The Roller Coaster of Consumer Spending, the Whiplash of Consumer Sentiment, and How to Effectively Engage for Collections

By on June 5th, 2024 in Customer Experience, Industry Insights, User Experience

At the end of 2023, economists were hoping for a “boring” 2024—just a relatively uneventful year thanks to a soft landing with downward trends for inflation, unemployment, and interest rates.

But instead, the first half of 2024 has been an economic roller coaster for consumer spending, resulting in a whiplash for consumer sentiment. While the soft landing may still be on track, that track doesn’t appear to be as straightforward as hoped. There is an onslaught of mixed messages:

Consumers are proving to be more resilient than expected as they continue to spend, staving off what had been predicted to be an inevitable recession


Consumers are actually financially stretched from depleting their pandemic-era savings and battling ongoing inflation and higher interest rates

And between these highs and lows, a serious fact remains for businesses: delinquency transition rates have increased across all debt types. But for companies looking to recover those delinquent funds, understanding how to communicate with consumers where they are in this roller coaster can mean the difference between repayment and write-off.    

Let’s look at the recent trends between consumer spending and consumer sentiment and how businesses can effectively engage with customers in the event of delinquency.

Roller Coaster of Consumer Spending

Up and down the economic roller coaster goes, but the ride may be feeling different for different subsets of consumers: Americans with higher incomes have continued to spend at healthy rates, yet lower- and middle-income consumers are starting to pull back.

This “split-spending” pattern hasn’t been the case in recent years—pandemic-era benefits, a savings surplus, and rapid wage growth resulted in consistent spending rates across all income groups. But as excess pandemic savings decline at the same time as both inflation and interest rates increase, lower-income consumers are feeling the squeeze while higher-income consumers are mostly unaffected.

And even when there is a spending uptick in the lower-income sector, like we saw in April 2024, what these consumers are spending on and how they are paying for it is still quite different from their higher-income counterparts. These spending patterns show that consumers are “trading down,” or changing the type or quantity of purchases for better pricing and value, and are starting to put more everyday bills on credit cards—and in turn, credit card delinquencies and charge-offs for low-income consumers are returning to their pre-pandemic levels faster than other groups.

Regardless of where on the financial spectrum individuals may fall, an overall slowdown is expected. According to a Fitch Ratings report, annual consumer spending growth will lower from 2.2% in 2023 to 1.9% in 2024, with much of the slowdown expected in the second half of the year as income growth decelerates, pandemic savings dissipate, and higher interest rates persist.

And the Whiplash of Consumer Sentiment

So how is this roller coaster affecting how consumers feel about the economy and their own financial outlook? Overall, consumers are reporting they plan to spend less money on discretionary items in the coming months, with approximately 40% citing affordability constraints due to “economic reasons,” but that doesn’t quite capture the true whiplash of consumer sentiment we are seeing month over month:

  • January: Consumer surveys find that 43% of respondents describe the economy as very good—but 59% are also worried about inflation.
  • February: The Consumer Sentiment Index fell in the February 2024 survey, down from the more positive outlook reported in January.
  • March: U.S. consumer sentiment rose unexpectedly in March to reach the highest it’s been in nearly three years.
  • April: Consumer confidence deteriorates and falls to its lowest level in more than a year and a half.
  • May: The Consumer Sentiment Index reports the largest decline in the index in approximately three years amid worsening concerns around inflation.

Despite these swings, recent consumer surveys have found that 22% of respondents expressed feeling less discomfort about spending a lot of money when using a credit card, and more than half reported they are more likely to make impulse purchases when using cards. Whatever the sentiment, people are feeling some confidence to continue to spend and continue to carry a debt balance, with 41% of consumers reporting a revolving month-to-month balance on their credit cards.

Looking at the dramatic spikes and dips in sentiment makes knowing how to message and engage delinquent consumers critical to eliciting commitments for repayment—especially when we already noted above that delinquencies and charge-offs are returning to pre-pandemic levels for certain income sectors.

How to Handle the Roller Coaster and Whiplash and Effectively Engage With Delinquent Consumers

So we’ve seen how although the roller coaster of spending trends may actually be split into two different tracks between income levels, consumers across the board are experiencing an almost monthly back-and-forth whiplash in their financial outlook and sentiment—how are debt collection and engagement strategies supposed to keep up when consumers are on this wild ride? In today’s world, traditional methods of outbound calling and mass blast emails are the epitome of “spray and pray” chasing the tail of the roller coaster and rarely reaching one of the consumers holding on.

To engage with today’s consumers, customization is key. Your debt recovery communications need to match where individual consumers are with the:

  • Right message – engage with empathy and options for repayment
  • Right channel – engage through their preferred method of communication
  • Right time – engage compliantly when they are ready

This means most businesses need to shift the mindset of debt resolution operations from only being focused on roll rates and placements to a more consumer-centric engagement strategy. Yet many collection agencies still practice call-and-collect (and struggle due to declining right-party-contact rates and tightening regulations), and even those using email will typically only develop basic messaging for all customer communications.

Effective debt recovery needs to take consumers’ roller coaster into account—but how?

TrueAccord’s patented machine learning engine, HeartBeat, ​​reaches out to every account placed with a goal of getting them to repay on their own terms when they are ready, versus the one-size-fits all communication that ignores trends in sentiment and spending habits.  

Powered by a combination of data-driven heuristics, the latest compliance regulations, and machine learning—continuously refined by data from our 20 million customer engagements and counting—HeartBeat dynamically optimizes the next best touchpoint for every consumer in real-time, including the content, timing, and channel for each customer. It leverages interaction signals to identify consumers at risk of breaking plans and automatically adapts to keep them successful until resolution.

The TrueAccord approach aims to engage and empower no matter where the roller coaster may be taking individual consumers. As we continue to listen, learn, and innovate, we remain committed to delivering exceptional debt collection experiences that prioritize consumer well-being paired equally with debt recovery.

What Do Consumers Have to Say About TrueAccord’s Engagement Approach?

“I really have enjoyed TrueAccord because they give you so many options that align with your finances, work schedule and once you commit to a schedule they still allow you more time to pay if something comes up. Everything is customizable to you which makes it so much easier to pay down your debts, never harder. They make it very user friendly and straightforward. I really appreciate this company and what they do for you.”

“Absolutely amazing! I really get uncomfortable admitting I need help, and calling and settling a debt. This being done by email initially made the process less stressful and myself less anxious about the whole thing. Much appreciated! Would recommend using TrueAccord to anyone that has the opportunity to settle a debt. Thank you so much.”

“I just want to commend True Accord for their professionalism as well as their empathy and outstanding customer service. NEVER have I encountered a collection company with such superb service, they did not continually harass me nor did they ever make threats in order to obtain payment, they understood my situation, and worked 110% to accommodate a payment plan specific to my financial situation.”

“I really appreciate the patience and kindness I feel I get with this company. Makes it easier to pay my bills.”

“I have dealt with enough “collectors” to be able to honestly say your company, Trueaccord, was the easiest to deal with. Allowing me to set up my own plan, not calling 15 times a day. You made this as easy as possible and without the stress! Thank you for such a stressless collection procedure.”

“I have been very backed up on getting my finances in order. I love how emails would always pop up and remind me. Finally got this one off my bucket list!”

“It was a joy working with you all, making it an easy experience. Thank you for making the ride a smooth one, slowly cleaning up our debts thanks to your company.”

Ready to get started? Schedule a consultation today»»


Digital-First Debt Collection Delivers 35% Liquidation Increase for Leading Telecoms

By on May 1st, 2024 in Customer Experience, Data Report, Industry Insights, Product and Technology, User Experience

Telecom Industry Evolves, But Call-and-Collect Can’t Keep Up

The telecommunications industry has evolved hand-in-hand with most consumer communication preferences throughout the decades. From the last remaining landlines to mobile and internet services, it’s challenging to find a consumer that doesn’t subscribe to a Telecom service.

