When it comes to reaching consumers, it’s no secret that email has surpassed phone calls as the preferred method of communication. In fact, 59.5% of consumers prefer email as their first choice for communication.
But just because your business sends emails to consumers doesn’t mean that your messages make it to their inbox. And if that email never reaches the intended recipient, it doesn’t matter what that customer’s preferred method of communication may be.
There are more factors than you may realize that go into whether or not your email reaches the consumer’s inbox, so let’s look at the hidden anatomy of email and the factors that influence where your emails end up.
What’s the Difference Between Mail Servers, Mailbox Providers, ISPs, and ESPs?
Before we look at what happens when you hit “send” on that email, it’s important to identify some of the key components that operate behind the scenes to get your message from point A to point B.
Mail Server: A mail server (also known as a mail transfer agent or MTA) is an application that receives incoming email from the sender and forwards outgoing messages for delivery to the recipient.
Mailbox Provider: A mailbox provider provides email hosting and implements email servers to send, receive, accept, and store email for the recipient.
ISPs: Internet Service Providers (ISPs) provide internet. Although ISPs can provide email services, separate ESPs are often used for business email operations—but ISPs play a major role in email delivery and landing in the recipient’s inbox.
ESPs: Email service providers (ESPs) are a service that enables businesses to send emails and email campaigns to a list of subscribers.
How Does Email Actually Work?
When you hit the “send” button, your ESP sends the email to the recipient’s mail server through various protocols such as SMTP (Simple Mail Transfer Protocol). The delivery process involves establishing a connection with the recipient’s mail server, transferring the email content, and receiving a response indicating whether the email was accepted or rejected by the mailbox provider.
Several key factors play into whether an email gets tagged in spam or junk or filtered into “social” or “promotion” categories.
Mailbox providers and anti-spam filters make inbox placement decisions based on a 30-day rolling history of sender reputation metrics
Inbox placement is based on the subscriber’s interaction, regardless of your business model
All types of emails are subject to the same filtering, regardless of content
At TrueAccord, every time we send an email our email providers notify us of events like delivered, open, click, hard bounce (such as an email being sent to an invalid or nonexistent email address), soft bounce (typically an indicator of a temporary technical issue on the recipients’ end), and spam complaints.
In the case of bounces, TrueAccord stores that data and categorizes it as not delivered. Emails that result in a soft bounce are temporary bounces and could get delivered within 72 hours. For hard bounces, we will not send to those again—or it severely hurts our reputation among ESPs and ISPs. For Regulation F compliance when delivering disclosures electronically, debt collectors are required to monitor for deliverability. TrueAccord presumes that any hard bounce or undelivered soft-bounce (one that is not delivered after 72 hours of the first soft bounce) has not been delivered.
Why are ISPs So Selective?
the ISPs are selective on what emails get accepted and which actually reach the inbox. But there are three key initiatives ISPs consider:
To protect email account owners from:
Spam
Scams
Poor experience
To protect and prioritize company resources:
Limited email engines i.e. mail servers
Limited bandwidth
Limited personnel or internal expertise
To continue driving revenue:
Lower email interaction reduces ad impressions and revenue
Too many emails can lead to account abandonment from subscribers
Best Practices to Get Your Emails Delivered
Understanding the different components of email, how it actually works, and the selective filters in place to protect consumers are all important to a successful email program. Now let’s look at several best practices to follow:
Build and maintain a positive sender reputation with ISPs and ESPs
Ensure good email list hygiene
Send to actively engaged subscribers
Maintain consistent volume and cadence (avoid spikes)
Avoid spammy subject lines
Develop valuable content that would engage subscribers
While many of these best practices may seem like no-brainers, achieving them can take more skill and effort than most businesses expect. Each of these contribute to email delivery rates and more importantly, deliverability to recipients’ inboxes—key drivers towards consumer engagement and your bottom line.
Outbound calling has been the main mode of collections for decades, but the cost of a call center or in-house full-time employees (FTEs) making calls is no longer justifiable when most consumers simply don’t answer the phone, on top of the mounting compliance restrictions limiting opportunities to call in the first place.
But outbound dialing isn’t completely obsolete—digital-first omnichannel strategies can turn traditional call-and-collect operations around by integrating new digital channels into the communication mix.
Let’s compare traditional outbound calling methods versus a digital-first approach in three key areas impacting your business’s ability to collect more, faster:
COST
COMPLIANCE
CONSUMER PREFERENCES
Get even more statistics and data in our latest eBook — Why Evolve from Outbound Calling to Omnichannel Engagement? Cost, Compliance, & Consumer Preferences — available for download now»»
COST: Call-and-Collect
The cost to collect has been on the rise for traditional methods for years, whether you outsource to a call center or have FTEs dialing the phones.
One reason for this rise is based on the fact that many lenders still practice old strategies to prioritize contacting customers based on their risk profiles, balance, and average days delinquent—completely missing portions of their portfolios. Factoring in propensity to pay is important to successful engagement, but it means that agents’ time is focused on only a small portion of accounts, leaving potential repayments on the table.
Add in the overhead costs, inflation, and hiring challenges of using agents as first attempts at engagement and watch the expenses continue to climb past what you’re able to collect through outbound calling.
COST: Digital-First Omnichannel
Right off the bat, digital-first shows the cost of collections can fall by at least 15%.
