The FCC recently released a Notice Of Inquiry (NOI) on the topic of on-call authentication, and the debt collection industry is again up in arms about its past, rather than embracing its future. Collectors are having a hard time authenticating consumers’ identity on phone calls, and that leads to a lower number of productive conversations. In a detailed article on InsideARM, Stephanie Eidelman correctly states that “While [the proposal] is not aimed specifically at debt collection, the problem is significant in the industry. The next trick would be to assist in helping the consumer authenticate their identity to a legitimate collector, in a way that eliminates the need to share personal information.” Dear collectors, there are wonderful authentication solutions available to you. Put down that headset, turn off your dialer, and turn your attention to the online world. Consumer preference is changing. 97% of business calls go unanswered, according to Neustar. Phone calls are real-time interactions, imposing on the consumer’s time and attention. Once consumers pick up, they start from deep suspicion towards the person on the other side, who now has to earn their trust while asking for personal information. It’s a stressful situation, especially for someone paid a commission for collected dollars. Often this devolves into a heated exchange between a stressed consumer and an equally stressed collector. Calls aren’t only bad for reaching consumers; they are bad for engaging them in a meaningful exchange, too. Emails and digital communication channels provide a superior customer experience. Emails and social media apps are password protected, simplifying the authentication process. If you require added security, many established companies offer real time authentication solutions that keep the consumer engaged with your system. It is easy to quantify and improve the experience to keep consumers engaged, reviewing their options, until they find one that fits. Consumers can choose to engage in times that work for them, rather than times when collectors are available to take their call. As a result, using digital channels significantly cannibalizes the phone channel: on average, TrueAccord makes 5 call attempts to each account over a 90 day placement period, compared with up to 6-10 attempts per day in call center based operations, and still collects better with lower complaint rates. Calls pose multiple challenges - from operational ones to legal ones. They are costly and complicated. The FCC’s ATDS ruling is disastrous and further limits the efficacy of phone calls. Yet collectors choose to focus on fighting phone-related regulation instead of finding new ways to communicate with consumers. It is starting to look as though some prefer a contact method that consumers think of as harassing and intrusive, because moving to digital communications is simply outside of their comfort zone.