Yet while Telecoms enable customers to communicate and access products and services via digital channels wherever they go, the industry’s own methodology for communicating with consumers who have fallen delinquent on their bills is quite antiquated for the modern world they operate in.

Many Telecoms have traditionally used call centers for collection services to collect charged-off debt, but face mounting challenges all contributing to less revenue:

These challenges are not unique to telecoms, but considering the evolution of the industry it would only make sense that their debt collection practices would also adapt to consumer preference for digital and omnichannel communications.

Future-Facing Digital-First Solutions Deliver Real Liquidation Results

For some of the leading Telecom providers in the US, the time had come to face the declining third-party liquidation performance and reevaluate their debt recovery approach. A more future-forward, effective engagement model was being adopted throughout other industries and it was time for these Telecoms to test the waters of digital-first outreach for late stage collections…and TrueAccord was there to be their guide.

Through a champion-challenger model during the six-month pilot, TrueAccord’s digital-first, omnichannel engagement proved to be more effective at recovering from the late stage accounts. Between multiple portfolios across three Telecom providers, the results tipped the scale so moving forward all accounts would be serviced entirely through TrueAccord’s platform.

Each of the Telecom providers saw notable increases in liquidation using TrueAccord compared to their traditional call-and-collect methods:

  • First Telecom: 35% increase
  • Second Telecom: 7% increase
  • Third Telecom: 32% increase

How did TrueAccord’s digital-first approach deliver these kinds of results? Get the detailed breakdown in our in-depth Telecom case study»»

Are you ready to evaluate your legacy collections servicer against TrueAccord’s proven digital-first, omnichannel approach? Schedule a consultation today!

Q1 Industry Insights: Persistent Inflation is Bananas and a Tale of Two Consumers

By on April 15th, 2024 in Industry Insights

Way back in January, 2024 was looking strong with decreasing inflation holding the promise of interest rate cuts that would ease the strain on consumer finances and reopen a tight market. Three months into the year, the outlook isn’t looking quite as rosy, but optimism for change persists. While the looming threat of a recession has passed, the outlook seems to point to inflation sticking around and consumer sentiment on the financial outlook this year is mixed. Case in point – even Trader Joe’s gave in and raised the price of bananas, from 19 to 23 cents, for the first time in 20 years, with loyal shoppers calling the move “the end of an era”. The Federal Reserve is still poised for a couple of rate drops this year, though the timing and impact of those are more in question, especially with the resilient labor market that could push interest rate cuts to later in the year to ensure inflation is truly tamed before acting and the global conflicts that are impacting Wall Street and interest rates.

The first quarter of the year coincides with tax season, when many consumers realize a tax refund that helps the strain on finances, which in turn produces an uptick in debt repayment. Strong liquidation rates this quarter don’t necessarily signal how the following months will perform. How has the economy impacted consumers this quarter and what’s in store for the rest of the year? 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 2024.

What’s Impacting Consumers?

Inflation persisted in Q1. The Labor Department’s Bureau of Labor Statistics reported that CPI rose 0.4% in March, bringing the 12-month inflation rate to 3.5%, or 0.3% higher than in February. This increase was driven by shelter and energy costs, with energy rising 1.1% after climbing 2.3% in February, while shelter costs increased by 0.4%, up 5.7% from a year ago. The Fed has been expecting shelter-related costs to decelerate through the year, which would allow for interest rate cuts, so this rising indicator is not favorable for consumer economic outlook.

Consumers kicked the year off with debt trending higher. According to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit, total household debt rose by $212 billion to reach $17.5 trillion in Q4 of 2023 and credit card balances increased by $50 billion to a record $1.13 trillion. Mortgage and auto loan balances also rose, with the Bank saying the data indicates financial distress is on the rise, particularly among younger and lower-income Americans.

The emerging situation is what recent reports have dubbed “a tale of two consumers”. One consumer cohort is the roughly two-thirds of Americans who have done substantially well, own their homes and/or have invested in the stock market – this group had the savings cushion necessary to weather high inflation. The other cohort, made up of mostly middle- and lower-income renters who have not benefited from the wealth effect of higher housing and stock prices, has been hit harder by inflation and is feeling more financial stress.

Experts worry that members of this second cohort are falling behind on their debts and could face further deterioration of their financial health in the year ahead, particularly those who have recently resumed paying off student loans. While approximately 4 million relieved Americans have benefitted from $146 billion in student debt relief as a result of the Biden-Harris Administrations myriad executive actions, millions more are still left trying to add resumed payments back into their budgets amidst a stubbornly high cost of living.

To cover this additional monthly debt, 33% of surveyed consumers with student loans planned to reduce discretionary spending or use their savings; 28% said they would get a second job or do part-time or temporary work; 25% will use money from retirement savings; 21% will use credit card available limits; and 19% will borrow from family or friends, or delay a key milestone like marriage or home purchase. For those who expect student loan forgiveness, 57% surveyed say they would use savings from forgiveness to pay off debt, 10% would put the savings toward a home purchase, 26% say they would put savings toward other savings and 7% say they would spend their savings on other things, according to the Federal Reserve’s latest Survey of Household Economics and Decisionmaking.

A Growing Mountain of Credit Card Debt and Other Indicators

For consumers who turn to credit cards to make ends meet, higher interest rates are making it more costly to carry a balance on a credit card, with the average credit card APR at a record 24.66%. Debt holders are also carrying their debt for longer periods of time, and struggle to pay it off as it compounds. According to a LendingTree analysis of more than 350,000 credit reports, the average unpaid credit card balance was $6,864 in Q4 2023. 

This starts showing up in increased credit card delinquencies, which soared more than 50% by the end of 2023, with about 6.4% of all accounts 90 days past due, up from 4% at the end of 2022. Delinquency transition rates also increased for almost all other debt types, with the exception of student loans. According to Experian’s Ascend Market Insights, overall 30+ days past due delinquency grew, starting the year with a 2.31% increase in delinquent accounts and 10.49% increase in delinquent balances month over month. Q1 of 2024 is also showing a rise in early-stage delinquencies, ticking up from 0.98% in January to 1.04% in February.

Missing payments correlate to another indicator of consumer financial health – the U.S. personal saving rate dipped down to 3.6% in February, compared to 4.1% in January and 4.7% in 2023. The situation remains that a majority of U.S. consumers (59%) live paycheck to paycheck as of February 2024, including 42% of those earning more than $100,000 per year. As an alternative to taking on debt, many Americans are taking on side jobs to increase income instead – as of February 2024, 22% of workers had a side job. The data also shows that 30% of employed consumers earning supplemental income depend on this money to make ends meet, up from 25% last year.

Consumers Worried About Inflation and Debt Accumulation

Unsurprisingly, 82% of consumers surveyed say concerns about inflation top their lists of economic woes, with only 17% holding out any hope that inflation will subside anytime soon. One of the few solutions available to consumers hoping to fight back against inflation is an increase in their paycheck, but the report found that fewer than 4 in 10 consumers anticipated a wage increase this year, down from 43% who expected a raise last year. According to the latest Compensation Best Practices Report, 79% of organizations are planning to give pay increases in 2024—the lowest number in years—in light of a strong labor market and cooling inflation, down from 86% in 2023. And the amount of raises planned for this year are generally smaller, with organizations predicting an average base pay increase of 4.5%, compared to the average of 4.8% given in 2023.

A slim majority of Americans (56%) reported optimism about their household finances in the next 12 months, according to TransUnion’s Consumer Pulse Survey from Q4 2023. Millennials had the highest optimism among generations (71%) while Baby Boomers had the lowest (44%). Millennial optimism likely spurred from reported income increases and expected higher income growth in the next 12 months.

The Conference Board reported a mixed bag of consumer sentiment, with assessments of the present situation improving in March, primarily driven by more positive views of the current employment situation, while expectations for the next six months deteriorated. PYMNTS Intelligence data found that 15% of consumers say debt accumulation was a main pressure point on their savings, having dipped into those accounts to ease their debt burdens. 

