Coast to Coast: the State of Privacy and Compliance in 2023

By on April 20th, 2023 in Compliance, Industry Insights, Webinars
Coast to Coast: The State of Privacy and Compliance in 2023

Disclaimer: The information provided in this blog post does not, and is not intended to, constitute legal advice. 

Protecting consumer privacy is not an unfamiliar concept in our industry and it’s something that should already be woven into our policies, procedures, and practices. With the rapid increase of state privacy laws across the United States, any company that collects, uses, transmits, or receives consumer data has to stay up-to-date on all related compliance issues.

In a previous webinar, Coast to Coast—the State of Privacy and Compliance in 2023, TrueAccord’s legal experts discussed the newest federal privacy laws and all the related compliance issues. Watch the full webinar on-demand now!

The passage of the FTC’s Safeguards Rule, amending the Gramm Leach Bliley Act (GLBA), has been a big topic in data security conversations across the financial services industry as businesses prepare to be in compliance on or before the extended effective date of June 9, 2023. Meanwhile, several states have actively been considering and passing new legislation requiring additional policies, controls, and practices not only in the data security space but also for data privacy and data breaches. It is important for Chief Information Security Officers, Privacy Officers, and Chief Compliance Officers to stay on top of this legislation, as well as Chief Executive Officers since we have seen many federal and state actions naming the CEO in their individual capacity for failing to properly secure and protect data or to properly delegate these responsibilities to the appropriate persons within their organizations. 

**Please note this article is not legal advice. This is not an exhaustive list of all laws. You should consult a lawyer if you have questions about federal and state data security, privacy or breach laws.

Data Breach Laws

All 50 states have data breach notification laws on the books. In 2022, 19 states considered enhancing their data breach laws.

Those states that passed revised data breach laws, tightened up notification timelines, added additional definitions of what constitutes personal information, and expanded the notification requirements to include additional state agencies. For example, Arizona’s law HB 2146, amending Arizona Revised Statutes section 18-552, not only requires that notification be made to consumers but also to the Director of Arizona’s Department of Homeland Security. If the breach impacts more than one thousand people, then the law requires the notification also be given to the three largest nationwide credit reporting agencies, the attorney general, and now the Director of Arizona’s Department of Homeland Security. 

While most states are shortening the time frame in which a consumer must be notified of a data breach to 45 days or less, some of these laws include exceptions or a short list of situations in which a delay in notification is permissible. For example, Indiana’s revised law, H.B. 1351, amending Indiana Code 24-4.9-3-3, limits a permissible delay in notification three circumstances: (1) when the integrity of the computer system must be restored, (2) when the scope of the breach must be discovered, or (3) when the attorney general or a law enforcement agency asked to delay disclosure because disclosure will impede a criminal or civil investigation, or jeopardize national security.

Both Maryland (H.B. 962, amending Maryland Personal Information Protection Act and section 14-3501 of the Annotated Code of Maryland)and Pennsylvania (S.B. 696, amending the Pennsylvania Breach of Personal Information Notification Act) expanded the definition of “personal information” to include medical and health information, including a definition of “genetic information” in Maryland’s law.

Since the webinar, Utah Governor Spencer Cox signed into law Senate Bill 127 on March 23, 2023, which amends the state’s data breach notification statutes. The amendments go into effect May 2, 2023.*

Along with updates to states’ laws, Federal regulators are also providing additional guidance too. For example, the Office of the Comptroller of the Currency (OCC) recently released more information regarding when banks need to know from their vendors about data breach including ransomware notifications.

Data Privacy Laws

In addition to creating and updating laws to help consumers in the event of a data breach, states have also been enacting laws dedicated to protecting consumer privacy. There are six states with comprehensive data privacy laws: California, Connecticut, Colorado, Iowa*, Virginia, and Utah. These laws give consumers various rights over their personal information, such as the right to know what information companies collect and use, a right to correct their information, a right to opt-out of the sale of such information, and a right to request deletion. 