Debt collection is a highly litigated activity. Compliance personnel and systems budgets are crowding out other investments. It’s appropriate: debt collectors and creditors are often hit by class action lawsuits and government action, leading to huge fines and settlements. Reducing risk is their primary priority. When examined closely, though, the traditional debt collection model attracts numerous compliance issues. The legacy approach is being replaced by  machine learning and digital first systems. These code-controlled systems offer predictable, scalable, and auditable operations that, coupled with best in class user experience, significantly reduce the risk of litigation and regulatory action. The traditional model invites regulatory scrutiny and lawsuits Collectors often cite compliance concerns as impediment to adopting new technologies. Lawyers are concerned about TCPA exposure from text messaging, consent requirements for emails, and FDCPA violations when using social media. These concerns are unfounded: text messages can be safely delivered if consent and revocation are properly documented, the CFPB saw no need for consent to email (as reflected by a growing body of opinions, as well as its 2016 rule outline), and social media can be used with restraint. While dragging their feet on evaluating new technologies, compliance departments embrace and perpetuate much bigger risks: the prevalent use of human labor, over reliance on phone calls, and the outdated, fragmented interfaces used by collectors. Humans are the weakest link in the compliance chain Traditional wisdom says that only people collect from people. That claim is demonstrably false. People are subject to biases and acting emotionally when interacting with debtors - which is why machine learning based systems collect better than humans. People may be tired, angry, or distracted. They can be baited into violating the FDCPA by a ill-meaning debtor. The prevalent commission-based compensation model, a broken and outdated model for collections, puts them in odds with debtors whenever they interact. Human beings just cannot do error-free work, no matter how trained or experienced they are. Keeping appropriate staffing levels is another challenge for collection teams. Large market participants report 75-100% annual turnover rates (per the CFPB’s operational survey), requiring constant hiring of collection staff. Training and overseeing these new people is a daunting task, especially with the ever changing case law and legislative landscape in the collection space. Providing an efficient and fully compliant collection experience while relying on new and untrained collectors is almost impossible. Phone calls are a dying communication method Consumer preference is shifting away from phone calls, but phone call compliance would have been difficult even if that wasn’t the case. Calls are a compliance liability due to their frequency, their real-time nature, and the overall regulatory sentiment towards them. Collection calls must be frequent to reach consumers. On days when an agent works an account, they may attempt to contact the consumer 4-6 times, often as frequently as 10 times per day. Consumers aren’t picking up the phone, so agents need to make more call attempts to try and reach them.   While most states, and the FDCPA, don’t limit call frequency, high frequency of calls often leads to complaints and lawsuits alleging harassment. Collector take this huge risk because calling is the only tool they understand. Collection calls are also real-time. No matter how elaborate call scripts are and how experienced collectors may be, it is impossible to completely control the development of any individual call. Voice analytics software is limited, unable to identify most baiting and escalation issues. Real time monitoring of all calls by supervisors is financially implausible. Collection agencies are forced to settle for the best training possible, clear escalation paths for collectors whose calls go badly, and hoping for the best. Realistically, when making a large volume of calls, every day will have some potential violation. Finally, regulation has been working against phone calls for the past few years. The FCC’s ruling limiting the use of ATDS has been devastating, and expecting it to be completely undone by the new commissioner is a pipe dream - government is not debt collectors’ friend. States like West Virginia and Massachusetts have enacted call frequency limitations, and the CFPB’s new rule outline includes a 6-times-per-week limit on call attempts. All signs point to a future where phone calls cannot plausibly be the main channel for collecting debt with any semblance of compliance. Code driven compliance is here, and it’s a big step forward Code driven compliance gives us complete control on what actions can be triggered by our system. It’s one of the components in Heartbeat, our machine learning-based, digital first collection platform. Heartbeat is a leap forward in debt collection, and its compliance advantages are many: from better user experience to perfect auditability. Best in class user experience in debt collection is a compliance advantage Many if not most of debt collection lawsuits hang on a technicality. A word is arguably missing or written in a debatable way. It’s unclear whether 8 calls or 9 calls constitute harassment. Often, consumers don’t resort to lawyers because they know for a fact they have been wronged - it is often not clear that they have been - but because their experience with the collector has been bad enough to push them to seek defence or retribution. Great user experience is therefore not only a way to improve the creditor’s brand perception and returns, but also a way to reduce the rate of complaints and lawsuits. TrueAccord’s Heartbeat system attempts to contact consumers an average of 3 times per week, compared to 4-6 times a day for traditional agencies. That, paired with best in class web and mobile experience and a helpful customer service department, significantly reduces consumers’ desire to sue for, or complain about, ambiguous technicalities. Consumers get a consolidated account page showing all their options Since more than 90% of Heartbeat’s interactions with the consumer do not involve a human collector, human beings are only needed for a fraction of the work. TrueAccord is able to hire skilled workers and pay them a living wage, with no commission component. Knowing that they will earn a good salary working for a technology startup reduces any incentive