the details of what we discuss to meet our federal and state compliance regulations, improve our chances of collecting on outstanding balances and to inform our clients on the status of their accounts. It is unclear in the CCPA whether an agency would be required to delete this valuable information at the request of a consumer. As written, the results of skip tracing could be considered personal information and if an agency is required to delete current addresses or respect an opt-out for using this information it is impossible to provide legally required disclosures to consumers. A likely unintended consequence may be more creditors choosing to sue clients than facing the legal uncertainty posed by the CCPA.

An issue raised by the CCPA particular to collections is there is no clear delineation between whether the client or the collection agency bears the responsibility for honoring a consumer request to opt out or to delete information. It is common for a consumer to communicate with both the creditor and the agency where the account is placed while the account is in collections. If a consumer tells the creditor that they are opting out and want their information deleted, does the creditor have to respect that request even if it makes the account unworkable? Will the creditor need to relay this request to the agency working the account and require them to delete consumer information? The law is unclear as to how the creditor or the collection agency can reasonably comply with consumer wishes without making the account potentially uncollectable.

These issues can be resolved before the law goes into effect.

The CA DOJ must build in a safe harbor provision to addresses these concerns that go beyond the consumer finance space into all forms of businesses interacting with consumers (think hospitals). We need to raise these issues with the regulators and ensure that there is no ambiguity around what information must be deleted or provided to a consumer upon request, the specific exceptions to this provision,  how to transmit that information to consumers securely, and to protect businesses and consumers from bad actors. If you are a business who interacts with consumers, you need to either attend the next public comment forum nearest to you or provide critical feedback to the regulators and to follow up with a formal written response. You can find information on the public forum schedule, along with an email address and postal address to send your feedback below.

Upcoming events: https://oag.ca.gov/privacy/ccpa

Email to provide feedback directly to regulators: privacyregulations@doj.ca.gov

Postal mail address to provide feedback:

CA-DOJ, ATTN: Privacy Regulations Coordinator

300 S. Spring St.

Los Angeles, CA 90013

ACA International members should consider participating in the meetings to learn more about the CCPA or submitting comments and share their experiences with ACA by emailing our Communications Department at comm@acainternational.org Attn: Katy Zillmer.

Dealing with debtors is a frustrating but unavoidable consequence of running an eCommerce business. Even the most experienced sellers can find the issue difficult to manage, but when you’re just starting out it can be impossible to know where to start.

To help you out, we’ve put together this introductory guide to eCommerce debt collection for beginners. We hope it will help you retrieve that money you are owed (plus we’ll take a look at the tricky area of chargebacks).

Getting started with eCommerce debt collection

Startups can live and die on their cash flow. So when someone isn’t paying up that can be a major issue for your eCommerce company. If you’ve tried every tactic to get them to pay the money they owe you should think about working with a debt collection agency. But before you jump right in, you should know that the quality of collection agencies can vary significantly. Make sure to undertake the following three checks before you hire anyone.

Check the agency’s reputation

Whenever you are working with a third-party you must consider how they will represent you. Your brand identity will be one of the single most important factors to eCommerce success so it’s vital you do everything you can to protect it. Unfortunately, we know from our own experiences that some debt collectors can be rude and aggressive, using intimidating methods to retrieve money. However, not every collection agency is like this. Finding a customer-focused collection agency that works with the debtor and not against, helps to increase customer retention and improve brand perception.

Check their processes

Before you start working with any debt collection agency you need to know what is going to be expected of you first. Every collection agency is different but TrueAccord’s process looks like this. Initially, we recommend you notify your debtors that we will be in contact. Then you need to send us the debts you would like recovered. Finally, you need to input your parameters into our easy-to-use automated system. After that you can follow the recovery process on our creditor dashboard which gives you up-to-the-minute information including how much has been recovered.

Check their success rates

Ultimately, there’s no point in working with a collection agency that will fail to secure the money you are owed. The latest stats show that, although consumer debt is one the rise, the total recovered by debt collectors is falling. What does that show? The traditional debt collection methods are becoming less and less productive. FinTech debt collection startups, however, are bucking the trend. TrueAccord, for example, uses machine-learning and AI to more effectively engage with customers on a far larger scale.

Dealing with chargebacks

When it comes to eCommerce, chargebacks can be a huge problem for a new business. If you think a customer has fraudulently made a chargeback claim then debt collection can certainly help you out.

