The Consumer Financial Protection Bureau (CFPB) quietly published on its website additional frequently asked questions (FAQs) on the Debt Collection Rule (i.e. Regulation F) relating to electronic communications and communicating during unusual or inconvenient times or places.
The FAQ answers multiple questions, ranging from “is a debt collector required to honor a consumer’s request to opt out of electronic communications if the request does not conform to the debt collector’s opt-out instructions?” to “does an automatically generated electronic communication (such as a payment confirmation) sent at a time the debt collector knows or should know is inconvenient to the consumer, which is sent in response to a consumer action (such as a payment), meet the limited exception for responding to consumer-initiated contact?”
While many of the responses to the FAQs can be found in the Official Interpretation section of Regulation F, there are some points worth highlighting:
A consumer is not required to use the debt collector’s preferred or stated opt-out method. This means, for example, an email opt-out can come from a non-email channel, an SMS opt-out can from a non-SMS channel, etc.
A consumer does not need to use specific terms contained in a debt collector’s opt-out instructions in order for their opt out to be effective. For example, if the instructions tell a consumer to reply with “stop” to opt-out, and the consumer replies with “quit” instead of “stop,” the debt collector must still honor that opt-out.
Email addresses and mobile telephone numbers are not necessarily associated with a “place.” This means that the prohibition on communicating or attempting to communicate at unusual or inconvenient places does not prohibit a debt collector from communicating or attempting to communicate with a consumer through email or mobile phone. However, if the debt collector knows, or should know, that the consumer is at an unusual or inconvenient place, then the prohibition still kicks in.
What should creditors look for in their debt collection partners?
Creditors should check to see if their debt collection agencies train their staff and design their processes so that they promptly and effectively identify and process opt-out requests. Since opt-out requests can come in various forms and fashions, debt collectors need dynamic procedures to capture any and all opt-outs. Debt collection agencies also need processes and technologies to help them implement controls for inconvenient time and place restrictions – which may be a little tricky when applied to email and mobile phone numbers.
What is TrueAccord’s take?
At TrueAccord, our goal is to make the debt collection experience friendly and easy for consumers. That is why we engage consumers on their preferred communication channels and make it easy to opt-out of electronic communications. We take a broad approach to honoring a consumer’s opt-out request no matter how we get it or what specific words they use.
While the new FAQs clarified that the Debt Collection Rule does not require debt collectors to communicate electronically with consumers, we pose this question back:
If a consumer reaches out to you electronically, why wouldn’t you want to communicate with them on the channel they prefer?
Lenexa, KS – Oct. 27, 2021 – TrueAccord Corporation, a debt collection company offering AI-powered digital recovery solutions, is proud to announce the appointment of Kelly Knepper-Stephens as chief compliance officer and general counsel. TrueAccord started in 2013 as a digital-first collection agency built to fundamentally change collections into a recovery and reconciliation process. TrueAccord was the first to offer digital solutions to the sector and continuously proves itself to be a trailblazer in an industry still dominated by traditional call-and-collect agencies. Knepper-Stephens’ appointment further confirms the company’s consumer-focused mission by tapping into one of the industry’s most sought-after counsel and compliance leaders.
“Compliance is at the forefront of TrueAccord’s mission, and Kelly guided the development of our robust digital collection compliance systems,” said Mark Ravanesi, CEO of TrueAccord. “TrueAccord’s investment in compliance is a win-win all around: it protects TrueAccord, it protects our clients, and—most importantly—it allows us to do right by consumers.”
An expert in debt collection law, Knepper-Stephens joined TrueAccord in 2018 as vice president of legal and compliance, where she has focused on civil litigation, government regulation, and compliance. During her tenure, TrueAccord secured federal court victories showcasing TrueAccord’s legal compliance in two of the main FDCPA court decisions involving the use of email in debt collection: Green v. TrueAccordandZuniga v. TrueAccord.
“As demonstrated in Regulation F, TrueAccord is the industry leader in email compliance,” Knepper-Stephens said, “I’m excited to join the mission-driven executive leadership team as TrueAccord continues to lead best practices for digital collections and beyond—empowering consumers to resolve their accounts according to their preferences.”
Knepper-Stephens started her career in the collection space in 2011. Collections Advisor Magazine named her as one of the top 25 Women in Collections in 2016 and top 20 in 2018. She currently serves on the Board of Directors for RMAI, on the Steering Committee for the Consumer Relations Consortium, and as an ACA-certified instructor. She received her Juris Doctor degree from the George Washington University Law School and is currently barred in California, the District of Columbia, Illinois and Maryland.
