Just as technology has evolved leaps and bounds, so have consumer communication preferences with that technology, especially when it comes to debt collection. So in 2021, the Consumer Financial Protection Bureau (CFPB) rolled out Regulation F under the existing Fair Debt Collection Practices Act (FDCPA). Regulation F seeks to provide additional clarity around the key FDCPA prohibitions covering everything from harassment, such as the 7-in-7 call caps, to sample language for the initial communication with enhanced disclosures and information to help consumers identify their accounts.
Now, one year after Regulation F has gone into effect, some organizations and lenders still have questions about these new rules and how they can impact their business overall.
To help elucidate the matter, TrueAccord’s Chief Compliance Officer and General Counsel, Kelly Knepper-Stephens, sat down with the CBANC Network to discuss Using Regulation F to Maximize Recovery.
Below are just a few highlights from the in-depth discussion, but we encourage you to watch the full on-demand webinar to learn more about:
Safe Harbors in Regulation F (and if they are worth it)
Social Media communication best practices
Rules on contacting consumers including from other laws like the TRACED Act
State and municipal laws applicable to debt collection
Highlights from “Using Regulation F to Maximize Recovery” with Kelly Knepper-Stephens*
We have found at TrueAccord that maintaining strong compliance with Regulation F doesn’t decrease your ability to recover defaulted debts from consumers. We know that consumers like digital collections, because we primarily communicate using digital channels.
At TrueAccord, we find that 65% of consumers are opening at least one email—and 35% click on the link in the email that directs the customer to the webpages with information about the account settlement offers and payment plans, how to dispute, et cetera. For TrueAccord, 96% of consumers resolve their account without any human interaction whatsoever because they find the information that they need through the self-serve platform.
The regulators understand the growing preference for digital and self-service methods, and have acknowledged in Regulation F that it is permissible for a debt collector to communicate with consumers via these digital channels, including adding rules about how to use social media in debt collection.
TrueAccord was very active in the CFPB’s Regulation F rulemaking process for this reason. We served on the small entity review board business panel in order to provide feedback as to the potential impacts of the draft proposal on our small business. We also provided a lot of data and information on how we designed our digital communications, such as having unsubscribe links in all email communications. This was important because at the time TrueAccord was one of the only companies in the industry using digital. The end result actually mimicked some of our best-practices practices.
Engaging the consumer is the fastest path to resolution, so no matter the channel—email, text message, phone calls, et cetera—using all channels compliantly to identify the right time, right channel, right message to engage the consumer is the ticket to success.
*Kelly serves as TrueAccord’s Chief Compliance Officer and General Counsel. This blog is not legal advice. Legal advice must be tailored to the particular facts and circumstances of each unique matter.
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.
The financial landscape for both consumers and businesses is particularly uncertain right now. Many new fintechs and neobanks are experiencing their first delinquency surge and others soon to follow. This year, the challenges of managing delinquencies and navigating an uncertain economy will compound, making it imperative for companies to critically think about their strategy to collect from consumers in debt.
But from the perspective of a seasoned veteran of the financial services industry, what are we really seeing in consumer credit trends today? And what should businesses really be preparing for tomorrow?
What are we seeing in consumer credit trends today?
OHAD SAMET, TrueAccord co-founder: I think we all notice that we’re dealing with a lot of lagging indicators in terms of consumer capacity to pay. Of course, one leading indicator is demand for credit. But in terms of what consumers are able to do—meaning their sentiment—are they willing to pay? Are they able to pay? Do they have enough disposable income? So many of these numbers are trailing indicators.
However, consumer net worth is still high. Why is that? It’s because stocks in primary, the value of primary residences, is calculated in the net worth of consumers. And so if you believe there was a bubble or just a run up in prices because of a lot of demand and very low supply, then that would artificially inflate the net value or net assets of consumers, and we will only discover how consumers are faring realistically in a few months.
Even if from a trailing indicator perspective, meaning delinquencies, net worth and so on, we are not seeing a drop yet. We’re only seeing banks increase their loss reserves in anticipation for losses.
We are definitely seeing a change in consumer sentiment. It can be because they’re running out of money. It can be because of general sentiment in the market. Inflation is up, risk is up, consumers start saving more—but we are definitely seeing that. And that, to me, is a leading indicator that we all need to be aware of.
If transforming the way you reach customers to recover delinquent accounts isn’t on your radar in 2022, a year where projected delinquencies are expected to soar, you’re at risk.