What is the issue?

Up to 30% of eCommerce chargebacks can be put down to buyer’s remorse, a spouse using their partner’s card without their knowledge or friendly fraud. That’s a misuse of the chargeback function, which was introduced to protect consumers from fraud. Even worse, it could seriously affect your business which, as a startup, is going to rely heavily on cash flow.

Can debt collection help?

The good news is that a collection agency can certainly help you retrieve the money you are owed. Now, there are pros and cons of sending a chargeback to collections so the first thing you need to do is communicate with your customer to determine whether the chargeback was fraudulent or not. If it was a legitimate purchase, then the customer is liable to pay you even though you can’t charge their card.

It’s worth remembering that just because you are involving a collections agency, that doesn’t mean you have necessarily lost them as a customer forever. In fact, some TrueAccord customers have gained $2 in additional business from previously lost customers for every $1 we recovered for them. Find an eCommerce debt collection agency that deals with the customer in a sympathetic manner to give yourself the best chance of spinning a negative into a positive.

As you have seen, eCommerce debt collection is a relatively simple process if you find the right company to work with. Remember to do your research and find a company that treats customers sympathetically but still has great results.

Sign up to talk to our team about your needs!

FinTech debt collection startups are transforming a dated industry that was relying on archaic methods of practice. The industry disruptors are seeing dramatically increased recovery rates while offering a more pleasant experience for both debtor and creditor.

So how are they doing it? Let’s take a look…

1) Communication modernization

Humans are communicating with each other on unprecedented levels, but forms of communication have evolved. People aren’t picking up the phone to each other anymore, instead they text, email or use social media. Did you know, for example, that up to 68% of customers will open an email? So why do traditional debt collection agencies stick to those dying forms of communication? Digital communications, such as email and SMS, are the industry’s link to those people who have ditched the phone. This modern, omni-channel approach helps to increase long-term engagement with the client and drives up recovery rates.

2) Customer interaction analysis

FinTech debt collection startups, such as TrueAccord, know that they can learn from every interaction with their client. That’s why digital debt collection agencies use powerful AI to analyze their communications and work out the response with the best chance of success. This data-driven method is highly effective with follow-up emails based on user behavior performing almost three times better than the traditional method.

3) Communication development

By using modern forms of communication, FinTech debt collection startups have a huge advantage over the legacy agencies. Every piece of communication can be analyzed, altered and improved by state-of-the-art AI. TrueAccord is constantly evaluating their communications with customers and making improvements to drive up engagement and, ultimately, recovery rates. For example, it’s possible to analyze the effectiveness of one call-to-action button in an email compared to another. We can also work out which email subject lines are better at convincing people to open their emails. Our machine-learning engine can then help us create content that has the best chance of engaging with the customer.

4) Scaling-up

It’s very difficult for legacy agencies to scale their operations. New manual debt collectors need to be hired and then subjected to extensive training. Once they’re on the job, they often receive low, commissioned-based wages, which can lead to low-morale and a lack of motivation. FinTech debt collection startups have removed these issues by implementing a highly-scalable communication process. More than 90% of TrueAccord’s interactions with customers are automated, which means each care agent can handle 10,000 cases compared to the industry average of just 800. The sheer number of accounts each person can handle naturally increases recovery rates. The automation of the communication process also has the benefit of reducing compliance risks. Every email sent to our customers has been pre-written by talented content creators and approved by a team of lawyers.

5) Personalized payment plans

Customers fall into debt for a number of different reasons. They may be in-between jobs or had an accident that cost them financially. FinTech debt collection startups understand this and, more importantly, have the means to do something about it. TrueAccord’s hi-tech AI analyzes millions of previous interactions to work out the best course of action for an individual. If a customer needs a longer time to pay off their debt, our data-driven system can recognize that and offer a highly personalized payment plan to cater to the customer’s needs. Where many legacy agencies once worked against the customer, TrueAccord works with them to help them out of financial difficulties. This sympathetic approach helps to increase engagement and drive up liquidity percentages.

As you have seen from the above examples, FinTech debt collection startups really are changing an out-dated industry. A machine learning and data-driven approach is providing a much more sympathetic service which produces outstanding recovery rates.

Sign up to talk to our team about your needs!