A key benefit of TrueAccord is the scalability provided by the flexibility of code-based compliance, overseen by Knepper-Stephens and her team to ensure its programming is adjusted to new laws, regulations, and court decisions. The company’s patented machine-learning algorithm, HeartBeat, is augmented by its compliance checker software, mitigating risk by ensuring regulatory requirements are met before sending communications.
Knepper-Stephens is a Receivables Management Association International (RMAI) certified receivables compliance professional and has earned the Credit & Collection Compliance Officer designation from the American Collectors Association (ACA). Prior to joining the industry, she worked as a Visiting Professor of Law at George Washington University Law School, teaching the Criminal Appellate Clinic, and as a San Diego Public Defender. Her long-standing dedication to helping others plays an integral part in her success.
To learn more about TrueAccord’s mission and digital debt collection solutions, visit www.TrueAccord.com and follow @TrueAccord on Twitter and LinkedIn.
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 16 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. The TrueAccord product suite includes Retain, an early-stage collection solution, and Recover, a full-service post-charge off recovery platform.
Ensuring regulatory compliance in debt collection is a high stakes and increasingly complex process. As we know, the industry is constantly evolving and collections strategies must adapt.
At the end of July, the Consumer Financial Protection Bureau (CFPB) announced that the final rules issued under the Fair Debt Collection Practices Act (FDCPA) will take effect as planned on November 30. The new rules focus on the time, place, and manner of debt collection communications, the expansion of those communications through digital means, and enhanced disclosures that collectors must provide consumers with at the beginning of collection communications.
To help explain and analyze the new rules, TrueAccord recently hosted a webinar featuring two members of our in-house legal team: VP Legal & Compliance, Kelly Knepper-Stephens and Associate General Counsel, Katie Neill.
Regulation F outlines the first-ever guidance for digital communication efforts in collections – effectively giving the green light to make alternative collection efforts more mainstream. The rule explicitly outlines email and SMS communication but also includes language for digital outlets that might not be in use for collections today or even in existence yet – a nod to social media and consumers willingness to be contacted privately on those platforms.
Furthermore, the rule does not change the federal law as it relates to consent to email. No consent is required to send debt collection emails, just like no consent is required to make calls or send letters.
“The devil is in the details for Regulation F;” the implementation of each new provision turns on the Bureau’s explanation in the preamble and examples in the comments. Legal and compliance teams should be the engine that makes sure the organization is in compliance with this guidance when the rule takes effect later this year.
Unlike regulations in regards to phone-based collections, there is no cap on outreach frequency in digital communications like email. This is because consumers and email providers self-regulate the communications frequency – collectors must design deliverability carefully to be successful, and if collectors email without a self-imposed cap their communications will be marked as spam or not delivered.
As a digital-first collections agency, TrueAccord is ahead of and prepared for the guidance that will be put in place at the end of November. As a leader in this style of collections, TrueAccord leveraged a lot of data and consumer preference insights to help inform these new rules. The issuance of Regulation F is a significant validation by the top financial services regulator of TrueAccord’s business model.
Compliance regulations in the debt collection industry are built to protect consumers in debt from potentially predatory practices and ensure an equitable collections experience. For debt collection agencies, this often requires building out entire departments dedicated to keeping the agency in line with ever-changing debt collection laws and regulations. These teams are committed to reducing risk wherever possible.
One risk that is built into traditional debt collection practices is the potential for human error in a contact center environment. Digital debt collection platforms, however, offer code-driven compliance solutions that range from supporting existing agents to operating largely without the need for agent intervention.
Digital compliance solutions
Agent support
Operations managers throughout the collections industry cite high turnover rates in contact centers as a major challenge. While the exact number changes drastically depending on who you ask, contact centers may see annual agent turnover rates as high as 100%, but properly training contact center agents takes time (at TrueAccord our training process spans a full six weeks). High turnover in a space that requires thorough training means that newer agents may make mistakes when navigating important and complex regulations.
Some of this concern can be alleviated through the introduction of a curated content management system that provides prompts. These systems can be built with pre-written responses that adhere to compliance guidelines that improve agent compliance performance. While this may help to reduce the risk, the consumer experience is less than ideal.