Fortunately, we recently rounded up a panel of experts to share their insights and experiences taking those first steps away from outbound calling and toward better consumer communication in our webinar “What Labor Shortage, Wage Inflation, and Regulatory Restrictions Mean for Your Call Center”—available to watch on-demand now»
Below are some of the top questions, answers, and first-hand accounts from our discussion (plus some attendee poll results):
What percentage of contacting consumers is done via phone vs other channels?
Heather Bentley [HB]: Overall a little bit above 50%, but that includes outbound calling from live agents and interactive self-serve calls, which really is more the digital channel.
John Craven Sr [JC]: Live agent we’re at 0%. We do use a virtual agent, so I would say we use that virtual agent probably 40% to 45% of the time.
Jennifer Masterson [JM]: We’re close to 50/50. We will always be taking phone calls, but we are doing a lot more now in the digital space trying to contact people.
Richelle Rocazella [RR]: Less than 1% of our communication is via phone. And that is all inbound when we do engage with our customers. We will only make an attempt to reach a customer via phone if they have requested a call.
What does outbound calling versus an omnichannel strategy look like at your organization?
JM: An omnichannel strategy triggers customers to get them to self-serve and frees up our agents to talk to customers that need more help or more assistance. That’s really where the more valuable conversations happen.
HB: It’s really about putting the two pieces together [outbound and other channels], and trying to find the sweet spot of customer experience and collection effectiveness. Pulling those two things together – so if we find customers who are responding to a specific channel like text, but then if they go past the point we would normally see in delinquency, we can say, “Wait a minute, something’s different. Now we need to call this customer.”
JC: When you take a person that’s spending a good portion of their day making outbound calls, and you turn them into an inbound agent where they’re talking to a customer almost every time that the phone rings, the maximization of your employee’s time puts you into a completely different realm of being able to perform.
Was COVID or labor shortage and wage inflation a driving factor in the shift to a more digital approach and self-service approach?
JM: We started before COVID because consumer behavior was dictating it. It’s really hard to get someone to pick up the phone. The number of times that you actually connect to somebody live on dials is really low. That’s really what drove us to start going down the digital path. Now, I think there’s a ton of benefits to be gained from that, things like when COVID happened, this labor shortage. Once you have the channels in place, it becomes easier to ramp them up or down depending on what’s happening in the economy.
How did you get started?
HB: We started individual channels at times with easy things like virtual messages, then interactive messaging and email and text, and then moved into two-way in those channels. And we’re still working so that you could have the same experience in that digital space that you’d have with an agent on the phone.
JC: In 2014 [Cox Communications] started texting customers and then we added email around 2017, but we didn’t have a digital platform at that time. We implemented a digital platform in early 2020, and fortunately we were able to go full omnichannel with integrated channels that we were able to roll out.
What are some of the challenges to building an omni-channel strategy?
RR: Making sure all channels are integrated to develop a full customer experience journey. Also ensuring service levels are maintained as more channels are added.
HB: If you’re not sequencing [the channels] and working them together, it can be like bombing your customers again. If you’re bombing them with calls and now you’re bombing with text and with email and it’s just, “Hey, we’ll just try everything.” You quickly desensitize your customers to your communications.
JC: We set up all the channels and then we went on a journey to bring them all in and orchestrate them so they were working together. If I can suggest anything to those that are using the phone strategy, if you’re ready to start your digital journey, start with a journey that is an orchestrated journey, instead of building out the channels and then trying to bring them all together. You’ll get so much further ahead and a quicker response to digital integration.
From a self-serve standpoint for debt collection and recovery, what are some of the compliance or regulatory challenges to keep in mind?
HB: As we move to digital channels, [regulators] move their focus to what happens in email and on your website and in text messages, because before their focus has been about calling over the last 10 years. So as an industry we have to stay ahead of that and think both like a customer and like a regulator. Be a bit conservative in some of your interpretations of how far and wide your communications go.
JC: From the risk side of things, if you’re moving from an analog or non-digital traditional approach to a digital approach, think how to digitize your compliance rules that may have some risk mitigation in it. Don’t create a new reality—make sure that you replicate what you have already in place to make sure you have safeguards.