Since digital is infinitely scalable, this communication tactic can touch every single account, regardless of scoring models—unlike human dialers who can only physically call a certain number of accounts on any given day. Going digital-first cuts down on the time billed for making repeated outbound calls that are never answered or returned, and it allows agents to interact with customers that want to speak directly to a person.
Overall, digital-first has shown to boost customer engagement by 5x, the first step towards repayment.
COMPLIANCE: Call-and-Collect
It’s no secret that it’s increasingly complicated to reach customers with all the legal communication restrictions.
While all debt collection communication is subject to compliance rules, outbound calling has specific laws and regulations that can carry costly penalties for non-compliance—and it’s only becoming more complex with new state-specific rules rolling out right and left. But no matter where your business is doing business, if you’re making collection calls you must follow these federal guidelines:
Inconvenient Time Rule: prohibits calling before 8am or after 9pm
Regulation F’s 7 and 7 Rule: Cannot call more than seven times within a seven-day period
Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act) tagging legitimate businesses as spam
FCC Orders further restrict dialing to landlines and include opt-out requirements for prerecorded voice messages
But there is a more streamlined way to ensure your collection communications are following all the rules: enter code-based compliance.
COMPLIANCE: Digital-First Omnichannel
Code-based compliance works by programing rules that ensure all communications fall within all federal and state laws and regulations, such as:
Frequency and harassment restrictions
Consent requirements*
Disclosure requirements
This digitally designed approach to compliance greatly reduces the opportunities for human error that are bound to occur in more manual processes. Additionally, the digital-first approach allows companies to continue to collect during times that calling would violate certain regulations, like the Inconvenient Time Rule. In fact, 25% of payments come in after 9pm or before 8am (the determined inconvenient times), since these hours can actually be more convenient for consumers to catch-up on digital communications they received throughout the workday.
*Generally, there is no requirement in the federal law to send debt collection communications by email, though some states are more restrictive. This is not legal advice, please consult an attorney for guidance on your unique circumstance.
CONSUMER PREFERENCE: Call-and-Collect
46% of consumers want to be reached through their preferred channels—so what are today’s consumers’ preferences?
Here’s a hint: phone calls aren’t at the top of the list.
And today’s Right Party Contact rates show it, ranging between just 0.5% – 4.0%. And out of those that do answer the phone, 49.5% of consumers take no action after a collection call. The old call-and-collect tactic may actually do more harm than good if compliance rules are ignored: out of the communication tactic complaints received by the CFPB in 2020, over half complained of frequent or repeated calls.
CONSUMER PREFERENCE: Digital-First Omnichannel
So if phone calls aren’t consumers’ preferred method of communication, then what is? For 59.5% of consumers, email is their first preference when it comes to debt collection communications. This is especially important considering that first contacting a customer through their preferred channel can lead to a more than 10% increase in payments.
This digital preference isn’t surprising since nearly nine in ten Americans are now using some form of digital payments—why would they expect collections to be any different? 14% of bill-payers prioritize payments to billers that offer lower-friction payment experiences, and digital is often preferred because of it. Digital communications are easily controlled by consumers and are tightly managed by service providers with built in mechanisms to prevent harassment (like with code-based compliance), which we know has historically been a challenge for call-and-collect practitioners.
Digital-First is the Future of Collections
And it’s here today, working for TrueAccord clients and customers.
At TrueAccord, we find that more than 96% of customers resolve debts without any human interaction when digital options are offered—reducing costs associated with outbound calling, lowering risks with code-based compliance built in, and delivering an experience that consumers prefer.
Get even more statistics and data in our latest eBook — Why Evolve from Outbound Calling to Omnichannel Engagement? Cost, Compliance, & Consumer Preferences — available for download now»»
When most people think of debt collection, the word “empathy” rarely comes to mind. As a mission-driven company, we at TrueAccord, are trying to change that. We know life happens and financial anxiety has become more common than ever—especially when it comes to dealing with debt. By understanding and anticipating a customer’s needs, TrueAccord takes an empathetic approach which enables us to tailor our message and help the consumer’s journey back to financial health. With this in mind, it’s crucial for us to understand how a consumer might feel when they fall into debt.
Understanding and Engaging with the Customer
Life happens and so do delinquencies. So far, most fintechs have been good at focusing on customer experience by investing in user research and making sure that their products resonate with their target audience. However, a customer’s situation can change at the drop of a hat and with it their financial status, priorities, and motivations. When a customer, whom you thought you knew well, has an account that goes delinquent, they essentially become a stranger. Now a whole new approach is required in order to engage with this consumer.
In order to adopt the right approach to engage a delinquent account, the first thing we have to figure out is who the customer is. What are their needs? What problems do they have? Do they have special circumstances? Not only is every customer different, but every interaction you may have with that customer could be different depending on what life situation they find themselves in. So it is very important to have a broad communication strategy and be ready to meet the customer when and where they are ready to engage. This means don’t limit communication channels and have options that consumers can explore, evaluate, and select on their own time.
Leveraging Digital-First Channels
Most consumers prefer using digital channels over talking on the phone with research showing 94% of unidentified calls going unanswered. Digital channels allow people to choose when to respond without being put on the spot.