Code-driven digital-first debt collection
Digital-first debt collection agencies and other debt collection software tools provide systems that allow for close control over what actions are taken and what messages are sent to consumers. These messages are carefully crafted by a dedicated content team, reviewed by a team of legal and compliance experts, and are easily accessible for auditing purposes. They are also then managed by the digital system once they are implemented.
Most importantly, these messages are then integrated into a digital, consumer-driven payment experience. More advanced systems use artificial intelligence and machine learning to customize a unique customer experience that is optimized for engagement and liquidation.
Compliant content creation
Pre-approved consumer-facing content
Building a digital debt collection system starts with creating compliant and adaptable content. Every email, text message, and landing page in a digital ecosystem is created by a team of dedicated content writers who draft and experiment with different approaches to encourage customer engagement. The guidelines used to draft these messages are shaped by collections laws, policies, and regulations.
Teams can also draft content that meets the needs of individual clients with specific brand considerations. Once the content is drafted, it is processed and reviewed by a team of compliance experts prior to being added to a content repository that the digital system can draw from.
Scalable compliance review process
The next step is to have a team of legal and compliance experts from within the debt collection agency review the content to ensure its adherence to the same regulations. Based on the client’s preferred level of involvement and resources, such a review process may also include a compliance team within the client’s organization. This process lays the foundation for compliant communication down the line.
Easily audited communication history
The content auditing process comes further down the line, but it is important to build that foundation early for the same reason stated above. Traditional call-and-collect debt collection agencies may record voice calls and even provide automated transcriptions of these calls. Unfortunately, these processes are not perfect because auditing activities can only review sample cases. Digital systems are able to accommodate a full audit-specific interface.
At TrueAccord, 96% of consumers resolve their accounts without communicating with an agent, so the vast majority of communications that exist are entirely automated and recorded. Compliance staff can easily search for individual accounts to review and evaluate all collections activity across multiple channels. Digital systems overall offer improved data retention and tracking to provide a clear picture of performance.
Because the system saves this data, it’s easy to investigate how it responded to a particular message, as well as why it made a specific decision. When these communications are controlled by code, decisions are easy to trace and replicate.
How do these steps lay the foundation for a scalable digital compliance system?
Once content is in place, and there is an established process for reviewing it, digital debt collection platforms can connect to consumers. At TrueAccord, our machine learning engine, Heartbeat, is able to draw from our content library and improve communications with a consumer over time. Digital systems reach out to consumers when and how they prefer and these communication decisions are driven by data, not by individual agent decisions or potential biases.
Digital systems reach out to consumers when and how they prefer and these communication decisions are driven by data, not by individual agent decisions or potential biases.
Digital debt collection systems rooted in machine learning are dynamic. The content they choose to use for an individual consumer is determined not only by historical data but how a consumer responded (or did not respond) to previous communications. Every single message in the system is vetted to meet compliance standards, and the review process is always ongoing to maintain those same standards.
At any point in the customer lifecycle, a consumer can opt-out of communications by replying to a text message or by clicking a link in an email that lets them easily unsubscribe from future communications using that channel. Each email and payment page also provides a link for consumers to request debt verification via a few simple online steps.
Coded compliance continues to scale
As the system scales and communicates with more consumers in this way, it’s able to continually enforce compliance without needing to be retrained because it is built to be compliant from the ground up. Built-in compliance checkers can prevent the use of contact methods that the consumer has unsubscribed from or ensure they do not receive a payment offer that the creditor has not approved.
Any compliance updates—such as new rules from the Consumer Financial Protection Bureau’s proposed rules—can be implemented securely and quickly at a company-wide scale rather than retraining on an agent by agent basis.
An improved, more secure consumer experience
Collections regulations and laws are largely driven by a need to protect consumers from bad actors in the industry. Digital debt collection empowers consumers to manage their accounts at their own pace and communicate using their preferred communication channels.
By evaluating content before it is ever sent and programming a platform that delivers unambiguous content you can reduce confusion and improve the user experience. Clear, compliant messaging enables consumers to resolve their accounts through self-service without added support. This leads to a dramatic reduction in consumer complaints, and in TrueAccord’s case, many positive online reviews.
A code-driven future for debt collection
Code-driven compliance offers predictable, pre-approved, and consistent collections methods. Coupling digital platforms with machine learning creates a system that improves over time and optimizes for a better user experience, guided by consumer preferences and shaped by compliance guidelines. This minimizes the need for agents to manage an account from start to finish and instead allows them to focus on more complex customer cases.