JM: On the phone side you’re dealing with agents that have to remember to say things right. But coming out of COVID a lot of the banks and other financial institutions put hardship assistance online just as an example, and I think the regulators like that because everybody’s essentially getting the same experience. I think it’s easier to be in compliance and meet all the regulatory requirements in a channel like that, than it is with agents.
What was the best way organizations should have prepared to meet the guidelines for the CFPB’s Regulation F to move to a more omnichannel approach?
RR: The best thing any organization could have done for Reg F would be to have a strong legal and compliance group that you work with. While it’s not something that drives revenue, it is a must in every organization.
Where would be an ideal place to start exploring or considering if you’re moving away from the outbound call center and looking to integrate more channels?
JC: Whatever your strategy is, you need to set yourself on a path making sure that your digital journey has a brain. Recognize that different profile customers react differently to different contact channels. As you use your omnichannel approach, having that brain mentality. Knowing what your customers’ preferences are and then leveraging those preferences will set you on a great path to performance.
JM: Every company is different in terms of what capabilities you have or don’t have. While texting and emailing made sense for PNC at first, maybe there’s another channel that a company can easily plug into. Start wherever you can because consumers don’t want to pick up the phone and call. Whether it’s the ideal option or not, give consumers another path and another option. Start somewhere and then build off of that in whatever way makes sense for your organization.
RR: For businesses in the early stages of adopting a more omnichannel approach for collections, email or text would be a good place to start.
In 2013, TrueAccord was founded with the hypothesis that AI driven digital collection was the way to transform the industry. Eight years later, we are still confident in the transformational nature of our hypothesis but are still surprised how few other companies in our industry have fully embraced digital-first debt collection.
The digital revolution has been ongoing for some time now. The word “digital” itself has evolved from a high-tech term that few understood to one that is now regularly accepted as part of our everyday lives – both personally and professionally. As the digital world continues to accelerate the way in which we do everything – from paying for things to driving cars to debt collection – it’s not enough anymore to just invest in digital. Focused strategies and understandings of more complex technologies are mandatory to getting the most out of what the digital economy has to offer.
At TrueAccord, to create powerful moments that actually help consumers, not only pay off debt, but become more financially stable and confident, we need to think bigger by putting them first. In honor of the launch of our newest product, Retain, TrueAccord hosted the Beyond Digital: The Next Era in Collections summit, which is now available in its entirety on-demand. Stay tuned for more on each of the individual sessions.
Here’s the lineup from the Beyond Digital summit:
Ohad Samet, Co-founder & CEO, One True Holding Company
Understanding Consumers in Debt in 2021 (and Beyond)
Mark Ravanesi, CEO, TrueAccord
Jacob Kong, Chief Product Officer, Experian
Jan Hansson, VP, Debt Collection, Klarna
What Debt Collection Leaders Can learn From the Masters of E-Commerce
Naama Bloom, CMO, TrueAccord
Sunil Kaki, EVP, Beachbody & OpenFit
The New Standard of Excellence in Debt Collection: Creating World-Class Consumer Experiences Via Machine Learning
Ensuring regulatory compliance in debt collection is a high stakes and increasingly complex process. As we know, the industry is constantly evolving and collections strategies must adapt.
At the end of July, the Consumer Financial Protection Bureau (CFPB) announced that the final rules issued under the Fair Debt Collection Practices Act (FDCPA) will take effect as planned on November 30. The new rules focus on the time, place, and manner of debt collection communications, the expansion of those communications through digital means, and enhanced disclosures that collectors must provide consumers with at the beginning of collection communications.
To help explain and analyze the new rules, TrueAccord recently hosted a webinar featuring two members of our in-house legal team: VP Legal & Compliance, Kelly Knepper-Stephens and Associate General Counsel, Katie Neill.
Regulation F outlines the first-ever guidance for digital communication efforts in collections – effectively giving the green light to make alternative collection efforts more mainstream. The rule explicitly outlines email and SMS communication but also includes language for digital outlets that might not be in use for collections today or even in existence yet – a nod to social media and consumers willingness to be contacted privately on those platforms.
Furthermore, the rule does not change the federal law as it relates to consent to email. No consent is required to send debt collection emails, just like no consent is required to make calls or send letters.
“The devil is in the details for Regulation F;” the implementation of each new provision turns on the Bureau’s explanation in the preamble and examples in the comments. Legal and compliance teams should be the engine that makes sure the organization is in compliance with this guidance when the rule takes effect later this year.