But starting a digital-first approach is not easy—it’s not just about sending emails or SMS messages to consumers. At TrueAccord we try to find the right communication channel to use for a specific consumer. We might start with a combination of email and SMS but once we get more engagement with one or the other, we’ll primarily focus on using the channel the customer engaged in.
We make sure that they’re aware of their debt and their options from obtaining more information, disputing, or evaluating payment plans all through a portal where the consumer is in control..
For consumers who do choose to set up a payment plan, we work to make sure that they have everything they need to be successful in their plan – whether that means changing the plan, the payment date, or amount, we monitor and provide content so that the consumer can effectively stay in control of their plan through successful completion – putting the consumer back in control of their own financial health while at the same time recovering for the creditor.
Using Data for a Personalized, Empathetic Experience
To truly engage consumers a successful digital strategy should go beyond a simple campaign that pushes out emails to all of your consumers at the same time every week or every other week with a generic message. Not only do you have to overcome the inboxing challenge to avoid spam filters, you need to deliver the communication at the optimal time for the consumer to open the message. And you have to have the right message, a personalized message that causes the consumer to act – to communicate back to you their intentions related to the account (dispute, full payment, payment plan, hardship, etc.).
But how do you personalize?
This is where it’s vital to leverage an understanding of your consumers. This can be done with experimentation in A/B testing consumer research, and machine learning. A/B testing and consumer research help identify what resonates with consumers and what does not. Machine learning allows personalization at scale. At TrueAccord, we rely on machine learning to continuously improve our models. We can see what digital channels, timing, and messaging each individual consumer responds best to and tailor those specific preferences to the individual journey for each consumer. We also make sure that compliance is included from the start as it needs to be regulated throughout.
For example, the best payment option is different for everyone. We provide a lot of flexibility, but we also know that showing them that flexibility up front, something that they can actually afford, will engage the customer to take the next step. Depending on the size and the age of the debt, we may show a couple of payment plans that we believe will be the most attractive to that customer along with the option to build their own payment plan. Once a customer sets up their payment plan, we send reminders when payment is due. We also have models that predict if a consumer is likely to break their payment plan based on past behavior and offer options to help keep them on track, like pushing the payment if they’re unable to pay on that date (because we understand that life happens, just like delinquencies). And as they make their payments, we celebrate their progress with them and acknowledge that they are making an effort to improve their financial situation!
The End-Product:
TrueAccord has worked with over 20 million consumers and sends over one million communications per day. For each of those communications, we’re making decisions on what to send, how to send it, and when to send it all in accordance with the legal and regulatory compliance obligations. We then use that data to continuously optimize and improve our communication method for each consumer. We’ve learned that if you’re building for the downtimes, it’s critical to realize that debt collection is a part of a consumer financial service. While our creditors are our clients, if we do what is right for the consumer (our clients’ customers), they are more likely to pay back to those creditors. A better consumer experience leads to better outcomes for all.
By incorporating an empathetic approach to debt collections, TrueAccord is able to collect more money while helping consumers with their financial situation.
Want to learn more about how your business can integrate more empathy into your collections communications? Schedule a consultation today!
Delivering communications to your customers has always been a compliance challenge with the plethora of laws, regulations, court decisions, and regulatory guidance in the debt collection space. Today with more communication channels available and regular communication from debt collection regulators—via consent orders, compliance bulletins, supervisory highlights, and even press releases—your compliance management systems and design must be flexible and easy to update.
To get expert insights on the newest compliance issues and opportunities that need to be front of mind when sending digital communications to effectively engage your customers, Associate General Counsel Lauren Valenzuela and Director of User Experience Shannon Brown teamed up to discuss the Future of Collections & Compliance in TrueAccord’s latest webinar.
Below are some of the key takeaways from their discussion, plus attendee poll results on top compliance questions.
*This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter.
The Current State of Compliance
Lauren Valenzuela [LV]: Needless to say, over the last 10 years the CFPB has fundamentally changed how we think about and approach compliance. That has really influenced our industry and how we think about communications in debt collection.
LV: Over the last decade the CFPB has taught us that compliance is an evolving thing. It’s not something that you can set and forget. It is something that is dynamic and that must constantly evolve and mature in order to be effective, because our environment is constantly changing.
Attendee Poll Question: What is the biggest compliance issue you face when trying to engage with your customers?
Changing Consumer Preferences for Collection Communications
LV: The CFPB recently published a blog and shared that it is a “mobile first” agency, meaning that most people who visit its website are using mobile devices or smartphones. Here at TrueAccord, what does our information show about mobile usage?
Shannon Brown [SB]: Consumer mobile use has skyrocketed. In 2016, about a quarter of our consumers were using their phones to read emails and visit our website—and that number has increased to consistently above 80%. We’ve put a lot of effort into making sure our emails and website are responsive to make sure we’re meeting the needs of our consumers who are overwhelmingly on mobile. We’ve made sure our pages are able to load faster for consumers that have less stable cell connections and really made sure our interactive elements are big and optimized for tapping with a finger instead of clicking with a mouse. As far as communications, our consumer research has really shown that most consumers don’t answer the phone and want to be contacted through digital channels—they want a multi-channel experience.
LV: So we’re seeing consumers increase use in mobile phones. Even the Bureau has seen that, and we’re seeing banks increase their use of digital technologies to communicate and facilitate transactions and engage with their consumers as well.
What’s the Role of the Legal Team in Your Collections Strategy?