What Does This Mean for Debt Collection?

With a mixed and uncertain economic outlook, consumers will be watching their finances closely. While some populations may reap wealth effect benefits and fare well financially, others will face headwinds with sticky high prices and student loan payments. For debt collectors, it will be critical to provide the right experience for each consumer and understand that everyone has a different financial situation with different considerations. While the first quarter may have brought increased liquidation due to cash influxes from tax season, the following months may bring challenges. We’ll soon find out, but as a lender or collector, here are some things to consider:

  1. Personalize your messages. What works for one consumer won’t necessarily work for the next. Consider the customer journey and tailor messaging so it resonates with consumers at different points in the debt collection process. It’s not just what you say, but how and when you say it that will determine how consumers respond. Learn more about the stages of the debt resolution funnel.
  1. Give options. For consumers balancing tight finances, paying a lump sum may not be possible. Payment plans facilitate smaller payments over time that consumers can work into their budgets. Other options like choosing what day to pay and the ability to reschedule a payment will also help consumers stay on track to repayment.
  1. Make it easy. When paying back debt is as simple as click→review→pay online, consumers will be more likely to engage. Using digital channels and giving consumers the pertinent information upfront so they can engage when and how they prefer means cutting out the middleman and empowering consumers to self-serve. 96% of consumers working with TrueAccord resolve their accounts without speaking to a human and often at times outside of standard customer service hours. 

Welcome to the Debt Resolution Funnel: Insights from 20MM Consumers

By on April 11th, 2024 in Customer Experience, Industry Insights, Industry Interviews, User Experience

When it comes to financial and lending services, the customer journey doesn’t drop off once a consumer enters delinquency—in fact, quite the opposite. In the world of debt collection, understanding this unique, and often overlooked, part of the customer journey is critical to securing repayment and debt recovery.

Welcome to the Debt Resolution Funnel. This goes beyond tracking roll rates and primary vs secondary vs tertiary account placements; it instead looks at the debt lifecycle from the consumers’ perspective in well-defined stages with the goal of repayment.

And for TrueAccord, it even goes a step further, with our resolution funnel taking a closer look at how to engage with each consumer in each stage with the optimal messaging, timing, and channel selection specific for that individual. This is possible thanks to our patented machine learning platform, HeartBeat, that automatically improves and optimizes engagement over time, all powered by engagement data from our over 20 million consumer journeys.

While many collection agencies still try to reach consumers through outbound calling (and struggle due to declining right-party-contact rates and tightening regulations), even those using email will typically only develop content based on what bucket the consumer is currently in and use the mass-blast approach for all customers in that particular bucket. Conversely, our patented machine learning engine, HeartBeat, dynamically optimizes the next best touchpoint for every consumer in real-time, including the content, timing, and channel for each customer.

In today’s digital world, one-size-fits-all communication strategies don’t work for any type of consumer engagement—and that has proven especially true in debt collection.

Understanding the Funnel: Tailoring Engagement Strategies for Success

Just as in marketing, where funnels mark the path from awareness to conversion, in debt collection it details the journey from debt placement to resolution. At TrueAccord, we’ve honed our strategies to optimize outreach at every stage of this journey, powered by our intelligent decision engine HeartBeat, delivering an effective resolution process for both our clients and their customers in delinquency.

Let’s take a high-level look at the distinct stages of the TrueAccord funnel and how successful engagement relies on our content, message timing, and communication channels.

Top of the Funnel: Debt Placement, Reachability, and Acknowledgement

  • Debt Placement: The journey begins with debts placed with TrueAccord for collection
  • Reachability: We strive to reach debtors through various channels, ensuring they are aware of their debts
  • Acknowledgement: The consumer acknowledges their debts through interactions with our communications or with agents through inbound calling

Strategies at this stage focus on contact coverage, leveraging and learning through use of diverse channels for communication, and optimizing content and messaging to enhance engagement and acknowledgement rates.

Middle of the Funnel: Active Consideration and Commitment

  • Active Consideration: The consumer explores their payment options, visiting payment forms, or interacting with inbound agents
  • Commitment: The consumer commits to payment arrangements, initiating payment plans or settlements

Here, we concentrate on providing flexible payment options (including completely self-serve a payment portal), improving website usability, and employing targeted follow-up communications to facilitate commitment.

Bottom of the Funnel: Progression and Resolution

  • Progression: Significant progress is made by the consumer towards their commitments, paying at least a percentage of their balances
  • Resolution: The consumer successfully resolves their debts through payment or dispute resolution

Strategies in these stages prioritize payment plan management, personalized communications based on HeartBeat’s machine learning insights, and celebrating debtor progress to foster brand affinity.

Driving Success: Strategies for Each Stage

  • Content and Messaging: Crafting compelling content tailored to specific consumer and funnel segments and leveraging HeartBeat’s machine learning for engaging messaging.
  • Channel Optimization: Utilizing diverse communication channels, such as SMS and email, based on consumer preferences and behavior.
  • Payment Offerings: Offering flexible payment options, including settlements and extended payment plans, to accommodate diverse financial situations.
  • Website Usability: Enhancing website design and functionality to facilitate easy navigation and understanding of payment options.
  • Continuous Discovery: Practicing ongoing experimentation and learning from consumer interactions to refine strategies and improve performance continually through HeartBeat.

Empowering Resolution Through Better Engagement Every Step of the Way

Shifting the mindset of the debt resolution journey only being defined through roll rates and placements to a consumer-centric resolution funnel instead can be a significant overhaul for any organization’s collection strategy. Whether communicating in-house, using a call center, or partnering with a third-party collection agency, adopting the nuanced approach we outlined above for better results takes time, a robust content library, advanced machine learning, and a platform able to scale to meet both your business’s and customers’ needs.

TrueAccord’s machine learning engine, HeartBeat, doesn’t just optimize our strategies for engagement and commitment. It leverages interaction signals to identify consumers at risk of breaking plans and automatically adapts to keep them successful until resolution. Our approach aims to engage and empower every step—and every funnel stage—along the way.

As we continue to listen, learn, and innovate, we remain committed to delivering exceptional debt collection experiences that prioritize consumer well-being paired equally with debt recovery. At TrueAccord, we’re not just collecting debts; we’re fostering resolutions and helping consumers build brighter financial futures.

Ready to get started? Schedule a consultation today»»

How Consumer Credit Trends Impact Debt Collection in 2024

By on March 5th, 2024 in Customer Experience, Industry Insights, Industry Interviews, User Experience

Today’s current economic climate is already influencing consumer spending and credit in 2024, and is becoming a hot topic for businesses seeking to engage past-due customers.

Economic Growth in 2023, But Slowdown Expected in 2024

Last year proved that the US consumer has been very resilient to the rumblings of a potential recession and continued to spend with surprising growth all the way through the end of 2023.
Despite inflation and high interest rates, consumers helped the economy end the year in a far better position than most predicted.

And consumers reported an uptick in optimism about the financial state, according to Deloitte’s ConsumerSignals financial well-being index, which captures changes in how consumers are feeling about their present-day financial health and future financial security based on the consumer’s own financial experience. We saw an increase to 101.4 in November 2023, up from 97.6 a year ago. Additionally, WalletHub’s Economic Index, which measures consumer satisfaction, rose by about 4% between January 2023 and January 2024.

But even as economic experts adjusted their outlook towards a soft landing and consumers reported a more positive financial outlook, 2024 is still expecting a slow down in consumer spending.

“Growing debt balances, stubborn interest rates and elevated prices are still a thorn for consumers, and contribute to their overall financial stability,” explains TrueAccord CEO Mark Ravanesi in his Q4 Industry Insights: Cautious Optimism with a Side of Holiday Hangover. “For lenders, service providers and debt collectors, guaranteeing repayment will still be a challenge [in] 2024.”