Unlike regulations in regards to phone-based collections, there is no cap on outreach frequency in digital communications like email. This is because consumers and email providers self-regulate the communications frequency – collectors must design deliverability carefully to be successful, and if collectors email without a self-imposed cap their communications will be marked as spam or not delivered.
As a digital-first collections agency, TrueAccord is ahead of and prepared for the guidance that will be put in place at the end of November. As a leader in this style of collections, TrueAccord leveraged a lot of data and consumer preference insights to help inform these new rules. The issuance of Regulation F is a significant validation by the top financial services regulator of TrueAccord’s business model.
During times of change, it’s more critical than ever for companies to embrace an innovation strategy to continuously deliver on changing customer needs.
This has long been a guiding principle for technology startups. But it hasn’t always been a common practice in the debt collections space, where incumbents have historically lagged in adopting new approaches.
That was one of the takeaways of a recent webinar we hosted with Laura Marino (Chief Product Officer), Roger Lai (Director of Product), and Tim Yu (Product Manager). These three product leaders made the case for why, now more than ever, debt collections providers must function like high-tech startups in order to thrive.
The Innovation “Flywheel” Laura began by introducing TrueAccord’s philosophy of innovation. She observed that tech companies rarely wait for inspiration (like the next big flash of genius around a new feature or service) to strike. Rather, they use a repeatable, data-driven methodology to ensure that they’re always exploring new opportunities.
TrueAccord organizes its efforts using an innovation “flywheel”: a repeatable cycle that ensures continuous improvement. At any given time, the product team is engaged in one of these steps across a portfolio of different features and initiatives:
• Define the problem: Analyze data to identify an area for improvement • Generate a hypothesis: Conduct user research to generate ideas for how to solve the problem • Test the hypothesis: Implement a controlled, randomized experiment to test the idea • Go live: Roll out the winning idea or improvement • Monitor and optimize: Continue to track performance and identify opportunities for improvement
At TrueAccord, the flywheel is designed to work alongside our built-in compliance system designed to meet and exceed the requirements of debt collection laws and regulation.
Three Ways TrueAccord is Propelling the Industry Forward The flywheel isn’t just a theoretical model. Particularly over the past few months—a time of unprecedented change in consumer behavior and needs—it’s a tool that has helped the team rapidly deliver new features to market.
To demonstrate how the flywheel is used in practice, the TrueAccord product team walked through a series of case studies that demonstrated the value of an innovation methodology:
The Takeaway The future of digital debt collections is one of superior results for creditors enabled through relevant, personalized, and empowering experiences at scale for consumers.
Forging that future requires a true innovation strategy: one that blends data analytics, deep consumer empathy, industry expertise, and continuous focus on compliance. TrueAccord has long been fortunate to be on the frontier of the possible, creating new ways to add value for both consumers and creditors.
Ultimately, the debt collections companies that embrace the “constant innovation” mindset of a tech startup are the ones best positioned to lead the industry forward.
The COVID-19 crisis has ushered in an era of extreme uncertainty. As the country begins to slowly recover, the collections industry will face serious challenges. To help make sense of it all, we hosted a webinar with TrueAccord CEO Sheila Monroe and VP Customer Success Mega Rankin to discuss the impact COVID-19 has had on collections and what it means for the months ahead.
Read on to learn how COVID-19 impacted companies and consumers, how digital debt collection adapted, and what to prepare for in the coming months. You can also watch the full webinar here.
The COVID-19 Impact
The spread of COVID-19 ushered in a wave of unprecedented health and economic uncertainty that rapidly changed daily life across the country. These changes affected almost every aspect of daily life, including finances.
This uncertainty caused a disruption to tax season, typically a time when consumers pay off their debts at a higher rate than usual. As businesses across the country closed, there was a dropoff in consumer engagement with their debt (anything from opening an email, looking at plan options, calling into a call center, etc.), as well as payments.
However, the coronavirus-caused recession turned out to be different from every other recession we’ve experienced. While unemployment skyrocketed to record levels in April, individuals actually saw an increase in personal income on average due to stimulus checks and increased unemployment benefits. With stay at home orders in place, spending on things like travel, entertainment, and dining decreased, which led to a record high personal savings rate.
Many consumers took this opportunity to clear their financial slate. In addition to a higher level of engagement with debt, there was a substantial increase in lump sum payments in late April and early May.