New technology is often seen as a risky investment, but digital debt collection systems offer more compliance security and more transparency—for consumers and creditors—than traditional debt collection agencies. Digital debt collection solutions not only evolve to meet consumer needs, but they can also continually adapt to changing regulations and quickly meet compliance requirements.
Do you want to see the power of a code-driven compliance platform in action? Reach out to our team today to see what this looks like at TrueAccord.
The Northern District of California has confirmed what the law makes clear: a debt collector may send the initial communication by email (except in New York).
In Greene v. TrueAccord, Case No. 19-cv-06651 (N.D. Cal. May 19, 2020), the Plaintiff claimed the initial email she received and opened violated the Fair Debt Collection Practices Act (FDCPA) and the Electronic Signatures in Global Commerce Act (E-SIGN) because she never consented to receive email from TrueAccord.
As the District Court made clear, consent is not a factor when an initial communication contains the validation notice in the body of the email. Only one week after final submissions on the motion to dismiss the Complaint, the District Court dismissed the case with prejudice also finding TrueAccord’s validation notice met the requirements of the law and TrueAccord’s emails sent during the 30-day validation period did not overshadow the initial demand.
The case
Sending the initial communication and validation notice by email
A debt collector must provide a consumer with a notice about how to dispute an account. The law states the notice must be given either in the initial communication or in writing within 5 days of that first communication. The FDCPA does not state what methods a collector can use to provide the validation notice in the initial communication—it only indicates that a “communication” is conveying information about a debt through any medium. Many debt collectors have hesitated to use email and other modern forms of communications that consumers prefer because these modes are not addressed in the FDCPA.
In this case, Plaintiff argued that TrueAccord violated the FDCPA by sending the validation notice in an initial communication by email without the consumer’s consent. Plaintiff argued that TrueAccord did not follow the E-SIGN Act, which outlines the requirements for obtaining consent to email a consumer documents that must be provided in writing.
However, as the Court recognized, the E-Sign Act applies to notices that must be provided in writing. Under the FDCPA, the validation notice is not required to be provided in writing if it is given in the initial communication. Since TrueAccord provided the validation notice in the body of the initial communication, E-SIGN does not apply. The Court ruled TrueAccord properly delivered the validation notice in the body of the initial email.
“The Court also agreed with the CFPB’s proposal on the fact that the subject line should contain the name of the creditor and one additional piece of information about the debt other than the amount.”
The Court, in finding that an initial communication can be made electronically, pointed to the fact that “a communication” is broadly defined and can be sent across any medium. Additionally, the Court pointed out that despite amending the FDCPA in 2006 Congress has not made any effort to amend the statute to account for newer communication technologies that have developed. The Court also recognized the CFPB’s proposed rulemaking permits a validation notice as part of an initial communication in the body of an email.
The Court explained that when using email to send the initial communication the notice must be reasonably conveyed to the consumer. This requires the notice to appear in the body of the email—not in an attachment where it could be “hidden from the eyes” of the consumer.
The Court also agreed with the CFPB’s proposal on the fact that the subject line should contain the name of the creditor and one additional piece of information about the debt other than the amount. This ensures “the consumer’s attention is focused on the email . . . as many . . . make decisions to read, ignore, or delete emails on the basis of the subject line.”
While TrueAccord’s subject line did not contain this information (it read “This needs your attention”), the Plaintiff received the email and opened it. While the Court noted that the subject line did not convey that the purpose of the email was to collect a debt, the Plaintiff still opened the email with the validation notice in the body. Therefore, Plaintiff had no standing to make an argument that the subject misled her from opening and receiving the notice when she actually opened it.
Use of the term “send” instead of “mailed”
Plaintiff also argued that the validation notice in the body of the email was incorrect and misleading because the statute reads “a copy of such verification . . . will be mailed to the consumer.” Yet, the notice in TrueAccord’s email used the word “send” instead of the word “mailed.”
When evaluating whether or not a collection communication violates the FDCPA, Courts use the “least sophisticated consumer standard.” This standard is designed to protect all consumers in the spirit of the FDCPA, not just the consumer who filed a lawsuit.
In looking at the challenged language under this least sophisticated consumer standard, the Court held that there is no requirement for a validation notice to track the language of the statute verbatim. The Court stated that:
“…the fact that TrueAccord’s notice departed from the statutory language could not plausibly have deceived or misled the least sophisticated consumer reading the notice.”
Instead, the consumer would understand from the use of the word “send” that a copy of the verification could be physically mailed or electronically mailed; as the Court noted, electronic mailing of validation documents is permitted in compliance with the E-SIGN Act.