LV: There needs to be a partnership between compliance and pretty much all core functions, and especially at a fintech company like TrueAccord where our technology and our digital communications platform are the center of what we do to help consumers. It’s really neat to see compliance interwoven, and I think that’s reflective of its compliance management system and company culture.
Compliance Management System Evolution
LV: Ten years ago, many collection agencies were likely in the undisciplined stage, where there was some type of compliance ongoing, but it didn’t have much structure—processes may be undocumented, potential exposure to vulnerabilities that expose themselves on lawsuits, for example.
The next iteration is reactive, meaning there is development of some policies and procedures, controls are identified, and the company is responding to issues and incidents reactively.
The next level is calculative. At this level, leadership is actively engaging the organization in compliance, risk assessment processes are maturing, corrective action plans are being developed and executed to remediate deficiencies.
This next level is proactive, meaning employees are trained and following clear policies and procedures, and such procedures have built in intentional redundancies. The organization is being proactive in identifying and responding to issues and incidents and is self-identifying deficiencies and essentially executing on comprehensive corrective action plans.
Generative means that there’s continuous improvement towards challenging goals, which are driven by data analysis. There’s critical evaluation of policies and procedures and controls, and risk is integrated in operations. Issues and incidents resolutions are driven by stakeholders and really enhanced controls.
Attendee Poll Question: Which category does your Compliance Management System (CMS) fall under today?
LV: So no matter where you’re at within your compliance management system and no matter what maturity level, the important thing to remember is that you don’t have to stay there—you can evolve. We can’t stress this enough. Compliance is an evolving and dynamic thing, and should be constantly evolving to stay effective in whatever environment it is in.
The fact that TrueAccord has a well-oiled compliance management system allows us to study that climate and then figure out how to translate it and make tangible improvements in our consumers’ experience. That’s something we encourage everyone to do: think about the consumer experience and the environment you’re collecting in, because it looks remarkably different than it did five years ago for example, and we should all be evolving.
The Product Perspective
LV: How has the CFPB influenced how we develop our products here at TrueAccord?
SB: Compliance has been built into our product development life cycle. Besides frequent meetings with our compliance team for feedback and approvals throughout the life cycle, we’ve designed and built our product so we can be nimble in responding to regulatory changes, which we know happen a lot.
LV: There are numerous federal, state, and local laws. Can you give some insight into how we at TrueAccord keep up with all of that?
SB: One of the ways we efficiently keep up with the requirements is through our code-driven approach.
But what does that mean practically? It means, for example, that for any phone call coming in, our agent knows exactly what disclosures need to be given to that consumer via our system, and then gives them an opportunity to log it. It means that any email that goes out has all the necessary disclosures appended, such as out of statute disclosures, state disclosures, et cetera, and these are all kept in our code base. Not only does it take the guesswork out of the equation for our agents and our content team that’s sending communication, it reduces human error. It also means that anytime anything needs to be updated, for example, a wording in a disclosure or when a new disclosure needs to be added, we can do it in one place instead of across a variety of templates and areas of the website. We can do it in one place and then that change propagates throughout the system. This helps us to react to changes really quickly.
Our compliance team is involved in every aspect of the process. They start as educators for the whole product team—we’re all aware of regulatory considerations and know where and when we need to ask for feedback and approvals from our compliance team. So they aren’t just making sure that agents are acting compliantly, but that the product team has that knowledge as well.
And as a product team, we have this wonderful research function that’s constantly talking to consumers and trying to understand their needs and asking for feedback, which we share with our compliance team so that they can go and advocate for consumers when they are talking with regulators and legislators
Future Forecast: Where is Compliance Heading in the Collections Industry?
LV: The next iteration of compliance can be seen in some of the recent CFPB and FTC activity. Last year in 2021 for example, the CFPB published a new section of its supervision and examination manual, specifically an information technology focused compliance management review section. The Bureau is looking at any type of technologies that you may employ, like machine learning models, algorithms, or analytics.
If you’re using any kind of algorithms or machine learning to help inform any aspect of your collection strategy—or if any of your service providers are using any type of algorithms or machine learning to help provide a service to you—you must pay attention to this section of the manual because it’s incredibly informative. We’re seeing the CFPB and the FTC addressing companies’ use of data and technology, wanting to make sure that companies have proper governance and oversight of it.
All of this recent activity shows how compliance within any company, more than ever before, must really take a cross functional approach to its work in order to keep up with the evolving environment. The compliance function should not be siloed. It really needs to be in partnership with all different disciplines and functions within the organization. We’re seeing right here and now and into the future, your information technology professionals, your information security professionals, your product professionals, your engineers, your data scientists, anybody who looks, touches, thinks about data and technology should all be working with compliance
Attendee Poll Question: Which of the following are you most interested in for the future of compliance and collections?
Three Key Takeaways
LV: Compliance is more than a department, it’s more than a program, it’s more than a system. It should be part of an organization’s cultural DNA. So when you think about compliance, wherever you are within an organization, think about how you can make it part of your organization’s DNA.
SB: Concentrate on building your tools to be nimble to the regulatory changes. Things like the design systems and the component libraries that allow you to make those changes quickly and easily, and make sure that they’re made everywhere across the system so you don’t have those older disclosures hanging out somewhere that someone forgot to change. Build your tools so you can make changes in one place efficiently.