Of course, the impact of the virus was not consistent across all consumers. For this reason, flexibility was key during this time. We saw many consumers modify their plans to fit their new financial situation in late March and early April. And those consumers who did create new payment arrangements opted for longer plans with lower payments. Consumer choice is always a crucial part of any debt collection communications, but all the more so during a time of unprecedented uncertainty. Luckily, 90% of webinar attendees allowed consumers to modify their plans in some way.
How digital-first debt collection adapted
As consumers shifted their behaviors to match a new reality, businesses were also facing some serious challenges. Specifically, companies needed to shift to a work-from-home environment. For most debt collection agencies, this was the very first time they considered having the majority (if not all) agents working from home. Many companies struggled to make that shift, especially around taking payments in a compliant manner. That means that at the same time as consumers actively wanted to pay off their debts, many of them were not able to reach an agent to do so.
As a digital-first debt collection agency, TrueAccord was able to rapidly adapt to best serve both our clients and consumers. Our cloud-based environment allowed us to seamlessly and safely shift our workforce to work-from-home, while our automated collections platform and self-serve payment portal, which allows us to carry agent workloads that are more than 50 times our competitors, ensured that consumers could self-serve payments, plan adjustments, and disputes while consumers who needed to talk to an agent were able to do so.
Additionally, as consumer behaviors shifted, our machine learning-driven outreach was able to adapt to these new patterns to ensure the best customer experience. And as always, our digital communications and self-service tools enabled consumers to engage with their debts when it was most convenient for them. This was especially crucial as consumers were also shifting to working from home, often with spouses and children in the same spaces. With packed schedules, the ability to explore payment options on their own time, even outside of FDCPA hours, was key.
While no one can be certain of what’s next, businesses must plan for multiple possible scenarios to best meet consumer needs. There are many factors to consider that will impact the future of the U.S. economy, including the unemployment rate, any possible additional government stimulus, vaccine development progress, individual states reopening and closing, schools reopening, and major employers going out of business.
While the exact timeline for recovery may not be known, according to a FiveThirtyEight survey, 73% of economists believe there will be a reverse radical recovery, meaning after a sharp decline, there will be a sharp partial rebound followed by a slow recovery. Similarly, the Fed is predicting that unemployment will remain in the double digits through at least the end of the year. Perhaps for this reason, the audience’s two biggest concerns for the next 12 months were lower liquidation rates due to high unemployment and pre-charge off delinquency rising.
That means that we can expect a few things to happen. It’s likely that there will be rising delinquencies through the end of the year, as a recent survey by the CFPB showed that 52% of households couldn’t cover expenses for more than two months after a loss of income. Additionally, as forbearance programs and hardship programs wind down, and government assistance becomes less regular, we can expect to see higher levels of charge off, and see generally lower levels of collectability while the economy slowly recovers.
TrueAccord’s Director of Service Operations, Cassie Cox, and our General Counsel & Chief Compliance Officer, Tim Collins, hosted a webinar on May 13th, 2020 to talk through collections continuity in light of the COVID-19 crisis. The team discussed adjusting to regulatory changes, how to effectively manage a work-from-home approach in collections, and what the future of the industry may look like.
How are federal and state regulations changing?
Federal-level regulatory updates
The pandemic has prompted the US federal government to examine how it can work to aid Americans in need. Following the CARES Act, the House has proposed a new, $3 trillion relief package, and we are likely to see other potential stimulus packages discussed as the Senate proposes their own stimulus plan. Major industry organizations like insideARM and the ACA International are watching these unfold closely, as should we all.
The Consumer Financial Protection Bureau’s activity has not slowed during the pandemic, and they are on track to meet their examination goals this year. Remote auditing processes are in place and buzzing. They may not be in your offices, but the CFPB’s teams are still actively working to ensure the industry remains compliant.
State-level regulatory updates
Several states, including Massachusetts and New Jersey, are pursuing legislation that directly impacts the ability of collectors to reach consumers. Massachusetts’ Attorney General recently enacted an emergency law that outright banned collections efforts.
This was fought by the ACA, and the law was declared too broad and in violation of First Amendment rights, but the changing playing field does not end there. New Jersey has worked to pass similar legislation which has now been narrowed to primarily impact medical debt collection practices.
There will also likely be a heightened focus on state budgets and an increase in understanding how to bolster state economies.