Subsequent email communications did not overshadow the validation notice
Plaintiff also claimed that multiple demands for payment during the thirty-day validation period violated the FDCPA because these emails overshadowed the initial communication containing the validation notice. The FDCPA protects consumers from collection efforts and communications sent during the thirty-day validation period that overshadow the consumer’s right to dispute. Typically, communications that demand immediate payment or offer deadlines prior to the expiration of the thirty days constitute overshadowing.
In dismissing Plaintiff’s theory, the Court found that the FDCPA does not put any limits on the number of times a debt collector can communicate with a consumer during the validation period. The Court noted that while it is possible that the number and timing of communications sent to a consumer could be relevant in an evaluation of whether the communications overshadow the notice, the number of communications in this case—seven within a 30day period—is not excessive.
The Court also looked at the content of all these emails. The emails clearly conveyed that TrueAccord would like a payment. They did not include:
Language requiring a payment
Language suggesting that a payment should be made prior to the expiration of the 30-day validation period
The Court noted there was no real expression of urgency and all emails had a prominent out of statute disclosure stating that, because of the age of the debt, the creditor will not sue Plaintiff or report it to a credit reporting agency. By taking this “non-threatening content” of the communications in consideration with the number of emails sent, the Court did not find it plausible that the least sophisticated consumer could be misled or that the emails overshadowed the validation notice.
What lessons can we learn from this case?
Greene is only the second case ever to evaluate how to properly provide the validation notice by email. It provides good guidance to follow:
Placing the notice in the body of the email, not behind a password or through a link with seven steps to download (like in LaVallee) and
Including the name of the creditor and one additional piece of information in the subject line. This step brings the consumer’s attention to the initial email as relating to the debt (this is also forthcoming in the CFPB rule).
Greene is also the first case ever to evaluate the content of email communications sent during the validation period. It provides good guidance to follow regarding appropriate tone, frequency, and payment requests. Of interest, the Court noted that TrueAccord included a “Dispute this Debt” link on all emails. The Court felt that it’s smaller font size and placement at the footer of the emails “buried” the link; but ultimately that fact:
“…did not mean that the original validation notice ha[d] been overshadowed, particularly given the specific facts before the Court.”
The text appeared in the footer of all emails, along with our mailing address, phone number, office hours, and Privacy Policy.
Email is a core part of an omnichannel, digital collection strategy, but it doesn’t evolve overnight. It’s important that you have the experience and infrastructure in place to send and deliver emails on a mass scale so that they’re delivered to the consumer’s inbox. Cases like this are shaping the future of digital debt collection practices and how consumers interact with their debts.
Want to learn more about how TrueAccord remains at the forefront of regulatory change? Reach out to our team!
When more than one-quarter of American consumers have debts in collections it’s easy to see the rising need for any company to have a collections strategy. Working to get a dedicated internal team up and running to collect effectively can be a resource-intensive project, especially for small businesses.
Creating the infrastructure for a collections team includes building extensive policies to protect your business from compliance violations, carefully training agents (or building incredibly complex digital infrastructure), and hiring collections and recovery experts to support these new efforts.
Once you have the logistics of your collections department sorted out, it’s time to start reaching out to your customers. Here are important things to avoid when you get started.
Wait to start collecting
“Too late” can come all too soon when it comes to recovering on aging accounts. A series of small payments or even a single large payment can cause issues for small businesses, but missed payments—especially in a recession—can pile up quickly for anyone. Avoid getting too far behind (and potentially sabotaging your growing email strategy) and get ahead of the problem.
While you gradually build an internal collections team, you can also consider partnering with a third-party debt collection agency. Having a partner on retainer can prepare you for working with a growing number of accounts as your business expands. These strategies aren’t mutually exclusive either, and you can gain greater insight into the performance of both teams by comparing their respective strategies and methods.
Reveal a debt to a third party
The Fair Debt Collection Practices Act (FDCPA) clearly states that it is illegal to expose an individual’s debt to third parties—including friends, family, neighbors, co-workers, and employers. The FDCPA was established in 1977, and it primarily focuses its regulation toward traditional call-and-collect debt collection agencies (with a team of collectors calling consumers on the phone).
Though the FDCPA was primarily focused on call-and-collect technologies, its rules still apply to other communication channels. Collectors attempting to call consumers must be wary of leaving voicemail messages that directly state that they are calling to collect a debt due to the potential risk of someone else listening to it. The law regulates how your teams can (and cannot) use social media to get connected with consumers.