In 2022, Congress introduced a federal privacy law, HR 8152, the American Data Privacy and Protection Act; however, it did not make it to the finish line despite having bipartisan support. It contained some preemption of state privacy and data protection laws, which would have been a relief to many companies navigating the existing patchwork of state laws.  As of January 2023, many states have introduced privacy-related bills and this is likely to continue throughout the years to come. 

California took the privacy law lead in passing the California’s Consumer Privacy Act of 2018 (CCPA) that went into effect in January of 2020 to protect the use and sharing of personal data. California recently expanded the CCPA with the California Privacy Rights Enforcement Act (CPRA) that took effect on January 1, 2023. The law created the new California Privacy Protection Agency and gave it the power, authority, and jurisdiction to implement and enforce CRPA. Additionally, businesses must regularly submit their risk assessment on the processing of personal information to this new agency. 

The four other states that followed suit have substantially similar laws with broad definitions of personal information. These laws typically apply to persons that conduct business in the state and processing a set minimum of consumer data records (typically 25,000 or more) or businesses who earn at least 50% of their revenue from the sale of consumer data. 

These laws give consumers various rights, such as the right to access their personal data, correct inaccurate personal data, delete personal data, in certain circumstances, obtain a copy of the personal data they previously provided to a controller, opt-out of the processing of their personal data if related to targeted advertising, sale of personal data or certain profiling activities, appeal a controller’s refusal to take action on a request, and submit a complaint to the attorney general if an appeal is denied. Interestingly, Colorado’s law makes clear that a consumer’s consent is not valid if obtained through the use of a “dark pattern.” 

These laws do not give consumers a private right of action but are enforced by the state’s attorney general with civil monetary fines calculated per violation. These laws also contain exemptions for data already protected by other laws, such as HIPAA, FCRA, and GLBA.

Virginia’s law took effect January 1, 2023. Both the Connecticut and Colorado Data Privacy Acts will go into effect July 1, 2023. The Utah Consumer Privacy Act takes effect December 31, 2023. The Iowa privacy bill (SF 262) was signed into law by Gov. Kim Reynolds on Tuesday, March 28, 2023. The legislation is set to take effect Jan. 1, 2025.*

Best Practices for the Future of Data Security & Privacy 

Having good security practices in place is not only beneficial for both consumers and businesses, but is absolutely critical to stay compliant with all the new laws and amendments being introduced. 

So what are some of the best privacy and security practices to implement to protect customers, companies, and stay compliant? 

  • Practice data minimization.
  • Know where personal information lives at all times by creating a data map of where the data goes and is stored throughout your systems, which includes knowing your vendor’s data security and privacy practices and controls. 
  • Know who has access to personal information and routinely examine if that access is necessary to complete that job function.
  • Be intentional with how data is organized and stored so it can be easily segmented and treated differently if need be (think network segmentation). 
  • Have a public facing Privacy Notice–and make sure it accurately reflects your practices for use, collection, deletion and correction.
  • Conduct an annual data security and privacy risk assessment to continually reassess areas for improvement and where you may need additional controls.
  • Ensure contracts with parties whom you receive and/or give personal information to specifically address each parties’ obligations and restrictions for how personal information is used, shared, disclosed, stored, and sold (if permitted).

Compliance with data privacy and data security requirements will continue to progress as new laws and regulations are passed. Best practices will continue to evolve as well, as we continue to learn more about the expectations from Federal and state legislators and regulators, and as companies navigate evolving threats and vulnerabilities. Watch the full Webinar: Coast to Coast— the State of Privacy and Compliance in 2023 here »»

Learn more in our Compliance & Collections Resource Center or schedule a consultation today

Footnotes: 

*The Iowa privacy bill (SF 262) was signed into law by Gov. Kim Reynolds on March 28, 2023 after TrueAccord’s Coast to Coast webinar. 