LV: As our environments get more sophisticated around us, compliance professionals need to collaborate cross functionally more and more with other disciplines within a company to be effective and stay ahead of the evolution.The more the industry uses data and technology, we have a responsibility to make sure that it is being used in accordance with the law and best practices.
Anyone working in the collections space should be familiar with the federal Fair Debt Collection Practices Act (“FDCPA”) and its regulation, Regulation F; but did you know that there are multiple debt collection laws and regulations at the state and local level too?
State and local laws and regulations often mirror aspects of the FDCPA, however, there are a handful which are remarkably different from the FDCPA. In fact, the FDCPA makes clear that it is not designed to “annul, alter, or affect, or exempt any person” from “complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of [the FDCPA], and then only to the extent of the inconsistency” (refer to 15 USC § 1692n). The FDCPA goes on to clarify that “a State law is not inconsistent with [the FDCPA] if the protection such law affords any consumer is greater than the protection provided by [the FDCPA].” Therefore, debt collectors collecting nationally have to grapple with and reconcile a patchwork of federal, state, and municipal debt collection laws and regulations when collecting in multiple states.
It is no simple feat to build and maintain a compliance program which keeps a debt collector in compliance with this patchwork of differing and competing debt collections laws and regulations. Debt collectors take different approaches to stay in compliance—from training their collectors on each and every state law and regulation, to deciding not to collect all together in a particular state/locality. Ten years ago when I first started in the industry, I remember compiling a job aid of all the state and local laws debt collectors had to remember and abide by—it was long and nuanced.
For example, the FDCPA explicitly permits debt collectors to speak to a consumer’s spouse without such communication resulting in a third party disclosure (see 15 USC § 1692c(d)), whereas some states such as Arizona and Connecticut are silent on this issue and other states, such as Iowa, consider spouses as third parties. In those states, a consumer must provide their consent in order for a debt collector to speak with their spouse. Another example is communication frequency limitations. While Regulation F provides parameters for call frequency (i.e., calls made in excess of 7 times in a 7 day consecutive period, and calls within 7 days of having had a phone conversation, are presumed harassing), Massachusetts has an entirely different call frequency regime. Massachusetts outright prohibits debt collectors from engaging any consumer in a communication by phone (i.e., calls and texts) more than twice in a 7 day period. While these phone restrictions are similar, they are nuanced nonetheless (e.g., one applies only to calls while the other applies to calls and texts; one in a presumption of harassment and the other is an outright prohibition, etc.) These are just a few examples to illustrate how there may be little distinctions and differences between the FDCPA/Regulation F and state/local laws.
In an effort to simplify how many rules debt collectors have to learn and abide by, some debt collectors design and adopt policies which reconcile as many of the laws and regulations as it can for a particular topic. For example, choosing to adopt the strictest law/regulation as a company policy so that it applies across the board is one strategy some companies may adopt. While this approach will help a debt collector meet or exceed a state law requirement, this approach can unnecessarily limit a debt collector’s ability to communicate and/or collect in more places than necessary, thereby undermining those state economies that have no such restrictions.
While the patchwork may seem daunting, this is an area ripe for compliance innovation—where technology can be leveraged to automate controls and guardrails. For example, instead of requiring debt collectors to memorize multiple state laws/regulations, controls can be designed to automate guardrails for state laws in a collection system. Here at TrueAccord, compliance has a close partnership with its product and engineering teams, to help leverage technology when laws and regulations are introduced or changed. While technology will not replace a compliance monitoring team, it has the potential to increase the efficiency and efficacy of any human monitoring by helping front line agents understand their state by state requirements and compliance teams focus their auditing and monitoring efforts.
*Lauren serves as TrueAccord’s Associate General Counsel. This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter.
Just as technology has evolved leaps and bounds, so have consumer communication preferences, especially when it comes to debt collection. The Consumer Financial Protection Bureau (CFPB) recognized in Regulation F—rules updating the Fair Debt Collection Practices Act (FDCPA)—that consumers in debt want to communicate with debt collectors through digital channels, like email and SMS.
Under the FDCPA, Regulation F, and other state laws, these digital channels have the same compliance requirements as calls, such as no harassment or abuse, no false or misleading representations, and no unfair practices. Even though these additional channels have the similar compliance requirements, businesses must still manage these requirements across all channels and have the capacity to update requirements as new laws are passed, new cases come out, and new guidance is released from regulators causing a need to change in a compliance practice. How can businesses ensure compliance through the evolving regulatory landscape?
Code-based compliance is a critical component for the debt collection industry.
We interviewed five key stakeholders in this process to get different perspectives on what code-based compliance is and how it benefits businesses, lenders, consumers, and auditors. Read below for insights from: Eric Nevels, Director Operational Excellence; Hal Eisen, VP Engineering; Kelly Knepper-Stephens, Chief Compliance Officer and General Counsel; Michael Lemoine, Director Client Success; and Milo Onken, Director Quality Assurance.
What is Code-Based Compliance?
Eric Nevels: When an algorithm is used to help make decisions on consumer communications in debt collection, a code-based compliance system would be coded into that algorithm or work side-by-side with the algorithm to ensure that all digital communications fall within federal and state laws and regulations.