Use confusing or unclear verbiage
Even if you are sending messages directly to a consumer’s inbox you can potentially violate communication compliance regulations. In the case Lavallee vs. Med-1 Solutions, that the defendant (Med-1 Solutions) did not provide the consumer with the required initial disclosures. The consumer received an email and had to click an unknown link and navigate a series of tasks before accessing information related to their debt. The email did not convey any information about the debt, and the court ruled that this series of steps meant that the email did not constitute a “communication” for the purpose of collections.
Any communication to a consumer from a debt collection agency must explicitly state who it is coming from and why (read more on the mini Miranda here), and masking that intent (either purposefully or not) can lead to more compliance troubles. While it is strongly recommended that you borrow metrics from marketing teams to enhance digital communications, be careful with taking too many queues from marketing language. All content sent by TrueAccord’s teams are processed through a legal review before they’re ever sent to a consumer.
As a collector, your first step to reaching your collection goals is having a well-organized team to support your efforts. Collections and recoveries at major companies can account for hundreds of employees, but a new department won’t appear overnight. Remaining careful as you scale your team and their strategy can save you from potential lawsuits and ensure a positive consumer experience.
Are you looking for a debt collection partner to help answer some questions? Talk to our team today to see how we can help build your digital collections strategy together.
However, we still see balance-related issues today under the Fair Debt Collection Practices Act as some debt collectors struggle to provide consumers with the amount of debt owed in a simple, clear manner.
Since Miller, other courts agree that a consumer must be told if the balance will increase adopting Miller’s safe harbor language. In September 2019, a court in the Eastern District of New York dismissed a case, finding the collection letter adequately set forth the amount owed because the letter included the safe harbor language.
“Additionally, debt collectors should not put the safe harbor language on an account where the balance will not increase.”
In Paracha v. MRS BPO, the fact that the balance on a second letter (mailed six months after the first letter) increased by thousands of dollars did not make the original letter deceptive or inaccurate. This decision was made because the first letter advised the consumer, through the safe harbor language, that the balance may increase over time.
Using (and not using) the right language
Debt collectors must be careful with the safe harbor language and cannot simply add it to a communication when a balance on a collection letter will increase. The safe harbor language must be accurate for the particular account in question. The safe harbor language will only be safe to the extent that it states what may cause the balance to change.
For example, according to Boucher v. Finance System of Green Bay, Inc., if the debt will increase due to interest—not due to fees or other charges—then the safe harbor language should only advise that the balance may increase from day to day due to interest and not mention fees or other charges.
Additionally, debt collectors should not put the safe harbor language on an account where the balance will not increase. Doing so could create a false sense of urgency, and a consumer may think that they need to pay the balance immediately or it will increase when in fact it will not increase. Debt collectors are not required to tell a consumer that a balance will not increase.
Courts have made clear that a debt collector has no obligation to state that the balance will not increase when the balance on a collection communication is static. But, even when a debt is static, a debt collection agency must choose their words carefully when describing the amount of the debt owed.
In Koehn v. Delta Outsource Group, Inc., a consumer sued a debt collector, arguing that the words “current balance” materially mislead and confused the consumer into thinking that the balance would change from day to day. The Seventh Circuit found that the phrase was “common and innocuous” and not a violation of the FDCPA.
Itemizing debt
Debt collectors should be wary of itemizing a debt when the debt collector does not have the right to add interest and fees. The CFPB’s proposed rulemaking does include debt itemization; however, until the rule becomes final, cases like Virden v. Client Services, Inc., suggest that listing “zero dollars” for interest and fees could mislead a consumer into thinking that interest or fees may increase. This deception would, in fact, be in violation of the FDCPA. In Virden the agency included the following itemization:
Balance Due at Charge-Off
$1,658.91
Interest
$0.00
Other Charges:
$0.00
Payments Made:
$0.00
Current Balance:
$1,658.91
The court found that the least sophisticated consumer could misinterpret the “$0.00” listed for interest and other charges and that one plausible misinterpretation could be that interest and other changes would begin to accrue if the debt was not paid. Since interest and other charges would not accrue on this debt, the court ruled that the information was deceptive.
Agencies need to be careful in choosing what words they use describing the balance owed on a debt. In this context, less is more. Do not add itemizations when not required and only use safe harbor language tailored specifically to the account.