As Consumer Delinquency Rises, So Does Consumer Confusion

That financial holiday hangover Ravanesi described is a harsh reality for consumers: approximately one-third of American adults go into debt to pay for holiday expenses, contributing to their overall financial stability year-round. Credit card balances hit a trillion dollars in 2023, but that unprecedented milestone proved to just be another number as credit card balances continue to grow—by the fourth quarter balances increased to $1.13 trillion and the share of those balances that were at least 90 days delinquent approached 10%, an increase of more than two percentage points in a year.

In January, overall delinquency grew with a 2.31% increase in delinquent accounts and 10.49% in delinquent balances month-over-month. Today, about 61% of American households have credit card debt and the average credit card debt balance sits at $5,875.

Bottom line: households took on more debt at the end of last year and we’re seeing loans increasingly going bad, according to data from the Federal Reserve Bank of New York, leading to a shift in consumer spending for 2024.

On top of historic credit card balances, delinquencies continue to climb across the board: automotive, mortgage, bank cards, and unsecured personal loans.

The rising popularity of the Buy Now, Pay Later (BNPL) options and their corresponding delinquencies are also a piece of the puzzle, but one that is not currently captured by the Bureau of Economics and falls into a category known as “phantom debt.”

“Today’s consumer is using more and different financial products,” shares Ravanesi. “Buy Now, Pay Later was a big driver of purchasing power [in 2023] amidst elevated interest rates. While a helpful product for consumers, BNPL can be tricky as it doesn’t show up on most credit reports and can be an invisible and unaccounted-for debt burden.”

With so many different BNPLs offered, consumers can be borrowing from a variety of different lenders all at the same time and it is becoming more difficult for them to keep track of the different payments—and easily slip into delinquency. This confusion can be especially detrimental considering consumers using BNPL as more likely to be “financially fragile,” as reported by the NY Fed, having credit scores below 620, being delinquent on a loan, or having been rejected for a credit application over the past year.

“It’s becoming more and more confusing for consumers,” TrueAccord founder Ohad Samet explained in a recent webinar. “And we’re seeing consumers often need help to organize the different debts.”

And then we add student loans back into consumers’ repayment mix…

The Impact of Resumed Student Loan Repayments

Millions of people are resuming another financial obligation every month: their student loan payments. This introduces one of the defining questions of 2024 for lenders and debt collectors:

How will student loans be prioritized among other payments and debts?

It’s a legitimate concern considering surveys found 45% of respondents used the student loan forbearance period to tackle other debts, including paying down mortgage/rent expenses (27%), credit cards (26%) and other past-due bills (24%)—and even before forbearance was lifted, 85% of borrowers already anticipated facing financial hardship due to student loan repayment, with 49% saying they’ll have a hard time paying other bills. In fact, 28% of student loan borrowers say the resumption of federal student loan payments will likely require them to take on new debt to manage their personal finances.

Only time will tell, but so far student loan repayment rates have been low amongst the 22 million Americans affected—in the first month of resumed payments, 8.8 million borrowers missed their student loan payment, equating to 40% of loan holders.

Whether they missed that first payment or not, student loan repayments resuming again are having a significant impact for those who borrowed—91% say financial stress is impacting their mental, physical wellness and student loan debt is a key driver of this financial stress.

So how can lenders and collectors effectively recover debts in 2024 given the rising delinquencies and rising financial stress for consumers?

Right Message, Right Channel, Right Time for Better Consumer Engagement and Debt Recovery

Consumers have more stress and demands on their attention than ever before so it should make clear sense that consumer experience is critical for an organization’s reputation, long-term success with customers, and how effectively you can collect even in late-stage delinquency.

Research shows that contacting first through a customer’s preferred channel can lead to a more than 10% increase in payments and that 14% of bill-payers prioritize payments to billers that offer lower-friction payment experiences. Plus, 71% of consumers expect personalized experiences, which means one-size-fits-all outreach isn’t going to cut it in collections. Your business must be able to engage with the right message, the right channel, and the right time to recover the most funds possible.

“If there’s one thing we’ve learned from our consumer interactions, including the 16.5 million we added in 2023, it’s that no two consumers are the same, and what works for one may not work for the next,” explains Ravanesi. “That’s why options are so important—in communication channel, customer support method, and perhaps most importantly, in repayment.”

Personalization of the collections experience—from channel to time of day to specific message—is critical in cutting through the noise and driving engagement and commitment, especially in today’s increasingly digital world.

“Digital is deeply, deeply ingrained in every group of the population,” Samet observes.

And consumers are engaging on more digital channels than ever before:

  • 65% of American consumers have paid a bill by mobile device in the past twelve months
  • 54% have used an online portal supplied by a biller
  • 85% of consumers are already using digital bill pay
  • 41% of consumers cite ease and convenience and 23% cite faster and instant payments as the most important reason to choose a digital channel
  • 59% of consumers stating email as their first preference for debt collection, according to a FICO survey (versus only 16% want to receive a phone call)

Research from McKinsey concludes that consumers who digitally self-serve resolve their debts at higher rates, are significantly more likely to pay in full, and report higher levels of customer satisfaction than consumers who pay via a collection call.

Providing multiple repayment options, communicating through a variety of channels, reaching out at the optimal time of day, delivering the message in a way that best resonates with the consumer—all of these factors play a role in how effective your debt recovery strategy will be.

The TrueAccord Difference

Partnering with a debt collection agency for late stage debt recovery provides a number of advantages, including improving debt recovery rates, reducing the workload for lenders, offering access to specialized resources, and providing flexibility and customization. Every business is different, just like every customer’s situation is different, but TrueAccord has proven for over a decade that our digital-first, omnichannel approach drives improvements in liquidation rates by engaging consumers with the right message, through the right channel, at the right time.

At TrueAccord, our mission to help organizations recover more (from happier consumers) is comprehensive and tailored to each business’s specific goals and individual customer expectations. Since 2013, we have provided win-win solutions between businesses and consumers in debt. By using our patented machine learning engine, HeartBeat, we create a personalized journey for each consumer and keep optimizing for the ideal message, outreach time, and communication cadence to elevate performance.

Ready to get started? Schedule a consultation today»»

TrueAccord’s Digital-First Engagement Out-Performs Call-and-Collect for National Bank’s Late-Stage Debt Recovery

By on February 7th, 2024 in Industry Insights, Product and Technology, User Experience

After three decades of providing exceptional customer experience, a leading national bank recognized a lot has changed in the world of personal banking, technology, compliance, and, in turn, debt collection. To continue delivering the level of service their customers expect meant it was time for the bank to update their recovery methods for the new digital age.

Although the bank had seen moderate success in late-stage collections with their call-and-collect vendor, they had a list of goals that they were unsure their existing collection provider could achieve:

  • Improve and increase liquidation performance
  • Keep up with new regulations and ensure compliance
  • Leverage new, more cost-effective solution

But what was the best way to evaluate the effectiveness of new digital-first engagement versus their existing outbound calling approach?

To test and measure the success of each distinct debt recovery method, the bank decided to use the Champion-Challenger model with TrueAccord joining their existing collections partner.

For their Champion-Challenger test, the bank assigned TrueAccord 50% of primary placements and tertiary placements against their traditional collection provider. By using scorecards, the bank was able to compare the two using set collection goals (varying by month and season) and several key performance indicators (KPIs), including:

  • Overall liquidation rates
  • Percentage of settlements in full
  • Percentage over/under set collection goals

With the Champion-Challenger model in place, collection goals and KPIs designated, and scorecards set, it was time to see how TrueAccord’s digital engagement methods would measure up compared to the old school call-and-collect method…and the numbers would speak for themselves.

Download the full case study to get an in-depth look at:

  • How TrueAccord won 100% of the bank’s primary placements
  • Why the Champion-Challenger model works so effectively for optimal debt recovery
  • What KPIs were used to compare call-and-collect vs TrueAccord’s digital engagement

Download the case study here»»

Ready to improve your collections communications using TrueAccord’s proven digital-first engagement approach? Schedule a consultation today!