Michael Lemoine: Here’s an analogy to help explain code-based compliance: You lace up your new running shoes. You scoured all the online reviews and this pair provides the best ankle support. You ate a light but fuel packed breakfast, no mid run slump for you. You eyed the weather app on your phone, all clear and perfect temp. Hydrated, check. Headphones, check. Mood, great! You’ve got this, everything is under control and accounted for. Off…you… go!
Even if you’re not a big runner this sounds like a safe and productive way to start a day. But what if instead of checking for rain and eating a little oatmeal to make sure you had a good jog, you had to manually complete a full body diagnostic and perform microsecond electrical and chemical adjustments to your body just so you didn’t become disabled or even die while getting a little exercise? Not so safe and productive now. Is the risk of immediate death worth the effort and small reward of a single run?
Every second your body automatically, without thought or effort, reads your current condition and reviews thousands of risks and initiates controls, responses, and actions to keep you alive—called the autonomic nervous system. Code-based compliance is the autonomic nervous system of an organization’s risk and control program. Now, it’s not as dramatic as life and death, but code-based compliance can supercharge any compliance management system because once the code has been programmed and deployed the system always follows the programmed rules leading to consistency and accuracy.
How is Code-Based Compliance Different From More Traditional Approaches to Compliance?
Eric Nevels: In the absence of code, human beings would need to check against the various restrictions on communications. Anytime humans are involved, even with rules and procedures in place, it is possible for errors to occur. With a code-based system, it is impossible for that action to take place.
Kelly Knepper-Stephens: Certainly it’s better than manual compliance because with manual compliance you have an opportunity for human error. But it doesn’t mean that code-based compliance is “code it and forget it.” Your coders need a process to quality check the code. And your compliance team or a front line control team needs to monitor to make sure the coded compliance rules are working as you intended them to work.
How Does This Approach Benefit Collection Compliance Strategies?
Hal Eisen: Code-based compliance is great because it never gets tired or distracted and is not subject to any of the other human frailties. Done correctly, it can be efficiently applied to a wide range of software products without needing additional investment. Most compliance rules were written for the benefit of consumers. The better we comply, the safer consumers are. Consumers should have accurate disclosures, fewer annoying interactions and feel better about the whole experience.
Eric Nevels: Lowers operational risk and ensures compliance with regulations. Additionally, it is much easier to update the code when regulations are changed. It helps ensure that they are being treated within the bounds of the law, which is their benefit.
Milo Onken: The code-based approach ensures accuracy and tangible evidence for compliance audits. Collaboration with different internal teams and Legal ensures we check, implement, and follow industry compliance directives.
A Code-Driven Future for Debt Collection
Code-based compliance offers predictable and consistent collections methods when coupled with digital platforms. New technology can be mistaken as a risky investment, but digital debt collection systems offer more compliance security and more transparency—for consumers and creditors. Digital collection solutions not only evolve to meet consumer needs, but they can also continually adapt to changing regulations and quickly meet compliance requirements.
Beyond code-based compliance, what are compliance issues unique to collections that need to be front of mind when sending digital communications to effectively engage your customers?
Join us Thursday September 29th at 1pm ET for our interactive webinar, The Future of Collections & Compliance, hosted by TrueAccord Associate General Counsel Lauren Valenzuela and Director User Experience Shannon Brown.
Reserve your space now for an interactive discussion on:
Cutting edge digital collection compliance
The role of the legal team in creating a digital collection strategy
Creating an effective compliance strategy is a crucial component of a business’s chance of success. Debt collection is highly regulated and must adhere to different regulations and laws like the FDCPA, Regulation F, and unique state laws—including regulations that may not be specifically focused on debt collection but still apply to the practice. Noncompliance with laws and regulations that govern or even parallel an industry can result in unhappy customers, litigation, reputational risks and/or enforcement actions.
Using a high-level overview of what an effective compliance strategy can look like, this article will help outline how to create a compliance management system to help your business mitigate risk and keep your customers happy.
What are the key elements to create a compliance strategy for collections?
Some of the key elements to an effective collections compliance strategy may seem like no-brainers but can be more complex than you realize. Being aware of what laws and regulations apply to your specific business, industry, state, and even local jurisdictions is a critical element. Equally, internal audits to make sure your business’ processes are working as intended is a great way to get a temperature check on your compliance’s health. Internal audits should be conducted on a routine basis.
Additionally, due diligence should be conducted on any third-party servicers you may work with for debt collection and recovery purposes: make sure they are legitimate, law-abiding, consumer-respecting businesses. For example, a great way to verify you’re working with a reputable debt collector is by searching the Receivables Management Association (RMAi) database. If a company is RMAi certified, that means they have passed and/or comply with the organization’s rigorous background checks, industry standards and best practices guidelines.
Beyond what can feel like the no-brainers of compliance strategy, another key element is having a Compliance Management System.
What is a Compliance Management System and what does it cover?
From a high-level view, a compliance management system (CMS) is how a company sets, monitors, and oversees its compliance responsibilities. The CFPB describes a CMS as how an institution:
Establishes its compliance responsibilities
Communicates those responsibilities to employees
Ensures that responsibilities for meeting legal requirements and internal policies and procedures are incorporated into business processes
Reviews operations to ensure responsibilities are carried out and legal requirements are met
Takes corrective action and updates tools, systems, and materials as necessary
What are the components of a Compliance Management System?