*The data breach law for Utah was passed on March 23, 2023 after TrueAccord’s Coast to Coast webinar

Q1 Industry Insights: Economic Stressors Persist while Pandemic-era Benefits End

By on April 5th, 2023 in Industry Insights

It’s tax season again, which can mean tax refunds for consumers that have historically been leveraged to stabilize finances or pay down debt. But with inflation and economic stressors persisting into the new year, many consumers are conflicted on their financial outlook and spending behavior is hard to predict. With uncertainties about how the end of various pandemic-era benefits will impact consumers, it’s more important than ever for creditors and collectors to implement strategies that consider consumer situations and preferences when attempting to collect.

Read on for our take on what’s impacting consumer finances and our industry, how consumers are reacting, and what else you should be considering as it relates to debt collection in 2023.

What’s Impacting Consumers and the Industry?

High inflation and interest rates persisted in the first quarter of 2023. While inflation eased for an eighth straight month in February at 6%, price increases rose sharply again on a monthly basis – prices grew 0.4% following a 0.5% increase in January, driven by higher gasoline and rent prices. In response, the Federal Reserve continued its battle against high inflation in March by raising its key interest rate by another .25% despite concerns around the turmoil that has shaken the banking system, landing it at 4.75-5%.

At the beginning of March, the federal government ended pandemic-era payments for low-income families on the Supplemental Nutrition Assistance Program (SNAP), causing nearly 30 million Americans to lose increased food stamp benefits. The extended payment boost was credited with keeping 4.2 million people out of poverty, with the average household expected to lose upwards of $95 per month in benefits with the program’s end.

In early Q2, another pandemic-era benefit around Medicaid will come to an end that will impact millions of consumers over the coming months. An estimated 15 million low-income Americans who were able to keep Medicaid coverage during the pandemic without needing to renew coverage or despite no longer qualifying will find themselves without health insurance. The Department of Health and Human Services estimates that in the end, more than 5 million children will have lost Medicaid, and predicts that Latino and Black beneficiaries will be disproportionately removed.

On the regulatory front, the Consumer Financial Protection Bureau (CFPB) hit the ground running for 2023 with new guidance on subscription fees, proposed rulemaking on non-bank company terms and conditions, and issued an annual report sizing up the three credit reporting companies. Directly impacting creditors and debt collectors, a January ruling from the District Court of Puerto Rico found that sending debt collection communications prior to any knowledge of a debtor’s bankruptcy filing is not a violation of the Fair Debt Collection Practices Act (FDCPA).

For businesses using pre-recorded messages to contact consumers, the Federal Communications Commission (FCC) published a new rule specifying that to be exempt from the Telephone Consumer Protection Act’s (TCPA) consent requirements, callers are limited to three pre-recorded non-commercial, non-telemarketing, or non-profit calls per 30 days, and would need to include an opportunity to opt out of prerecorded calls as part of the message. The final amended rule will go into effect on July 20, 2023.

Meanwhile, eyes are on the Big Apple as the New York Department of Financial Services (DFS) and the New York City Department of Consumer and Worker Protection are simultaneously engaged in amending their consumer debt collection rules. The DFS amendments would be an overhaul of its existing regulations and would include new debt types, while both amendments would introduce new disclosure requirements and additional restrictions on communications – specifically extending the existing requirement for direct consent to send email and text messages.

Key Indicators and a Heavyweight Court Decision

According to the New York Fed’s Quarterly Report on Household Debt and Credit, total household debt increased in the fourth quarter of 2022 by $394 billion (2.4%) to $16.90 trillion. Balances now stand $2.75 trillion higher than at the end of 2019, before the pandemic. In the same time period, the Federal Reserve reported that household net worth rose 2% to $147.71 trillion, driven by the value of equities holdings increasing $2.7 trillion offsetting a drop in real estate values by about $100 billion.

Consumers trying to make ends meet have continued turning to credit cards and other credit types to bridge the income to expense gap. According to the Federal Reserve Bank of New York, U.S. consumer credit card debt has increased to nearly $1 trillion. Credit card balances jumped more than $60 billion over Q4 2022, lifting the total amount of U.S. credit card debt to an all-time high of $986 billion, the report found. Home equity loans and lines of credit continue to be an attractive option to homeowners, though high interest rates may make opening a new account less appealing in 2023.