Declining RPC Rates, Rising Consumer Complaints: Why Outbound Calling for Debt Collection Won’t Work in 2024

By on January 31st, 2024 in Customer Experience, Industry Insights, Product and Technology, User Experience

If your business plans to use outbound calling as the main mode of engaging past-due customers in 2024…good luck.

Good luck reaching the right number for the target customer.
Good luck getting them to commit to repayment over the phone.
Good luck not getting complaints.

And if the plan is only to use outbound calling…be prepared to start accepting more losses in 2024. Even if you can get the right customer on the phone, studies show 49.5% of consumers take no action after a collection call.

Let’s look at the challenges around right-party contact rates, consumer complaints, and the timely factors that make the challenges more detrimental to your business’s late-stage debt recovery.

Declining RPC Rates

The decline of right-party contact rates (RPC)—the percentage of calls in which an agent is able to connect with the target consumer—isn’t new for 2024, but its impact on debt collection is reaching new heights in the new year. RPC is considered one of the most accurate measurements for the effectiveness of an organization’s outbound calling efforts, whether internally or through a third party.

Surveys from the Association of Credit and Collections Professionals (ACA International) found that 62% of the respondents reported seeing a decrease in right-party contacts, with 78% of the respondents experiencing call-blocking and 74% having their calls mislabeled.

Call-blocking and spam-mislabeling are only part of the issue for RPC rates: government regulations, robocalls, lack of consumer trust in answering calls, and inaccurate phone data all contribute to the drop in RPC rates.

The bottom line is the declining RPC rates are negatively affecting your business’s bottom line—but that’s not the only challenge outbound dialing for debt collection faces in 2024.

Rising Consumer Complaints

As almost all other forms of financial transactions have evolved, so have consumers’ communication preferences in that arena. Nearly nine in ten Americans are now using some form of digital payments and 59.5% of consumers prefer email as their first choice for communication, but traditional call-and-collect methods still dominate in late-stage recovery efforts.

And with that in mind, it shouldn’t be surprising that consumers complain about debt collectors’ and creditors’ communication tactics used when collecting debts.

But beyond ignoring communication preferences, many consumer complaints actually equate to compliance violations.

According to the 2022 Annual Report on the Fair Debt Collection Practices Act (FDCPA), 51% of communication-related complaints were because of repeated calls. Despite the 7-in-7 Rule (debt collectors are prohibited from calling the same consumer more than seven times within seven consecutive days, unless the consumer directly gives consent to receive any additional calls), 17% of respondents of a Consumer Financial Protection Bureau (CFPB) survey said a creditor or debt collector tried contacting them eight or more times per week. Similarly, other common complaints revolve around the collector or creditor calling at inconvenient hours outside of the FDCPA presumed convenient calling hours from 8:00 a.m. to 9:00 p.m. at the consumer’s location.

But again, even if you are following the letter of the law, it doesn’t protect your brand’s reputation from consumer complaints.

Minimize These Collection Challenges with a Digital-First Approach

Between declining RPC rates, shifting consumer preferences, rising consumer complaints, and increasingly stricter compliance regulations, the once tried-and-true outbound calling methods are no longer viable in 2024.

But your business doesn’t have to resign to accepting losses once accounts hit late-stage delinquency—taking a digital-first approach negates concerns over RPC rates, catches up with evolving consumer preferences, neutralizes the cause of common consumer complaints, and smoothly navigates compliance requirements.

Kick start your 2024 recovery efforts with a digital-first consumer communication approach—learn more and get started now»»

Q4 Industry Insights: Cautious Optimism with a Side of Holiday Hangover

By on January 10th, 2024 in Industry Insights

2023 brought a whirlwind of an economy, and we spent most of the year trying to predict when things would finally turn around. The good news is that things are looking up, and so are consumer sentiments on their financial outlook. Despite the optimism, consumers are still battling high prices and interest rates, though the holiday shopping numbers would make you think otherwise. For consumers, the challenge of balancing finances persists and holiday spending hangovers are adding to the swing. If you’re a creditor or collector working with financially distressed borrowers, considering consumer situations against the economic landscape and accommodating their financial needs and preferences when collecting is critical to your success.

Read on for our take on what’s impacting consumer finances and our industry, how consumers are reacting, and why employing digital strategies to boost engagement is more important than ever for debt collection in 2024 and beyond.

What’s Impacting Consumers and the Industry?

After a lengthy struggle against inflation and high interest rates, the economy is showing welcome signs of strength and stability, ending the year in a far better position than most predicted. Headline PCE fell 0.1% in November and was up only 2.6% from last year, unemployment remained flat at 3.7% and the economy grew at an annual rate of 4.9% from July to September. The Federal Reserve has indicated that the rate hikes are finished and it will be looking at cutting rates starting in 2024, an encouraging sign for the economy and consumers.

The fourth quarter marked the resumption of student loan payments for 22 million Americans, but repayment results were low. In October, the first month of resumed payments, 8.8 million borrowers missed their student loan payment—that’s 40% of loan holders. Some of this miss is attributed to an overwhelmed system and people making use of the Education Department’s 12-month “on-ramp” period, which guarantees that missed payments will not be reported to credit agencies until September 2024, protecting borrowers from the harshest consequences of missed payments like delinquency, default and collections. But interest will continue to accrue and only time will tell how much of this miss is actually due to inability to repay and what that will mean for those who can’t.

The Consumer Financial Protection Bureau (CFPB) has had its hands full overseeing actors across sectors–from regional and large banks to auto and online lenders to mortgage and credit agencies–in an ongoing effort to protect consumers in an ever-growing landscape of financial product offerings. And as offerings grow, so do the issues the CFPB must watch. In Q4, the CFPB issued statements and proposed rules relating to accelerating open banking, oversight of big tech companies and other digital financial service providers, and discrimination concerns. Bureau director Rohit Chopra himself has an eye on the future, saying he’s concerned that a handful of firms and individuals could wield “enormous control over decisions made throughout the world” with advances in artificial intelligence.

The CFPB also took a close look at fees and interest rates, issuing guidance to stop large banks from charging illegal fees for basic customer service and finding that many college-sponsored financial products offer students unfavorable terms and unusual fees. And despite recent changes at banks and credit unions that have eliminated billions of dollars in fees charged each year, a December report found that many consumers are still being hit with unexpected overdraft and nonsufficient fund (NSF) fees. A reported 43% were surprised by their most recent account overdraft, while 35% thought it was possible and only 22% expected it.

Key Indicators and Consumer Finances

According to the New York Fed’s Quarterly Report on Household Debt and Credit, total household debt increased by $228 billion (1.3%) in the third quarter of 2023 to $17.29 trillion. Breaking it down, credit card balances increased by $48 billion to $1.08 trillion in Q3 2023, showing a 4.7% quarterly increase while auto loan balances rose by $13 billion and now stand at $1.6 trillion. Student loan balances also increased by $30 billion up to $1.6 trillion. Other balances, which include retail cards and other consumer loans, increased by $2 billion. 

Experian’s Ascend Market Insights for November reports overall delinquency (30+ DPD) rose in November, with a 7.26% increase in delinquent units and an increase of 3.54% in delinquent balances month over month. Serious delinquency (90+ DPD) continued to rise month-over-month for all products except auto loans, which appear to be stabilizing. Credit card delinquency rates, on the other hand, rose sharply in Q3, landing at 5.3% and up more than 2% from the previous year. Notably, according to a Liberty Street Economics blog post examining the composition of newly delinquent credit card borrowers, the rise in credit card delinquency rates is broad across demographics, but is particularly pronounced among millennials and those with auto loans or student loans.

After months of increasing delinquency rates, it’s not surprising that charge-off rates are following. The charge-off rate for all consumer loans was 2.41% at the end of Q3, up from 1.32% a year ago. As for credit card debt, the charge-off rates clocked in at 3.79%, up more than a half point from Q2 2023 and up from 2.1% a year ago.