Board Management and Oversight
Allocate the right resources to compliance and risk management
Regular Board of Directors reporting
Policies and Procedures
Documented and updated at least annually by the business owner
Detect and minimize potential for consumer harm
Reviewed by Audit and Compliance to ensure followed and meeting requirements
Risk Assessment – Controls & Corrective Action
Documented and evaluated regularly by the business owner
Reviewed by Audit & Compliance to ensure mitigating risks and control gaps
Deficiencies remediated by business owner through corrective action plans
Training
Consistent with policies and procedures
Ready before a change or roll-out
Consumer Complaint Response
Recorded and categorized – used to improve processes
Independent – reporting shared with top management
Why is a Compliance Management System important?
A compliance management system is important because it’s the checks and balances of the business you’re operating. One of the most important parts of a CMS are the policies and procedures—these help to manage risk by setting a framework and infrastructure to proactively and reactively respond to incidents, issues, and change, such as:
Changing product and service offerings
New legislation, regulation, interpretations, court decisions, etc. that address developments in the marketplace and are relevant to the product and service offerings of the organization
Unexpected incidents (data breach, global pandemic, etc.)
How can you ensure your compliance strategy is effective?
A compliance strategy is not “set it and forget it”—the strategy needs to be tied to the evolving consumer preferences and corresponding new compliance requirements to be effective. This helps businesses be proactive versus reactive. Ensuring checks and balances are in place helps establish proactive stance in case normal policy fails, gaps are discovered, or other unforeseen issues arise.
What can you do to ensure compliance strategy is effective for the future?
Want to learn more about the different facets of what makes a compliance strategy effective in collections? Join us Thursday September 29th at 1pm ET for our interactive webinar, The Future of Collections & Compliance, hosted by TrueAccord Associate General Counsel Lauren Valenzuela and Director User Experience Shannon Brown.
Reserve your space now for an interactive discussion on:
Cutting edge digital collection compliance
The role of the legal team in creating a digital collection strategy
*Leana serves as TrueAccord’s Paralegal Operations Analyst II. This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter.
Buy Now, Pay Later (BNPL) plans have taken over as a popular financing option for consumers, partly due to an increase in online shopping demands during the pandemic. In 2021, Americans spent more than $20 billion through BNPL services, taking up a bigger part of the $870 billion-a-year online shopping market. From laptops and airline flights to clothing and furniture, BNPLs make it simple to pay for almost anything in small installments. Since the start of the pandemic, millions of international consumers, especially Gen Z (10-25 years old), have gravitated toward using this service. According to a study by Forbes, BNPL use among Gen Z has grown 600% since 2019. The rise of interest in BNPL is also likely influenced by increased financial uncertainty, high-interest rates and a downward trend in credit card approval. As consumers show preference for digital financial services, BNPL continues to grow and become available at more retailers.
Why are BNPLs Popular with Gen Z?
Services like Afterpay, Klarna, Affirm and others have gained a lot of popularity in recent years, especially among younger generations who may struggle with cash flow. With BNPL, the first payment is due at the time of purchase, with subsequent interest-free payments usually due within a few weeks or months.
More and more, BNPL providers are reaching these younger audiences through influencers and brands on TikTok, and the variety of goods and services you can purchase with the service continues to expand. Some popular buy now, pay later items include clothing, concert tickets, cosmetics, electronics, furniture, groceries, hotels and flights.
But, like credit cards, missing payments can result in late fees and other penalties. With Gen Z, there’s already a pattern of missing payments. A survey conducted by Piplsay showed that 43% of Gen Zers missed at least one BNPL payment in 2021.
Gen Z Favors BNPL More Than Other Generations
Debt types and payment preferences constantly change along with technology. The traditional credit card debt is being replaced by BNPL, specifically when we look at Gen Z. For one, it’s easier to be approved for a BNPL application since the process only requires a soft credit check, unlike a hard credit check that most credit card issuers require. When looking for an alternative to high-interest credit cards, BNPL installment payment plans are a popular option. BNPL consumers know upfront what will be expected of them, and the possibility for large debt build-up is replaced with a finite number of payment installments. This transparency and manageability make it easier to understand. And it’s one that has the potential to continue to evolve for the better by providing consumers with more inclusive credit and payments options.
When it comes to both luxury and essential purchases, younger consumers are more likely to take advantage of BNPL to afford them. A survey from TrustPilot found that 45% of consumers between the ages of 18 and 34 were likely to use such services for basic essentials while 54% would use them for luxury items. For those aged between 34 and 54, these results were 33% and 38% respectively. And for people aged 55 and up, the results were 16% and 24%.
Since it’s quite easy to sign up for one or more BNPL loans, the likelihood of losing track of payments or overspending is real, especially for Gen Z. According to a report from J.D. Power, about one-third of younger consumers said they spent more than their budget allows with BNPL. And since different retailers offer financing through various BNPL services, it can also be a challenge to track multiple accounts at once. This isn’t surprising as some of the younger generations do not have the financial literacy or experience that older generations have and they’re more likely to face consequences and penalties like missing a payment.
Meet Gen Z Where They Are to Effectively Recover More
The good news is that the outlook for Gen Z BNPL customers that end up with accounts in collection is different than for those who default on credit card debt. On average, BNPL debts see higher and faster repayment rates than similar-sized credit card debts. Higher engagement leads to better repayment rates. According to TrueAccord data, the percent of BNPL customers who make a payment is more than double the like-size credit card accounts at 30 days post placement and 50% higher at 90 days.