Diving deeper into credit cards, Experian’s March Ascend Market Insights report found that credit card balances, while slowing slightly from previous months as seasonally expected, were up 18.8% year over year in February 2023. Additionally, the report found that there were 7.2% more open credit cards in February than there were a year prior. These balances and new cards coincide with an increase in interest rates, raising the stakes for delinquent accounts. According to a January 2023 Bankrate survey, 35% of Americans carry credit card debt from month to month, up 6% from 2022.

And delinquency is trending. Experian also reports that early-stage delinquency is nearing or exceeding pre-pandemic levels for most credit products, with exceptions for first and second mortgages, Home Equity Lines of Credit and student loans. 30+ day past due accounts showed a 2.12% increase month over month in February, while 90+ days past due unit delinquencies for auto loans and personal loans are higher than they were in 2019. Additionally, roll rates show 1.06% of consumer accounts rolled into higher stages of delinquency in February. Revolving credit utilization continues to slowly increase, as well. The same month, 63% of consumers had utilized 20% or less of their revolving limits, while 21% of consumers had utilization of 60% or more.

The student loan forgiveness debate continues into 2023 as the nearly 19% of Americans with student loans wait to see how the case shakes out with the Supreme Court. If successful, many consumers will see their overall debt burden decrease. If unsuccessful, those consumers will see no reduction in their debt and will be responsible for resuming payments that were deferred or went into forbearance during the pandemic. A ruling is expected sometime in Q2 2023.

While student loan delinquency rates have been almost nonexistent since payments were paused, the delinquencies in mortgages, auto loans and credit cards have been trending back to pre-pandemic levels, which doesn’t bode well for student loan holders with other debts. When student loan payments resume, consumers will have to prioritize debt repayment, leading to higher delinquency rates for other debt types. For a data-driven look into this topic, read our latest report, “Consumer Finances, Student Loans and Debt Repayment in 2023”

Consumers Sending Mixed Signals About Finances

As the cost of living remains high, 62% of Americans said they are living paycheck to paycheck in February, up from 60% the month prior, according to the latest Paycheck to Paycheck Report from PYMNTS.com and LendingClub. According to Deloitte’s State of the Consumer Tracker, consumers are feeling slightly more optimistic about their personal finances and the direction of the economy, but are also signaling stronger intentions to save versus spend. 

But Bankrate’s 2023 Annual Emergency Savings Report shows that growing debt is hurting consumers’ ability to save, with 36% of Americans reporting having more credit card debt than emergency savings, the highest on record since 2011. The report shows that consumer concern about finances is high, with 68% of people surveyed worried they wouldn’t be able to cover their living expenses for one month without their primary source of income, including 85% of Gen Zers — the most concerned of any generation. Unsurprisingly, 74% surveyed said economic factors, inflation and changes in income and employment are causing them to save less right now.

What Does This Mean for Debt Collection?

So far in 2023, the economic landscape isn’t cutting consumers any breaks. With persistently high inflation and interest rates, the impending threat of a recession and a number of pandemic-era benefits coming to an end, consumer finances will likely be impacted and stretched in myriad ways this year. For lenders or collectors engaging with distressed borrowers, here are a few things to keep in mind:

1. Meet consumers where they are, compliantly. While regulations and compliance impacted both phone calls and digital channels in some way in 2022, our takeaway is that a one-size-fits-all approach to debt collection communication won’t work at scale in 2023. By using an omnichannel approach, collectors are more likely to engage a customer on their preferred channel and open the door for engagement. For a closer look at what using an omnichannel approach means in debt collection, check out our latest eBook.

2. Give consumers agency to engage on their own time. What do emails and online payment portals have in common? Consumers get to decide when and where they use them. Just because a call center operates from 9-5, doesn’t mean consumers do. Remember that everyone’s situation is different, including when they can (or want) to address their debt. 