As of this writing, forty-seven US states are either reopening or partially reopening by lifting shelter-in-place orders. Twenty of these state legislatures are now back in session and may begin to make other changes that collectors should keep an eye on. There will also likely be a heightened focus on state budgets and an increase in understanding how to bolster state economies.
One major change that seems to be for the better is the newfound flexibility for collection agencies and other companies to allow employees to work from home. This behavior is being echoed by Rhode Island’s new “stay healthy” order which has started the reopening process but is strongly encouraging employees to work from home when possible. Collections is beginning to adapt to the changing need, and TrueAccord was able to adapt quickly.
How is collections operations changing?
Maintaining control and information security in a work-from-home environment
TrueAccord’s team began to prepare for potential risk to our operations in early March by reviewing and updating our practices, policies, and procedures to make sure all of our teams could effectively work from home.
Here are some of the standards we established as we transitioned 80% of our agents to work from home full-time:
Replicate an effective office space
Agents must have a private area in their home and commit to working their shift uninterrupted.
Agents must have a minimum internet speed of 50Mb/s in order to maintain high sound quality on calls.
Enhance work from home agent information security
Agents do not take payments over the phone. All payments are received via IVR or guided through our secure payment portal.
Agents are not permitted to have cell phones near their workplace.
Agents are monitored by their supervisors via webcam with at least two random checks throughout the day.
Calls are randomly monitored by supervisors to ensure continued commitment to exceptional customer service and quality.
These were only made possible by bringing on new technologies and building processes before we dove in headfirst. We also made sure that all of our agents fully understood these new practices in advance, and they signed off on the policies ahead of time. The 20% of our team members that are still in-office (at safe distances) continue to meet the same standards as the other agents.
The remaining 20% either opted to not work from home due to a lack of interest or they were not permitted due to their homes not meeting security requirements (e.g. not having a private space, not having a fast enough internet speed, etc.).
Managing agent performance standards remotely
Call centers are filled with high-energy individuals that are driven by their wins. Maintaining the same hum and energy of an office space without sharing the same space is difficult, and we’ve taken steps to keep our agents excited about their work.
Meet (virtually) Face to face
A robust virtual management system has been put in place to keep building our team’s connectivity. The webcams we provided to our agents not only help with security monitoring but also increase our ability to build team morale. All of our agents are dialed into (and muted on) a Google Hangout or Zoom meeting throughout the day so that at any point they can turn and see their teammates working hard.
This practice has also extended to our new management strategy. All of our contact center team meetings are required to be on camera so that we get face time with each other. These meetings include small group meetings, individual coaching sessions, and any other 1:1 meetings as well.
Look for opportunities to create additional team touchpoints. Our current structure includes:
Weekly coaching sessions
Weekly team meetings
Random, weekly 15-minute huddles
We also have a wide range of Slack channels in place for sharing anything from anecdotes to best practices. In an office environment, it’s easy for folks to look over their shoulder and share tips and tricks, and those conversations drive positive change. Slack (and other work chat tools) also provide ways to circulate urgent updates with ease.
Keep the excitement up
We’ve increased our budget for intra-day chachkes, small giveaways, and rewards. Our in-office management style was largely visual: performance trend boards, goal setting boards, and team-based competitions were huge drivers for us. Now, we’re turning to setting up more contests. In this environment, a $10 gift card can get almost as much traction as a $50 card. It’s the thrill of the win, not necessarily the prize itself. Keep the energy up!
Monitor issues closely
The first two weeks of the work-from-home experiment were an amazing honeymoon period. There were three, consecutive days of perfect attendance in our contact center. Typical efficiency metrics like production volume per hour and average handle time have remained consistent. Keeping the same levels of performance is another story entirely, and close performance management is critical to making work-from-home, well, work.
We continue to track month to date metrics and just as closely monitor individual daily performance. Though many of our agents had no issue moving to a home environment, just as with any contact center, the bottom 10% of our group semi-frequently underperforms. It’s more essential now to keep a careful eye on red flags and correct underlying issues immediately.
The biggest concern was properly tracking things like call or work avoidance or time card manipulation. Thankfully, with all of our systems are aligned and our supervisors actively checking on their teams, the only instance we found was caught immediately.
Terminating a remote employee
Unfortunately, this is a necessary part of any operations manager’s role. In a work-from-home world, we still want to make it as direct an experience as possible. The full investigation, conclusion, and termination conversation should all be conducted via video conference.