For more discussion of current balance issues, listen to the most recent episode of Two DEBTicated Attorneys.
In an effort to further improve the debt collection experience for consumers, TrueAccord filed comments in response to the Consumer Financial Protection Bureau’s (CFPB) Notice of Proposed Debt Collection Rulemaking. Our experience using mostly email to communicate with consumers about their debts gives us the unique ability to provide detailed feedback to the CFPB on the parts of the Proposed Rule that impacts the use of email, data science, and machine learning in debt collection.
We know that consumers in debt collection benefit from both email communications and machine learning technologies. Email communications allow consumers to access content at their convenience (including emails that contain legally required disclosures); new machine learning technologies provide additional information and payment options based on the consumer’s interactions to further personalize their collections experience.
What are we suggesting?
Make the transition into collections communication simpler
When emailing a consumer, either an initial communication—one containing the validation notice in the body—or any communication relating to the debt, a debt collector should be able to contact that consumer at the email address that the consumer provided to the creditor.
The proposed rules do not currently provide this option without causing an undue burden on consumers. TrueAccord highlighted that unnecessary restrictions in the proposal greatly limit the ability to communicate with consumers via email. Consumers who have already provided their preference for electronic communications to their creditor(s) would be forced to take extra steps because they have fallen into collection.
Define and properly evaluate email as a unique medium
Our customers regularly tell us that email is very different from phone calls and even paper mail. As such, email communications warrant different treatment under the FDCPA and should not be subject to the standard time, place, and manner restrictions that were designed for and apply to primarily oral communications.
TrueAccord asked the Bureau to take this opportunity to further modernize the FDCPA by distinguishing that certain provisions do not apply to email.
Recognize other, optional forms of electronic communications as legitimate
We raise concerns over the proposed definition of “attempted communication” and “limited content message.” The current proposed definitions have the unintended consequence of limiting digital advertising and other electronic messages that consumers can opt-in to receive.
What is our goal?
TrueAccord’s suggested changes will increase the proposed rule’s ability to make collections more efficient, provide actual notice to consumers, give consumers immediate access to information, and enable consumers to control how they want to communicate.
The debt collection proposed rulemaking is an opportunity to empower the vast majority of consumers who prefer to communicate electronically. The Bureau must take advantage of this opportunity.
On August 8, 2019, the Seventh Circuit Court of Appeals (7th Cir.) released its long-awaited verdict in the case of Lavallee v. Med-1 Solutions, LLC, 17-3244 (7th Cir. Aug. 8, 2019). The court ruled that Med-1 Solutions, LLC did not properly provide the validation notice as required by the Fair Debt Collection Practices Act.
Additionally, the court held that the first email Med-1 Solutions, LLC sent did not constitute a debt collection communication. Despite the unsuccessful method by which Med-1 attempted to email the initial communication, it is possible to do so in a compliant manner consistent with the current interpretation of the FDCPA.
The court’s decision
The Court held that Med-1 Solutions, LLC did not properly deliver the validation notice to the consumer. Med-1 sent the Plaintiff an email, but the email did not contain the text of the validation notice.
Instead, the email contained a hyperlink to a page where the Plaintiff would have had to enter personal information, and then take four additional steps in order to open a PDF containing the full initial demand letter with the required validation notice language.
The Court reasoned that Med-1’s email did not constitute a communication because the email did not have any content relating to a debt. The Seventh Circuit reasoned that the “email conveyed three pieces of information:
The sender’s name (Med-1 Solutions, LLC)
Its email address
The fact that it ‘has sent … a secure message.’ ”
The email did not convey any information about the debt so it did not constitute a communication.
The FDCPA requires debt collectors to provide the validation notice in the initial communication or within 5 days of the initial communication in writing. Since the email did not constitute an initial communication, the Court found the initial communication happened over the phone. Med-1 Solutions, LLC, however, did not provide the validation notice during that call or in writing within 5 days because the company believed that their email satisfied the requirement.
How to provide a validation notice in initial communication via email
When sending an initial communication by email, the content in the body of that email must contain all the validation notice requirements (15 USC § 1692g). It should:
Identify current creditor
State the amount owed
Provide the validation statement explaining the customer’s dispute rights
With the right information provided in the initial communication customer’s are more likely to recognize the account and trust that the email is from a legitimate debt collector. It should contain information on:
How to unsubscribe from future emails
Telephone contact information
The business’ hours of operation
Beyond that, it should comply with any other state, federal, or local obligations such as whether or not to provide a disclosure or other information. These are some of the principals embraced in the CFPB’s proposed debt collection rule. Had Med-1’s email contained this information in the body of the email, the result in the case would have been different.