our team members would have had to fight with or harass consumers. That, in turn, contributes to great user experience and reduces compliance risk. Pre-approved content and an integrated system eliminate human error Human error is the biggest challenge for compliance departments. Collectors today need to navigate multiple systems to call, negotiate with, and collect payments from consumers. Updating the results of a call is often a complex process, requiring yet another system. Many requests to unsubscribe numbers, cease and desist communications, or simply to provide debt verification are lost and lead to complaints. This fragmented process is extremely tedious and time consuming, and inherently flawed. Letting collectors write their own emails and text messages is too much risk - something that will surely lead to violations on a daily basis. TrueAccord’s content approval console Heartbeat takes a code controlled approach to communications. Every outgoing communication is pre-written, then reviewed and pre-approved by TrueAccord’s legal team. Every email, text, web page and letter have to pass TrueAccord’s content guidelines driven by law, policy and procedures, including required disclosures and forbidding certain words and phrases in subject lines, or in the body of communications. Our clients’ legal and content team are also involved in commenting on our procedures as well as specific content items, to make sure we fit each company’s risk tolerance. Heartbeat will only send text messages to numbers that it knows it has express consent to text, and that have gone through an ownership check within a defined time period. Even when collectors respond to inbound consumer emails, they use pre-written replies that then direct Heartbeat how to proceed in serving the consumer. The decision to proactively communicate is strictly based on Heartbeat logic, not on collector whims; collectors cannot decide to contact consumers whenever they see fit. After contacting consumers, the system monitors their response. Consumers can easily opt out of communications, by replying to a text message or by clicking a link in every email that lets them easily unsubscribe from future email communications. Every email and every payment page contain a link that lets consumers ask for debt verification via a few simple online steps instead of a cumbersome and mail-based process. Every interaction is designed to give consumers an opportunity to ask for more information or limit communications to their preferred channel. Though easy to dismiss as an invitation for abuse, these options increase consumer engagement and result in overall better collections - while significantly reducing complaints about continued communications and missing documentation. These two categories have consistently been the top reasons for filing CFPB disputes ever since its dispute portal was made public. The compliance firewall: enforcing compliance at scale Human collectors are expected to remember dozens, maybe hundreds of compliance laws and regulations as well as creditor-imposed rules. It’s an impossible task, greatly simplified by Heartbeat’s Compliance Firewall. Since it controls all contact decisions by code, Heartbeat can enforce its compliance policy at scale on every interaction without needing to train human collectors. Contact timing or frequency, matching content to the right stage in a consumer’s process or preventing the use of unsubscribed contact methods, even making sure that a consumer doesn’t get a payment offer that the creditor didn’t approve - all are controlled by the Compliance Checker. Any attempted action outside of its well defined policy is dropped. Since it’s code controlled, it cannot forget to check the time and call a consumer after 9pm or before 8am. The Compliance Firewall also allows updates to policies and procedures. Every new update can be implemented with accuracy within days, once the appropriate code is written. By taking judgement away from the collector and subjecting all contact decisions to a data-based, code-controlled system, Heartbeat makes the optimal decision for consumer experience and driving payments, without harassing the consumer or violating the myriad of restrictions that govern debt collection. The easiest system to audit Compliance requires tight monitoring, and creditors audit a large sample of collection activities by their vendors. With so many voice calls, even if they are all recorded, complete and accurate audits are impossible. Auditors need to sample cases and hope to find the right patterns, or employ a large and expensive team for sufficient coverage. Heartbeat eliminates almost 95% of phone calls (typically attempting to reach the consumer 3-5 times over a 90 day period), instead focusing on written communication. Back and forth written interactions are easier to capture, store, and search. The system also saves consumers’ browsing pattern on the website and their interactions with the content they receive. It’s easy to track consumer behavior and how the system responded to it, as well as why it made a specific decision. Code controlled compliance means that decisions are easy to replicate and trace back in case they’re questioned. A readout from TrueAccord’s event-based audit trail TrueAccord’s system also has an audit interface for creditor audits. Compliance staff can easily search for accounts and review all collection activity - including recorded calls, emails, and every other contact. It’s a much easier approach to compliance and controls than an unwieldy excel file or PDFs dropped in an FTP folder. TrueAccord’s data retention and tracking of consumer behavior provide a fuller snapshot of Heartbeat’s collection decisions and how consumers reacted to them. Code driven compliance is the future We examined the inherent risks in traditional collection activities and how sticking to the phone as the leading collection tool in a call center environment creates more risks than rewards. Then, we dove into how code controlled compliance offers predictable, pre-approved, and consistent collection strategies that are easy to audit and understand. The coming years will see more and more creditors and collectors move to these machine learning based systems, as they demonstrate dominance in returns and compliance. It’s time for risk averse compliance departments to realize that they are putting businesses at risk by sticking to their phone-based roots, and look beyond tradition. A whole world of mature, stable and trustworthy technologies awaits.