Beyond the human aspect of termination, there are data and security considerations that should be tested ahead of time. Your team should understand how and when data should be cleared from a remote employee’s computer, and systems should be in place for the employee to either drop off or otherwise return their gear. Remember to accommodate for the possibility of lost assets. Some folks, even under contract, may not return your stuff.
What is coming next?
Changes in the office
The COVID-19 pandemic prompted a lot of changes to the way companies operate in general. While it continues to unfold, we are likely to see more change. That said “Right now, maintaining [business continuity] means not changing anything,” said Cox.
As shelter-in-place rules begin to lift, and we see some employees return to their offices, we will see physical changes:
New desk layouts
A possible return to cubicles or dividers and a shift away from open-plan offices
New air filtration standards for enclosed spaces
Changes in the industry
While the US economy recovers, we expect to see a massive wave of customers that are unable to pay their bills. Unemployment rates will continue to drive payments from slightly overdue to collections, and debt collection agencies and internal recovery teams are likely to struggle to meet the account volume.
“Collections has long been driven by human capital,” said Collins in discussing the need for contact center agents. “Technology will have to step in and fill a new, higher demand.” He went on to add that alongside the increase in volume, we expect a change in collections mentality. In order to overcome the disparity between payment deadlines and consumers unable to meet them, there will be a rise in customizable payment plans, hardship plans, and digital, self-service tools.
Crises drive rapid evolution and change. Many business practices and technologies that were slowly gaining traction in a pre-COVID-19 world are now fast-tracked. Working from home is a must at the moment, and the collections industry has to embrace that. Moving forward, we’re likely to see new innovators that are reinventing an aging industry, and it’s time for collections to adapt.
The age of digital communication has led to a dramatic shift in the way companies do business and in the way that people communicate generally. The collections industry is not exempt from this change. On April 22, TrueAccord’s CEO, Ohad Samet, spoke on how TrueAccord is pioneering a radical transformation for consumers and collectors alike, especially in the wake of the COVID-19 pandemic. This is a summary of the webinar.
Attempting to reach consumers in debt is becoming increasingly challenging. Reaching these same consumers during a rapidly evolving recession, when tens of millions of people in the US are filing for unemployment, is only making it more difficult. Beyond this, social distancing practices are limiting the ability of traditional call-and-collect based agencies.
There has been some progress made on improving work-from-home opportunities in collections, but 78% of TrueAccord’s clients are experiencing severe disruption of their 1st- and 3rd-party call center operations. This includes some collections partners shutting down entirely.
High agent turnover rates are a common issue for collections agencies due to the difficult nature of the work. Agencies typically expect turnover rates of more than 70%, and these numbers are climbing in the midst of the pandemic. All of these factors have largely left the collections industry in a holding pattern as we wait and see what changes may come, but what else can we do today to make change?
Finding the solution today
TrueAccord is focused on building sustainable, consumer experience-focused collections systems and tools. Our machine learning algorithm, Heartbeat, is a patented, scalable, tool that personalizes the collections experience with empathy-driven content for consumers. The multi-armed bandit algorithm learns from customer interaction and optimizes based on these behaviors.
What’s the difference between machine learning optimization and demographic segmentation?
Demographic segmentation is dividing a group of individuals based on demographic information such as age, gender, race, marital status, etc. when deploying a process or function. Machine learning optimization is teaching a computer model to evaluate the choices individuals make to improve a process or function. For example, in the credit and collections space, debt collectors typically approach customers during tax season to discuss using any tax refund to pay existing debts.
Our Heartbeat system learned that consumers do not like these suggestions—consumers who received content without the phrase “tax refund” paid their debt during tax season (likely with their tax refund) more than those consumers who received content with the words “tax refund.”
Samet explained, millions of consumers have completed payments and established payment plans using TrueAccord’s platform (through Heartbeat). The options employed by Heartbeat are based on its historical data learned through continued experimentation without access to an individual’s demographic information. Based on the millions of users that came before them, we can depend on Heartbeat to function as a complete virtual agent with built-in years of experience.
Customizable communication offers a personalized experience
While email is TrueAccord’s primary communication channel, Heartbeat is a multi-channel solution that includes but is not limited to, SMS (with consent), push notifications (with an opt-in), and a self-serve interactive platform. Other digital services segment channels to test with different audiences, or may specialize in one, requiring creditors to work with separate vendors. TrueAccord uses a multi-channel approach to reach consumers how they prefer.