Limited content emails
The Seventh Circuit’s decision also highlights a concern with sending limited content communications via email. This case reinforces the importance of developing an email strategy and fully understanding deliverability requirements. This can ensure emails are delivered and not identified as spam and filtered away from a recipient’s view.
A full deliverability strategy may consider several factors including, but not limited to ISP reputation, providing relevant content in the body of the email, and more technical aspects of email such as throttling, bounces, and bulking. These elements can greatly affect an email’s ability to reach its intended recipient and ultimately convey its message.
Med-1 Solutions, LLC did not have a prior relationship with the Plaintiff, they did not remember receiving the email, and they did not click on the hyperlink provided in the email. As the lower court noted in its decision, the Department of Homeland Security warns consumers from clicking on links received in emails from unknown senders. The Seventh Circuit decision showcases the ineffectiveness of using a limited content message to reach and engage a consumer.
TrueAccord and the future of digital debt collection
We work to create a digital environment that places customer experience at the forefront of our collections strategy. This means ensuring not only personalized content delivered through our machine learning technology, flexible payment options, and digital access for customers to manage their debts. We do all of this via software that guarantees compliance.
If you want to learn more about how our technology can change your strategy, reach out to our team here!
In debt collection, the language one uses in customer communications makes a big difference on liquidation rates. At TrueAccord, compliant content is the lifeline of our system. We continuously create, test and revise our content to engage consumers more personably—which drives better results for our clients.
Our Goal: Create a Better Customer Experience
Communication styles in the debt collection industry are typically stiff and unapproachable. Most of the time, it sounds like “legalese,” which can be off-putting, if not intimidating, to many customers. TrueAccord has a digital-first strategy to debt collection, primarily with emails, supplemented by SMS and phone calls to effectively engage with our customers. We strive to make our content informative, actionable, and compassionate.
Our mission is to transform the debt collection industry by helping people regain their financial health. Thus, our content is written to reflect that. It’s not accusatory or condescending, but respectful and empowering. We focus on finding solutions and helping people by presenting options on how to resolve their debt.
How We Experiment with Content —and Continually Improve It
Our proprietary content management system (CMS) was designed to help us craft and edit content based on massive amounts of dynamic data. We track everything from the customer’s balance, creditor, where they are in the debt lifecycle, if they’re in a payment plan, and how long we’ve been communicating with them to craft customized emails.
We constantly run experiments to generate the right content for each person. We try new subject lines to see if we can get more people to open emails. We write different calls to action on our buttons to see what drives better engagement. We also consider how far a consumer has to scroll down in an email or a landing page to get to the call-to-action button. If something’s not working well, we try something else. And our machine-learning engine—which continuously learns from our experiences—helps us customize specific and customer follow-ups that resonate. All of these small experiments add up to get us very high open and click rates from customers.
How We Keep Content Compliant
The debt collection industry is heavily regulated and is inherently protective of consumers, as it should be. We always look at communications content through a customer-focused and thorough compliance lens.
Our system provides code-driven compliance, appending the appropriate disclosures and text to automatically comply with whatever is necessary for each user, such as debts unreported out of statute or specific state disclosures. Our compliance rules dictate the content parameters for each customer, making it easier for our content writers to focus on writing compelling content. And yet, because there is wide variation in our writing styles, syntax and payment options, our content is still engaging.
Our legal team gives our content a final review, and we get very granular to ensure the message is clear for every type of customer. We look at the actual message, the email layout and design (including button placement) and even the size of the font for our disclosures. We write content that engages customers but also clearly lays out the customer’s rights and responsibilities.
This process is highly collaborative. Our content and legal teams work in concert to continuously adapt new scenarios to see how different options might come across. Our communications library constantly evolves as we keep on improving our customer engagement.
Think About What You Can Say
Most of the industry is focused on what you can’t say, but they’re not thinking about what you can say. That’s why we spend so much time perfecting our content and why we end up with such great response rates and overall results.
TrueAccord is a machine-learning and Al-driven 3rd-party debt collection company that is reinventing debt collection. We make debt collection empathetic and customer-focused and deliver a great user experience.
Our digital-first approach to debt collection creates a cycle of collections growth:
1. Improve the perception of the industry
2. Provide a personalized experience
3. Build brand equity and collect