3. Give consumers flexibility on repayment time and terms. Higher monthly financial obligations make it harder for consumers to absorb unexpected expenses or carve out funds for debt repayment. Patience will be key in engaging distressed borrowers – give them payment plan options for when and how much they repay, which could mean smaller payments, shifting payments to align with their cash flow schedule or skipping a payment without penalty so they can get back on track.

Q4 Industry Insights: Economic Challenges, Big Unknowns and Worried Consumers

By on January 17th, 2023 in Industry Insights

In 2022 we started to see the toll inflation and economic stressors are taking on consumer finances. Inflation remained a top concern as the Fed tried to rein it in with rate hikes, and the higher costs and interest rates may have caused consumers to stretch their budgets as far as possible (or farther – holiday spending, anyone?), leading to a precarious financial outlook in 2023. As we start the new year with the continued threat of a recession and a shrinking employment market, building strategies that take consumer situations and preferences in mind is key, and of course, finding ways to work with distressed borrowers is the best path forward.

Read on for our take on what’s impacting consumer finances, how consumers are reacting, and what else you should be considering as it relates to debt collection in 2023.

What’s Impacting Consumers?

Compounding inflation and higher interest rates continued to be hard on consumer finances in Q4 of 2022. Inflation has been slowing, but still came in up 6.5% year over year in December, dropping 0.1% from November and driven by lower fuel costs. Food and housing inflation continue to rise at 10.1% and 8.1% annually respectively, and gasoline prices in January have already been rising. Interest rates sit between 4% to 4.25% after the latest 50 basis point rate hike, and the Fed projects raising rates as high as 5.1% (raised from a 4.6% projection in September) before ending the campaign to beat inflation.

According to Moody’s, while higher-income households saved more during the pandemic and are far less sensitive to rising prices, lower-income families are bearing inflation costs unequally and drawing down excess savings more quickly. Households earning less than $35,000 annually saw their excess savings shrink the most out of all income cohorts — their excess savings depleted by nearly 39% from Q4 2021 to Q2 2022 and was expected to run out by the end of the year.

Tasked with making ends meet and running out of savings, many consumers have turned to credit cards for extra funds. Credit card balances continued to climb for the ninth month in a row in November, up 16.9% year over year. According to Experian’s November Ascend Market Insights, there were 6.2% more open credit cards in October than there were a year prior and 11.1% more than at the end of October 2019 (pre-pandemic). Read: more credit cards with higher balances. 

And many of those credit cards belong to subprime borrowers who are more financially at risk to inflationary pressures and unexpected expenses. Equifax data reported by Bankrate shows that about 3.95 million traditional credit cards had been issued to subprime borrowers (consumers with a VantageScore 3.0 below 620) in Q1 2022, jumping by 18.3% and representing an overall credit limit of $3.29 billion, compared with the same period in 2021. And those balances will get more expensive as interest rates go up. According to Bankrate, credit card rates have risen to the highest levels ever since it began measuring the data in 1985, with today’s average annual credit card rate at 19.42%.

Credit cards aren’t the only option – consumers have other ways to access credit like personal loans and home equity lines of credit (HELOC). But these products are showing similar use trends, too. TransUnion reports that as of Q3 2022, 22 million consumers had an unsecured personal loan, the highest number on record, while total personal loan balances in the same quarter continued to grow, reaching $210 billion – a 34% increase over last year. Similarly, Experian reports that HELOC balances grew by 1.5% after increasing over 9 of the last 12 months. With HELOC originations down, the increase in balances is attributable to homeowners tapping into existing lines of credit as the cost of living rises.

Higher prices didn’t stop the holiday shopping – holiday sales rose 7.6% last year despite inflation, and much of that was online. Consumers spent a record $9.12 billion online shopping during Black Friday and another record $11.3 billion on Cyber Monday. Buy Now, Pay Later (BNPL) products, which help consumers with flexible payment plans, played a big role. From Black Friday through Cyber Monday, BNPL payments through leading providers jumped 85% compared with the week before, according to the most recent data from Adobe, with corresponding BNPL revenue rising 88% for the same period.