The savings rate fell to 3.8% in Q3, down from 5.2% in Q2, while consumer spending jumped by 4%. This spending helped drive up the quarter’s GDP growth rate, but less saving could be a sign of financial strain amidst nagging high prices. And the excess savings from the pandemic? Americans outside the wealthiest 20% of the country have run out of extra savings and now have less cash on hand than they did when the pandemic began, which could spell trouble for consumers in the event of an emergency or unexpected life event. About 116,000 consumers had a bankruptcy notation added to their credit reports in Q3, slightly more than in the previous quarter. And currently, approximately 4.7% of consumers have a 3rd party collection account on their credit report.

Consumer Sentiment on Financial Outlook Improves

The economy’s resilience seems to be encouraging for consumers, with Americans’ perceived likelihood of a recession in the next 12 months falling in December to the lowest level seen this year. In fact, the Conference Board Consumer Confidence Index® increased to 110.7, up from a downwardly revised 101.0 in November. The overall increase in December reflected more positive ratings of current business conditions and job availability, combined with less pessimistic views of business, labor market and personal income outlook over the next six months.

The Federal Reserve Bank of New York’s November 2023 Survey of Consumer Expectations supports the optimistic findings. The report found that median one-year ahead inflation expectations declined by 0.2 % in November to 3.4%—the lowest reading since April 2021. Combining economic optimism with a decline in expected spending, the result is a 0.2% decrease in the average perceived probability of missing a minimum debt payment over the next three months, which is good news for lenders.

Similarly, Deloitte’s ConsumerSignals financial well-being index, which captures changes in how consumers are feeling about their present-day financial health and future financial security based on the consumer’s own financial experience, increased to 101.4 in November, up from 99.1 last month and up from 97.6 a year ago. The overall takeaway is that many consumers are feeling better about their financial situations and are more optimistic about the future of the economy.

Preparing for Debt Collection in 2024

Optimism about the economy’s turnaround hasn’t hit wallets just yet—consumers are still feeling the financial pinch of the high costs of rent, groceries and other basics that haven’t started retreating to pre-pandemic levels. But that didn’t stop holiday shopping—U.S. consumers spent a record $9.8 billion in Black Friday online sales, up 7.5% from 2022. Cyber Monday numbers were even stronger—consumers spent $12.4 billion, up 9.6% from the previous year. And those figures don’t include the ​​118.8 million Americans who spent money at brick-and-mortar stores on Black Friday weekend. 

Today’s consumer is using more and different financial products to cover the cost of the holidays, and Buy Now, Pay Later (BNPL) was a big driver of purchasing power this year amidst elevated interest rates. BNPL purchases, which allow shoppers to buy items on short-term credit and frequently with no interest, also reached a record high on Cyber Monday, making up $940 million of the total online spending—an increase of 42.5% over last year. While a helpful product for consumers, BNPL can be tricky as it doesn’t show up on most credit reports and can be an invisible and unaccounted-for debt burden. 

Every year, an estimated one-third of American adults go into debt to pay for holiday expenses. Growing debt balances, stubborn interest rates and elevated prices are still a thorn for consumers, and contribute to their overall financial stability. For lenders, service providers and debt collectors, guaranteeing repayment will still be a challenge as we start into 2024. So what’s the best way forward in engaging customers in debt collection who are balancing expenses and a bit of a holiday shopping hangover? Here are some things to consider:

  1. Prepare for timely factors. Keep in mind post-holiday bills can make January a difficult month to collect from consumers. But tax season is almost here, when consumers’ refunds create a better scenario for repayment of past-due balances. Plan for this time accordingly and ensure your engagement strategy is in place before February. 
  1. Consider email deliverability. Just sending emails doesn’t guarantee your message will reach your customer. With inundated inboxes, your outreach strategy needs to include how to cut through the clutter and ensure successful email delivery of your customer communications. Learn more about deliverability, the most important debt collection metric you probably aren’t measuring, and how it impacts your debt collection efforts.

  1. Options are your way forward. If there’s one thing we’ve learned from our consumer interactions, including the 16.5 million we added in 2023, it’s that no two consumers are the same, and what works for one may not work for the next. That’s why options are so important—in communication channel, customer support method, and perhaps most importantly, in repayment. Give your customers options for engagement and payment (think partial payments, payment plans, etc.) and you’ll likely see better collection results and customer experience.

New Yorkers Should Receive the Same Digital Communications Benefits All Non-New Yorkers Receive: Part Two

By on November 20th, 2023 in Industry Insights

In our first blog post on the New York and New York City’s proposed amendments to their debt collection laws, we explored the proposed amendments and the alternative opt-out laws in the federal Fair Debt Collection Practices Act (FDCPA) and the Washington, DC debt collection amendment that achieve the same objectives without the unintended consequences. In this part two, we explore the benefits of digital communications for consumers in all other states and jurisdictions—except New York—as well as these unintended consequences New Yorkers face from these potential amendments.

Since the New York Department of Financial Services (NYDFS) is still considering the comments received to their proposed changes and the New York City Department of Consumer and Worker Protection comment period is open until November 29, 2023, there is still time for these Departments to revise their proposals to match the federal law or Washington DC’s law. Both the federal and DC laws permit debt collectors to communicate digitally about a consumer’s account as long as the digital communications contain clear and conspicuous opt-out language with strict penalties for failing to abide by the opt-out provisions. Washington, DC goes a step further and restricts digital communications to one per week unless a consumer opts in to more digital communications in a seven day period.

Both NYDFS and NY should allow their consumers to have the same experience as the consumers in the rest of the country.

Digital Communication Benefits Consumers, Creditors, and Collectors

TrueAccord knows digital communication benefits consumers, as evidenced by countless consumers who have provided feedback (either directly or online) throughout our years in business, like this consumer who wrote in July 2023:

Digital Communications are a Step Forward in Consumer Protection
Digital communications are easily controlled by consumers and tightly managed by service providers with built in mechanisms to prevent harassment. These methods already provide superior consumer protections than phone calls and letters for several reasons:

  1. All digital communications are written, documented, and can be searched, automatically creating a paper trail of communication between the consumer and the collector.
  2. Electronic communications offer significantly better protection from unwanted or harassing communication compared to phone calls and letters. Consumers hold the power and can easily opt out of electronic communication by clicking “unsubscribe,” marking emails as spam, replying STOP to a SMS, or blocking a number entirely from their device.
  3. Service providers closely monitor inbound communications and those senders who appear to be mass marketing are often blocked from delivery altogether in the spam filters for both email and SMS. Unfortunately for licensed businesses, like law abiding debt collectors who have a legitimate reason for these digital communications, their digital communications may never reach a consumer’s phone or inbox without a very sophisticated delivery strategy that takes into account frequency.

Additionally, email is designed to travel with a consumer forever, whereas addresses and oftentimes phone numbers can change. Email addresses are not ever reassigned by service providers. If consumers frequently change addresses, like military families, email may be the best channel to use to communicate as it lowers the risk of missed communication when consumers forget to update their account information with their new physical address.

Consumers Prefer Digital Debt Collection
By and large, consumers prefer to communicate with their collection agencies digitally—they already predominantly communicate with their banks, creditors, and lenders digitally, so digital collection is a smooth transition when an account moves to collection. As this consumer reported just this past August 2023:

Almost all TrueAccord communications with consumers (96%) happen electronically with no agent interaction. This is possible because our electronic communications contain links to online pages where consumers can take action on their accounts. In fact, more than 21% of consumers resolve their accounts outside of typical business hours—before 8AM and after 9PM—when call centers are closed and it is presumed inconvenient to contact consumers under the FDCPA.

Consumers Should Not Have to Opt-In to Electronic Communications Twice
Consumers already opt in and communicate through primarily digital channels with their creditors. Requiring consumers who have already opted in to have to again opt in to digital communications in order to discuss the same account with a collection agency adds burden to consumers. When a consumer provides their electronic contact information (email address or cell phone number) to the creditor, there should be little doubt that the consumer desires to communicate electronically. If the consumer does not, they can unsubscribe or opt out from continuing to receive messages through these channels.