In fact, more than 95% of users on our platform resolve their accounts without ever communicating directly with an agent. 80% of the consumers that do reach out to our team are able to resolve their accounts via email. Our dedicated team of agents is available to speak on the phone, but our digital tools allow each agent to service more than 80,000 accounts (and that number continues to grow). Some agencies are gradually scaling digital strategies, they still account for less than 30% of their overall operations.
In fact, more than 95% of users on our platform resolve their accounts without ever communicating directly with an agent.
While Heartbeat operates as the frontline of our digital strategy, TrueAccord’s phone number is always readily available. We firmly believe in using only one phone number, (866) 611-2731. This creates brand familiarity, drives engagement, and is consumer friendly. 97% of consumers ignore calls from unknown numbers because many companies buy phone numbers in all area codes. Their goal is to appear as if they are calling from the same area code as the consumer.
TrueAccord does not want to trick the consumer into answering an unknown call. We want to make it easy for consumers to search for our number online, do their own research about TrueAccord, and respond on their time. When consumers do reach out to our team, TrueAccord agents are trained to focus on customer care and on helping consumers to build the right financial plan to meet their needs.
Combining this approach to customer care with our machine learning algorithms allow us to expand our offerings to include new tools like a detailed self-service portal for payment plan adjustments. Consumers can customize payment plans that work for them, and this has led to a spike in plan creation and higher successful plan completion rates.
TrueAccord doesn’t want to pressure consumers to make payment amounts they cannot afford and make deadlines they can’t meet. Instead, we enable the consumer to fully personalize the repayment experience into a plan that meets the consumer’s ability and time frame. “We sell the experience of being debt free.” Samet says.
A different approach to collections
Traditional call-and-collect agencies are built on foundations similar to telemarketing: high agent turnover rates result from low-base, high-commission pay rates. These collectors are incentivized to collect and meet call minimums and payment quotas that lead to a rapid rise in complaints toward the end of pay periods as deadlines loom.
Machine learning algorithms don’t have the same stresses. The bounds of payment plans are defined by clients in advance. Heartbeat leans on historical customer data, consumer engagement behavior, and chooses content to inform consumers about the stress free experience of repaying debt using customizable on-line repayment tools. If the customer has any questions, they can always check in with our team by phone or email!
Changing the industry
TrueAccord’s changes are continuing beyond our technology. Our leadership team works directly with the Consumer Financial Protection Bureau (CFPB) to understand evolving best practices and remain at the forefront of regulatory change. Members of our legal team also work with the Receivables Management Association (RMAi), the Consumer Relation Consortium, and Association of Credit and Collection Professionals ACA International boards to keep up with trends in collections.
These experiences all point in a similar direction: legislators want to see fewer phone calls, more reliance on technology, and more consumer choice in the collections space. Building compliance adherence into TrueAccord’s system drives brings these changes together in one place.
How does TrueAccord fit into existing collections strategies?
TrueAccord is able to service at any stage in the debt cycle (early, late, warehoused, etc.), across segments, with competitive results. Our platform is built to accommodate your team’s needs, and we recognize that not every collections agency works perfectly in every segment.
We can easily increase or decrease the use of specific channels and optimize in whichever segments you see fit. While larger placement volumes provide more data and by extension clearer automated decision making, we fit into your strategy at any stage.
The same tech that supports TrueAccord’s post-charge-off product also offers new advantages and easy onboarding within a few short weeks for early stage delinquencies. Heartbeat can supplement your existing call center strategy. We’re also equipped to provide different levels of service in different phases.
This can be a small change to your normal business practices: uploading a traditional “dialer file” to our system. We can email payment reminder content driving your customers to your existing teams, tools, and webpages, while maintaining your branding. This can also involve full outsourcing through the use of our online self-service individualized payment portal as well as use of digital channels to drive engagement.
The next steps
We continue to scale and develop new tools for consumers to self-identify their current financial needs and provide new ways to work with them to adjust payment plans. We know that demanding payments isn’t nearly as effective as empowering consumers, and finding the right middle ground helps all parties involved.
Getting started with TrueAccord is easy with inbound file receipt or APIs and standardized, out-of-the-box reporting. It can be as simple as a .CSV upload to our secure dashboard or as complex as a long-term integration period designed to align our systems, policies, and procedures to your own.
Ready to join the future of debt collection? Do you still have questions about how TrueAccord can help your team? Get in touch with us today!
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