Key Indicators and a Big Unknown

According to the New York Fed’s Quarterly Report on Household Debt and Credit, total household debt increased by $351 billion (or 2.2%) during the third quarter of 2022. Household net worth, which showed a record loss in Q2, continued to decrease in Q3 by another $392 billion (.3%). The value of equity holdings dropped $1.9 trillion and the value of real estate held by households only increased $820 billion.

Financial pressures mean consumers have less, if any, to save. The U.S. savings rate fell to a 17-year low in October, with the personal savings rate as a share of disposable income dropping to 2.3%. The latest Paycheck-to-Paycheck Report from PYMNTS and LendingClub shows that in November 2022, 63% of U.S. consumers were living paycheck to paycheck, a 3% rise from October. Spending more and saving less means many Americans may be at risk for financial hardship in 2023. 

Unsurprisingly, delinquencies are on the rise. According to Experian’s November Ascend Market Insights, there have been increases in 30+ days past due unit delinquency rates for six consecutive months, with those accounts showing a 3.28% increase month over month in October. This goes for both early-stage delinquencies, which are nearing or exceeding pre-pandemic levels for automobiles and unsecured credit products, and 90+ days past due delinquencies for auto and personal loans (higher than pre-pandemic). Experian’s data on overall roll rates also show that 1.32% of consumer accounts rolled into higher stages of delinquency in October 2022, representing the highest level of that metric since February 2020. 

But delinquencies haven’t peaked yet. TransUnion’s 2023 forecast, based on its latest Consumer Pulse Study, projects that both credit card and personal loan delinquencies will rise in 2023 from 2.1% to 2.6% and 4.1% to 4.3% respectively. If those projections come to bear, it would represent a 20.3% year-over-year increase in delinquent accounts. According to the report, Americans took out a record $87.5 million in new credit cards and $22.1 million in personal loans in 2022.

The big unknown around student loans will impact many consumers for better or worse. As President Biden’s student loan forgiveness program meets legal challenges, tens of millions of Americans wait to see what it means for them. If successful, many consumers will see their overall debt burden decrease, which may help stabilize finances. If unsuccessful, those consumers will see no reduction in their debt and will be responsible for resuming paused payments, which may further stress their financial situation. We’ll find out sometime in Q1 or Q2 of 2023, but the result will likely have a big consumer impact either way.

Consumers Are Worried About Inflation and Credit Cards

How are consumers feeling about the economic landscape and their personal finances? TransUnion’s Consumer Pulse Study reports that 54% of consumers said their incomes weren’t keeping up with inflation, while 83% said that inflation was one of their top three financial concerns for the next six months. But despite concerns about rising prices, more than half (52%) of Americans said they felt optimistic about their household finances for the upcoming year, even though 82% of consumers believe the U.S. is currently in or will be in a recession before the end of 2023.

All those new credit cards are causing some concern for consumers, as well. An early December survey from U.S. News & World Report shows that more than 8 in 10 Americans who have credit card debt are experiencing anywhere from a little to a lot of anxiety about it. An overwhelming majority of respondents (81.6%), all of whom have credit card debt, express some degree of stress about it – from a little bit (33.1%) to a medium amount (27%) to a lot (21.5%). The combination of rising costs and insufficient income was the most common reason given for having credit card debt, with unexpected expenses a close second.

What Does This Mean for Debt Collection?

As consumers wake up in 2023 with a holiday shopping hangover and bills to pay, the economic landscape isn’t going to cut them any breaks. Consumers will have to prioritize what they can pay and when, which means repaying some debts may get moved to the back burner while food, housing and other basic needs are addressed. Will delinquencies rise as expected? Will consumers turn to more credit cards or BNPL for a stopgap? What happens to overall debt burden with all the unknowns? We’ll soon find out, but as a lender or collector, here are some things to consider:

Make it easier to engage. On their preferred channel, at a convenient time, with all the information they need is the best way to engage consumers. Bonus points if they can self-serve on their own time.