Consumers are familiar with opt-out methods such as the standard unsubscribe hyperlink in emails and the phrase “Reply STOP to opt-out” in text messages, as they do from all other unwanted communications in other industries. Not only can consumers opt-out from digital communications by simply replying stop to a text or clicking twice to unsubscribe, at TrueAccord consumers can also reply to any digital communication, phone into the office or send us a letter. Even with the multiple options and ease of opt out, few consumers unsubscribe. Of the millions of email communications TrueAccord sends, only 0.04% of consumers unsubscribe, most using the unsubscribe link provided in the email. And out of the millions of text messages we send, all text messages contain the phrase “Reply STOP to opt-out,” and on average only 1.13% of consumers reply stop.

It is a requirement of the FDCPA to include a clear and conspicuous method to opt out of digital communication. Additionally, failure to honor a request to stop communicating in a particular channel is a violation of the law subject to fines that include attorney’s fees. In addition, consumers expect an easy way to opt out, if that option is not available in digital communications (not only is it a violation of the law) but consumers can just as easily report the communication as spam which will result in the inability of the debt collector to send digital messages. All of these protections, along with the clear consumer preference for digital (in part demonstrated by their low opt out rate), negates the need to change the experience to one where the consumer has to take steps to phone in to consent before any digital communications can be sent notifying the consumer of their account in collections as will be the case if the NY and NYC amendments take effect.

Unintended Harms to Consumers if Digital Communications are Restricted

Limiting Digital Communication Use Hurts All Consumers
Requiring special consent for email, text messaging, or other digital channels, when no such consent is required for calls and letters, hurts consumers by increasing unwanted calls and litigation risk. The proposed changes will require debt collectors to capture consent from consumers directly, even when consumers already opted in to text and emails about their account with their creditors. This means that a debt collector cannot text or email to inform the consumer about their account being in collection, provide them with a notice of their rights, and detail possible next steps (the fastest, least bothersome methods of communication).

Instead, debt collectors must mail consumers letters and consumers must affirmatively respond to those letters by calling into the office (something that must be completed during working hours as opposed to electronic communications that can be explored at any convenient time for consumers). This stifles the flow of information that helps consumers make informed decisions about their finances and simultaneously helps creditors make informed choices about recovery options and future lending strategies. After all, we know busy consumers often do not respond to outbound letters.

If consumers don’t respond, then debt collectors place outbound calls—which we also know is no longer consumers’ most preferred method of communication—until they get the consumer on the phone to discuss their account and capture the direct consent that will be required if the NYC proposal takes effect.

When a debt collector cannot reach a consumer to communicate about their debt the creditor is forced to make difficult decisions about how to recover, absent an understanding of why a consumer is not reaching out. This includes a decision about whether or not to file a lawsuit to recover the debt (which, if successful, results in garnishment of a consumer’s paycheck or a lien against a consumer’s property).

In some instances where a consumer might not own property or be employed, a creditor may not file a lawsuit but simply accept the loss. This decision can have negative impacts on all consumers: in the future it will be more difficult or impossible to receive access to credit, not only for the individual consumer who was unable to repay the debt but for others consumers that have poor credit history or no credit history, as lenders become less likely to take risks when there is a lower chance of recovery. Additionally, and depending on the extent of their loss, lenders may choose to raise interest rates and APRs impacting all consumers to ultimately cover these losses.

Non-Digital Communications Can Be Disruptive to Consumers
Consumers use the internet, mobile devices, and their emails for communication, shopping, and financial transactions. When a customer defaults on their account, it is a disruption to their lives to suddenly receive phone calls and letters regarding an account for which they previously only communicated via digital channels. Many of TrueAccord’s creditor-clients, concerned about their consumer experience and their brand image, prefer a seamless transition to debt collection communications and prohibit TrueAccord from making any outbound calls or sending letters on their accounts because their customers have only ever interacted digitally.

This approach has proven to benefit the consumers that need help the most, as one customer explained to us in February, 2023:

New Yorkers Should Receive the Same Digital Communications Benefits All Non-New Yorkers Receive: Part One

By on November 13th, 2023 in Compliance, Industry Insights

The New York City Department of Consumer and Worker Protection (NYC DCWP) just released an updated proposed amendment to its rules relating to debt collection. This updated amendment changes significantly more than the first proposed amendment released by NYC DCWP last year. Interestingly, this update contains revisions that are similar to the New York Department of Financial Services (NYDFS) proposed amendments to New York’s debt collection law, 23 NYCRR 1, that NYDFS released last year. After receiving a number of comments to the proposal, including a comment from TrueAccord, NYDFS paused the rulemaking and has not yet released any revised proposal. Both of these departments, NYDFS and NYC DCWP should change their proposed amendments to give New Yorkers the same digital communication benefits all non-New Yorkers receive.

The NYC DCWP and NYDFS proposed amendments are designed in part to align with the federal Consumer Financial Protection Bureaus’s Debt Collection Rule, Regulation F, that took effect in November 2021. Even though consumers often prefer to communicate digitally, the NYDFS and NYC DCWP updated proposals are more strict than Regulation F, particularly as it relates to the proposed restrictions on digital communications. While attempting to provide additional protections for consumers when debt collectors reach out using digital channels, these NYDFS and NYC DCWP restrictions create unintended consequences that raise barriers for NY consumers to correspond with collection agencies in their channel of preference and hinder communication efforts. The effect will raise the number of lawsuits brought against NYC consumers and ultimately increase the cost of credit for all consumers across the US to offset New York losses.

As a company that predominantly leverages digital communications for virtually all aspects of our customer interactions, TrueAccord has unique experience and information from serving over 20 million consumers, which showcases the benefits of digital communication in collections. Small edits to these proposed amendments can have the same desired impact (protecting consumers from a barrage of digital debt collection messages) without limiting the ability of debt collectors to proactively reach out—in fact, both the federal debt collection rule, Regulation F, and Washington, DC’s recent debt collection law amendments restrict the frequency of outbound digital communications and include specific requirements for opt-outs on all communications with severe penalties for failing to honor a consumer’s request.

In this two part blog series, we explore the provisions in these proposed amendments that focus on restrictions on digital communications, the unintended consequences to consumers when laws require opt-in instead of opt-out rules for debt collectors, and how the proposals could be changed to accomplish the same result without placing barriers on consumers ability to communicate in their channels of preference—read part two here. This first installment focuses on the provisions of the law, consumers preference for digital communications, and the small changes that could be implemented before these amendments are final. The second installment seeks to provide information about the benefits of digital communications for consumers in all other states and jurisdictions—except New York. If you are impacted by the current NYC proposal, consider speaking at the upcoming hearing (virtually or in person). Information on how to register is below.

Proposed New York State and New York City Amendments

Three proposed amendments, two different departments, two different jurisdictions, and potential unintended consequences that can harm consumers. Let’s start by evaluating the different proposals by jurisdiction.

New York’s Approach to Digital Communications
The New York debt collection law, 23 NYCRR 1, which took effect in 2019, already restricted the ability of a debt collector to reach out proactively to consumers via email without first having direct express consent from the consumer. This means that a debt collector must first call a consumer to obtain consent before the collector could send an email message about the account. While a debt collector can send proactive emails in an effort to obtain consent, to comply with the law these emails cannot reference the reason why a consumer would want to opt-in to communicate by email with the company, (i.e. about a past due account) and cannot even reference information about the account. So, they ultimately sound like spam.

For example, if a consumer received a message from a company they do not know, without any information about why the company is reaching out and asking for consent to email, why would a consumer opt-in?

The result, not surprisingly, is that New York consumers who had already opted in to communicate via email about the account with the creditor would, after falling behind on payments and being referred to a debt collector, only receive phone calls and letters from debt collectors.