Today, 80 million consumers are in debt. They are often not treated well by collectors, and subjected to harassment, intimidation and an overall bad user experience that does not encourage or empower resolution. According to a recent CFPB survey 1 in 4 consumers felt threatened by collectors, 3 in 4 consumers reported that a collector did not honor a request to cease contact, over ⅓ reported being contacted at inconvenient times, and 40% of consumers reported they were contacted 4+ times per week. These results are quite disheartening, and demonstrate that the traditional debt collection agencies have not adopted user centric practices and behaviors, nor have they integrated technology into the process to adapt to changing consumer needs. They are stuck making large volumes of phone calls to uninterested consumers who end up complaining. When we set out to survey our consumers about their experience with TrueAccord we weren’t quite sure what to expect, or if they would even respond. On one hand, we believe our data driven, consumer centric, digital first experience is reinventing the debt collection process and will replace legacy agencies, and consumer will appreciate that. On the other, we are still talking about debt collection, and most likely a lot of these consumers have experienced multiple negative collections experience and have low expectations of the process. They aren’t likely to recommend a debt collector, and as we’ve seen above, are highly likely to have had a bad experience. Overall satisfaction What we found was both exciting and inspiring, 80% of respondents were satisfied with their experience with TrueAccord. It’s an unprecedented number in an industry that, for decades, only attracted negative attention. TrueAccord is building a product and brand focused on delivering great user experiences and helping consumers rebuild financial health, and consumers are reacting to that. Traditional agencies’ behaviors have been impacting liquidation, hurting brand reputation and causing a lot of compliance risk. Yet they haven’t changed their ways. We show that working differently is possible - and will yield better results.   Tone 81% of consumers stated that the tone and personalized offers in our messages were appropriate for their individual needs. Our content is personalized, and tailored to empower and motivate consumers to want to pay off the debt, combined with the ability to offer a wide selection of custom payment plans. Consumers’ needs are served and they are treated like customers. Our clients understand that debt collection is part of a natural consumer life cycle;at one point or another, most of us will encounter debt collectors, but unfortunately traditional agencies lack the technology and best practices to deliver good user experiences, leaving consumers feeling frustrated, angry and wronged. This does not have to be the case. User experience 80% of our users had an overall positive experience with TrueAccord and recognized TrueAccord as different and better than other agencies. A large proportion of the other 20% resolved their debt by disputing it, so even though they may not feel great about their experience, they were able to dispute and discharge a debt electronically and with minimum hassle. It’s exciting to see that consumers see our brand the way we see ourselves, as innovators focused on great user experiences. We believe helping people get out of debt has positive impact for everyone involved, even (and sometimes more so) if getting out of debt means it can’t be collected. What consumers had to say: “You were easy to work with and the payment plan worked for me. Even when I had to make a small change, it was no problem. I'm glad to have the debt behind me. I appreciate the email correspondence as opposed to numerous phone calls.” “They worked with me and I needed that.” “It is always a pleasant experience dealing with True Accord.” “Wish you could handle all my debts.” “I love the fact that TrueAccord was kind and polite! I wanted to pay my debt but needed a plan that wouldn't leave me over spent or struggling every month. TrueAccord was happy to accept the payment plan I requested. Thank you!” “TrueAccord provided me a way to be true to my word.” “The agents are all very friendly and accommodating. It doesn't feel like you are dealing with a collection agency.” “The best collection agency ever!”  