As a debt collection platform that engages digital-native consumers where they are and with a priority on customer experience, many leading BNPL providers partner with TrueAccord to address both early delinquencies and charged-off accounts. After these BNPL customers repay their loans and have a positive experience, they’re able and likely to use the service again, and this time with some experience about how it works. By using this information, TrueAccord can help find the most optimal ways to reach the younger audience and help them pay off their debt from BNPL.
Want to learn more about how to engage with consumers of any generation in whatever stage of collection they might be in? Schedule a consultation to see what TrueAccord’s digital solutions can do for your debt recovery strategy.
With more than 20 million consumer accounts serviced through intelligent, digital-first collections products, results show better repayment and happier customers than “call to collect” agencies
LENEXA, Kan., July 12, 2022 — TrueAccord Corp, a debt collection company using machine learning-powered digital recovery solutions, today announced that it has served more than 20 million customers in debt with a digital-first experience. TrueAccord’s customer-centric approach and commitment to creating a positive consumer experience is reflected in its 4.7 Google customer satisfaction rating, customer feedback, and an A+ rating with the Better Business Bureau.
TrueAccord’s collection solutions harness machine learning and digital-first communications to deliver a personalized, consumer-friendly experience for those in debt. As is the nature of machine learning, the system dynamically analyzes and refines the approach used for each customer based on their interactions combined with years of previous engagement data in order to deliver the most effective communication treatment. The patented system, HeartBeat, which is now 20 million customer engagement interactions strong since its 2013 inception, continues to optimize with each new customer interaction.
“Machine learning is only as good as its data sources, and with more than 20 million accounts’ worth of engagement data that informs the HeartBeat system, we’re confident that the experiences being delivered are as streamlined and as aligned to consumer preferences as possible,” said Mark Ravanesi, CEO of TrueAccord Corp. “As a mission-driven company, we prioritize creating better experiences for consumers in debt, and based on our high customer satisfaction and repayment rates, it looks like we’re making significant progress.”
Powered by TrueAccord’s industry-leading tech stack, the product suite includes Retain, a client-branded early-stage consumer engagement platform for managing pre-charge off debt, and Recover, a full-service debt collection solution. Key benefits of both products include a simple, intuitive and effortless-to-use digital platform leading to great user experience, constant A/B testing and optimization to reduce friction and boost conversion rate, infinite scalability, and second-to-none channel deliverability.
While holding customer experience as a priority, TrueAccord products continue to prove more effective than competitors, as evidenced by client case studies showing 25-35% better performance on accounts using Recover when compared to those placed with traditional agencies, and recovering $17 million in delinquent bills with a 44% paid in full rate using Retain.
To learn more about TrueAccord and its digital-first recovery solutions, visit www.TrueAccord.com and follow on Twitter and LinkedIn.
About TrueAccord
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 20 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 recovery solution, and Recover, a full-service debt collection platform.
Debt recovery and collection look quite different in 2022 than it did ten, five, even just a year ago: new channels to reach consumers, larger data sets to analyze, complex regulations that can vary state by state, and so much more.
So when it comes to deciding the best way to engage consumers and effectively recover debt, has your strategy evolved to keep up? Machine learning, artificial intelligence, data science—these terms are thrown around a lot, and for good reason.
But how does it tactically improve the experience for both lenders and members?
Decoding Machine Learning for Debt Collection and Recovery
To help decipher real differences between a machine learning strategy versus the traditional call-and-collect, we have designed a highly visual guide to cut through the jargon and help you understand the basics of machine learning in collections. Decoding Machine Learning for Debt Recovery and Collection provides straightforward definitions, clear diagrams, and bottom line benefits make this eBook your at-a-glance guide to machine learning in debt collection.
From delivering a better experience in-line with what consumers expect from businesses to streamline communications, machine learning has gone from a “nice to have” to a “must have” for collection efforts.
Upgrade Debt Recovery & Collection With HeartBeat
Although this type of technology is a step in the right direction, it’s only one step forward—your debt collection strategy can go even further with TrueAccord’s patented decision engine, HeartBeat.
Integrating machine learning into your practice is certainly important—but how does this technology know what the best choice is to engage all of your delinquent accounts now and in the future?
Say hello to HeartBeat, our intelligent decision engine, and say goodbye to missed debt recovery opportunities left on the table by basic machine learning models. See exactly how HeartBeat upgrades your collection strategy in our new eBook, Upgrade Debt Recovery & Collection With HeartBeat—the more in-depth companion piece to our visual guide to machine learning (detailed above).
While HeartBeat utilizes machine learning in its decision-making process, it is not limited to it. This decision engine is continuously evaluated for performance, and adjusted to align with the current economic situation, changes in consumer behavior, and updates to compliance rules.
If you are switching from a more traditional outbound approach then a basic machine learning model can provide a short-term lift in recovery rates, but will hit a dead end when it comes to optimizing, adapting, and improving over time. HeartBeat is set up for the long game and recovers more because of it.
Discover how an intelligent, digital-first collection strategy drives overall improved performance, better member experience, and the more effective recovery of delinquent funds—without implementing more manual processes or adding headcount to your team.
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