New York’s First Proposed Amendment
December 2022 NYDFS released its first proposed amendment to its debt collection rules. Comments were due February 13, 2023. The first New York proposed amendment also never became final. The amendment included the following:

  • Revised definitions of communication, creditor and debt and a new definition of electronic communication
  • Revised requirements for the validation notice, including that the initial communication must be made in writing to avoid having to send another written communication within 5 days of the initial communication
  • Revised requirement that the validation notice cannot be made by electronic communication but may be made in the form requested by a consumer to section 601-b of the General Business Law
  • Revising the disclosure requirements for debts that have passed the statute of limitations for the purpose of filing a lawsuit
  • Revisions to the substantiation requirements, including a 7 year retention period and requirement to provide full chain of title
  • Revisions to the requirement for a debt collector to obtain consent from a consumer before emailing, including, extending the consent requirement to text messages, requiring the consent to be given in writing and retained for 7 years, requiring electronic communications to include clear and conspicuous opt-outs, requiring collectors to honor such opt-outs, and explaining opt-outs are effective upon receipt
  • New provisions covering the relationship with other laws, clarifying, for example, that local laws are not inconsistent with this law if they afford greater protections
  • New section on severability making clear that if any court rules one section of the law to be invalid, it does not invalidate the other sections of the law

The proposed changes to Section 1.6(b) seek to extend the prohibition on a debt collector to reach out proactively to consumers via email without first having direct express consent from the consumer to text messages. This limits the only digital channel currently available for proactive outbound debt collection communications with consumers in New York.

New York City’s Approach to Digital Communications
New York City’s debt collection laws did not contain any restrictions on digital communications. But, after the New York law restricting proactive emails took effect in 2019, New York City consumers who had already opted in to communicate via email about the account with the creditor would, after falling behind on payments and being referred to a debt collector, only receive phone calls and letters from debt collectors.

New York City’s First Proposed Amendment
November 2022 NYC DCWP released its first proposed amendment to its debt collection rules, comments were due December 5, 2022. These first NYC proposed amendments contained changes to align their laws with those of New York, however, the proposals never became final. The amendments included the following:

  • Revised the out of statute disclosure agencies must provide on communications with consumers whose accounts have passed the statute of limitations for the filing of a lawsuit to recover the debt
  • Revised requirements for debt collectors to maintain records of attempted communications, complaints, disputes, cease and desist requests, calls, including what calls are recorded and not recorded, credit reporting, unverified debt notices, and communication preferences (if known) as well as unsubscribes or opt-outs from particular channels
  • New definitions for attempted communication, electronic record, electronic communication, clear and conspicuous, language access services and limited content message
  • New prohibition on electronic communications unless the debt collector sent the initial communication with the validation notice by mail and the consumer opted in to electronic communications with the debt collector directly and clear and conspicuous opt-outs without penalty or charge on all electronic communications
  • Revised unconscionable and deceptive practices to include: adding attempted communications anywhere communications appeared, such as adding attempted communications to the excessive frequency prohibition
  • New prohibition on social media platform communications unless the debt collector obtains consent and communicates privately with the consumer
  • New rules on requirements prior to furnishing information to credit reporting agencies
  • Revised validation notice disclosures and obligations for translating, if notices are offered in different languages

New York City’s Revised Amendment
November 2023 NYC DCWP released an updated NYC proposed amendment. Comments can be submitted through November 29, 2023. A hearing will be held that same day at 11AM. The updated version contains all of the changes suggested in the first proposal as well as:

  • Additional revisions to what information is required to be maintained in debt collection logs that would require major changes to all collection software systems
  • Additional new definitions for covered medical entity, financial assistance policy, itemization reference date, original creditor and originating creditor
  • Clarifies that any communications required by the rules of civil procedure in a debt collection lawsuit do not count toward frequency restrictions
  • New disclosures for medical debts as well as specific treatment of medical accounts, such as validation procedures and verification of covered medical entity obligations prior to collections

These amendments align the New York City law to that of New York. If these amendments become final, New York will be an opt-in jurisdiction instead of an opt-out jurisdiction, meaning debt collectors must communicate by telephone or letter to obtain consent to text or email, even when a consumer already opted into digital communications about their account. This puts New Yorkers at a disadvantage from consumers in all other states who are able to communicate electronically under the provisions of the federal Fair Debt Collection Practices Act (FDCPA) and Regulation F.

Opt-Out Jurisdictions Offer Consumers the Same Protections

The rest of the United States have approached debt collection attempts via digital communications very differently from New York. For all consumers outside of New York, debt collectors may send proactive debt collection communications via email or text messages. The laws require all digital communications contain clear and conspicuous opt-out methods (unsubscribe flows in emails and “reply STOP to opt-out” in text messages) with strict penalties for debt collectors who do not honor a consumer’s request to opt-out of digital communication channels. Digital communications also fall under the frequency limitations of the FDCPA and Regulation F.

Only one other jurisdiction to date has created additional restrictions related to digital communications that exceed the protections in the FDCPA and Regulation F. Washington, DC amended their debt collection law Protecting Consumers from Unjust Debt Collection Practices Amendment Act of 2022, and the changes that took effect in January 2023. DC remains an opt-out jurisdiction with specific requirements for opt-outs on all email and text communications with severe penalties for failing to honor a consumer’s request, but also added a specific frequency limitation on digital communications. Debt collectors are only permitted to send a consumer one digital communication per week—one email or one text message (one time in a seven day period). A debt collector may only communicate digitally more than one time per week after a consumer opts-in to additional digital communications.

As a result in these opt-out jurisdictions, consumers can still receive the digital communications they prefer without having to have phone calls attempting to get them to opt-in to digital communications, like the consumers in New York. Additionally, with these opt-out jurisdictions consumers learn about their account faster, can explore options on their own time, and receive the additional benefits that come with early communication about their debts—such as setting up a payment plan, having a credit reporting tradeline updated or deleted, providing evidence of fraud or identity theft, and disputing all or portions of the balance. New York consumers who do not answer their phones are less likely to receive these benefits that come with knowing there is a debt in collection and the options to resolve.

Ultimately, New York still has time to amend their proposals to ensure their consumers receive the same treatment as all other consumers in the US.

Consumers Prefer Digital Communication

By and large, consumers prefer to communicate with their collection agencies digitally—they already predominantly communicate with their banks, creditors, and lenders digitally, so digital collection is a smooth transition. For example, almost all TrueAccord communications with consumers (93%) happen digitally with no agent interaction because the digital communications contain links to online pages where consumers can take action on their accounts. In fact, more than 21% of consumers resolve their accounts outside of typical business hours—before 8AM and after 9PM—when it is presumed inconvenient to contact consumers under the FDCPA. In fact, consumers often post publicly about their positive experience with digital collections:

We believe restricting digital methods to reach and serve consumers will disadvantage vulnerable populations of consumers who primarily conduct most of their affairs digitally. According to the Pew Research Center, “reliance on smartphones for online access is especially common among younger adults, lower-income Americans and those with a high school education or less.” As the consumer described above, TrueAccord’s approach of sending digital communications helps consumers easily navigate to our website and perform actions at their convenience online.

We will continue to explore the impact of these proposed amendments in the second blog post of this series, including how:

  • Limiting digital communication use hurts all consumers
  • Multiple opt-in requirements burden consumers
  • Non-digital communications can be disruptive to consumers
  • Email and text messages are a step forward in consumer protection

Register to Speak at the Upcoming Hearing

Sign up to speak for up to three minutes at the hearing by emailing You do not have to be present at the hearing to speak if you join the video conference using this link,, meeting ID: 255 089 803 499 and passcode: 8HGNSw.

Read Part Two of Our Series: New Yorkers Should Receive the Same Digital Communications Benefits All Non-New Yorkers Receive

Discover the unintended harms New Yorkers face if digital communications are restricted by proposed amendments to New York and New York City’s debt collection laws and the digital communication benefits consumers get in all other states here»»