I’m honored and excited to have been appointed to the CFPB’s Consumer Advisory Board. With this appointment, the CFPB is sending a strong message about how it views technology's role in shaping the future of consumer finance in general, and debt collection in particular. I'm proud to be able to represent the industry's point of view while making sure we usher in a new era of great user experience and technology innovation. When we founded TrueAccord in 2013, we set set a goal for ourselves - to go to Washington and influence policy making in the debt collection space. Ever since then, we engaged with the CFPB in various ways: quarterly meetings through Project Catalyst, participating in the SBREFA panel for the proposed debt collection rule, and even potential data exchange. We view policy making that enables better debt collections as our mission, and this appointment is just another step in the process. This appointment isn't about me, when I attend these meetings I will represent the industry, TrueAccord, its team and our consumers. I will take as very seriously, like we all take our mission. This could not have happened without the TrueAccord team’s hard work and laser focus on making a difference.

The US economy has taken a turn for the better in the past year. Unemployment has plummeted, the Federal Reserve is raising rates, and the stock market is soaring. However, for the past two quarters, several issuers reported an increase in charge off rates. While banks may be changing their underwriting standards to encourage growth, there is another contributing factor: a fundamental shift in the way consumers live and work, one that the credit card industry has failed to adjust to. 2008-2009 was a turning point for the US economy. Millions of jobs were lost across all industries, without much hope of recovery. College grads joined a crippled job market, and felt like they needed to “hustle” and find alternative means to sustain themselves. Uber, founded in 2009, created an opportunity as standard-bearer of the gig economy and many others have followed suit. At the same time, social media became prevalent as Facebook went international in 2007. These processes created  new consumers - the millennial cohort. Millennials are on the move, working several unsteady jobs, managing their own time and relying heavily on social media and digital communications. They use traditional financial solutions like credit cards, but the dominance of mobile and digital in their life is driving their preferences for communications and interactions with people and businesses. However, if they default, they are effectively sent back to the stone age, where in time to a world that knows nothing about them, and does little to service them effectively. When a system that “always worked” faces a new type of consumer behavior, it breaks - and leads to increased defaults and losses. Consumers expect a better user experience - even in collections As digital, always connected users, millennials expect their bank - or the bank’s collection vendor - to fit their lifestyle and preferences. Unfortunately, the debt collection and recovery industry hasn’t changed in decades. There has been little investment in moving away from phone calls and letters to a more digital and technology driven process,  that can deliver a better user experience for those in debt. Contact through digital channels is table stakes for the digital consumer. Many have never  visited a bank branch and most will not answer a call from an unidentified number, or respond to a letter. According to Accenture’s “Banking Customer 2020”, 58% of consumers use their mobile device when seeking support from their bank, 53% report going to their online banking center at least once per year to sort an issue; 78% report doing so to make a payment. More than half of the population has adopted  digital channels to manage their lives, and will not respond to cold calls and letters in nondescript white envelopes. Call center-based collection approaches fail to get these consumers on the phone, and debts make their way to charge off without any meaningful engagement from the consumer. Once contacted, millennials expect clear communications. The common disclosures used in debt collection, for example, feel onerous and obscure - causing them to disengage (the CFPB recognized that and is planning a survey regarding disclosures). The dispute process, asking for more information about their debt, is onerous and slow. Consumers need, and deserve, communication that drives them to action rather than intimidates and coerces them. Collectors are pressured to cold call and create instant rapport with unwilling debtors - and they are failing this task in growing numbers. Finally, consumers need flexible payment options that fit their work schedules. As Robert Reich notes, while 1099 workers may make slightly higher hourly salary when working, their hours are irregular and difficult to schedule. This means irregular paychecks that can vary in size and resulting disposable income. A consumer might be able to pay $100 this pay period, $150 next time and only $50 the following one. Traditional approaches fail to adjust to these realities, focusing on steady payment plans that these consumers cannot always keep up with.

This article, written by our In House Counsel Adam Gottlieb, first appeared in the RMA Insights Magazine The word “startup” conjures images of stereotypical open offices, complete with ping pong tables, standing desks, and people in hoodies feverishly hammering at keyboards. Startups are often associated with high risk, scrappiness, and the ability to break things and move fast–all a stark contrast to the bureaucratic and highly-regulated environment that most debt buyers and collectors operate in. Yet, as startups begin venturing into the area of financial technology, they have had to adjust to new operating principles and new stakeholders, with the government chief among them. (more…)

Tax Season in Debt Collection Tax season is to debt collection as holiday season is to retail. According to the National Retail Federation, of the 66% of consumers who are expecting a tax refund this year, 35.5% plan to spend their refund on paying down debt. For this reason, mid-February through May is considered the most productive time of the year for debt collection by many in the industry. (more…)

In case you missed it, our CEO Ohad Samet spoke in a panel at the LendIt Conference about the use of artificial intelligence in FinTech. Joined by industry leaders in a propelling talk, this video is not to be missed. (more…)

This week, Breaking Banks host Brett King chatted about the ideas of debt rehabilitation with Ohad Samet, CEO of  TrueAccord, and how machine learning and AI can help people fix their credit situations. (more…)

Our CEO , Ohad Samet, will be part of a panel discussing Artificial Intelligence Uses in Fintech. The panel will be held at 2:15pm Eastern on Tuesday, 3/7. (more…)