Make it easier to pay. Paying in full may be impossible for many people with tight budgets, and offering flexible payment plans or removing minimum payment requirements may make debt easier to tackle. Self-serve online payment portals are a win/win for your business and your customers.

Make it more empathetic. Balancing finances and being in debt is hard, and people are doing their best to keep up. Understand that you may not recover past due balances immediately and it may take time and patience. In addition to when and where, reconsider how you’re speaking to consumers and you may be surprised at how empathy drives engagement. Need proof? See how customers responded to TrueAccord’s digital approach to debt collection in our 2022 Year in Review.

How Buy Now, Pay Later is Transforming Online Shopping With Gen Z

By on August 24th, 2022 in Industry Insights, Product and Technology
How Buy Now Pay Later is Transforming Online Shopping With Gen Z

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. 

Further Reading: 

Survey: Consumers Talk Financial Regrets, Credit Scores and Debt

By on February 23rd, 2022 in Industry Insights

Most Americans are in enough credit card debt, they would do anything to go back in time and change the outcome of their financial situation, according to new research.

A survey of 2,000 general population Americans examined how they tackle their financial hurdles and found the average person owes $3,083 to credit card debt. 

Many respondents shared their financial regrets over the years, from not setting up a retirement plan when they were younger (51%), to not paying close attention to their credit score (43%) and buying goods that were too cheap (41%).

Three-quarters (76%) have made an average of five financial decisions they regret in the past five years. And those who are eager to get out of debt (76%) have already planned their “debt free” celebrations once they finished paying all their dues. 

Conducted by OnePoll and commissioned by TrueAccord, a digital debt collection company, the study revealed 77% of respondents have lost an average of nine hours of sleep per week due to their financial woes.

When they’re in a financial crisis, 63% of people will turn to someone they trust — with half turning to their parents, 48% to their best friend and 46% to their primary bank. 

Overall, 87% of people credit their financial “wins” to the people who had given them advice, while seven in 10 (71%) said they’ve learned from others’ financial mistakes.

“There are close to 80 million Americans with past due debt and most want to pay it off and move on with their lives. But that is exceedingly difficult, especially in a debt collection system that treats consumers poorly and is more interested in process than simplifying debt repayment,” said Ohad Samet, founder of TrueAccord. “What we see more and more are consumers in debt who want to pay off their balances but are met with challenges of communicating with collectors, financial literacy and budget considerations that create roadblocks to being debt-free.”

For many Americans, recovering from financial regrets starts with their credit score. The average person doesn’t understand the importance of their credit score until they’re 28 years old, but believe it’s better to start building a credit at 25 years old.

Over four in five (84%) said maintaining a good credit score is important to them, with nearly as many (81%) saying it’s even more important than their social lives.

Respondents also recalled the feelings they have when they see their credit card statements and when they’re about to make a payment. When seeing their statements, 31% said they feel confident and 24% feel fear. 

On the other hand, people feel satisfaction (36%) and happiness (22%) when making a payment.

While 38% don’t plan on taking out any kind of loans in 2022, many are already making plans for loans in the year ahead — including credit card loans (34%), personal loans (33%) and mortgages (30%). 

“For those who are able to repay their balances, there may still be a longer-lasting impact to their credit score that can be difficult to remedy and further inhibit financial stability,” added Samet. “People will continue to borrow money when they need it, but what’s important is that they are informed on loan or credit terms and have a financial plan in place to ensure they’re making smart spending and repayment decisions. At the end of the day, though, getting into collections is often the result of trauma — loss of work, a healthcare crisis, and so on — many of them unexpected.”

TOP 10 FINANCIAL REGRETS AMERICANS HAVE

  1. Not starting a retirement plan while I’m young 51%
  2. Not paying attention to my credit score 43%
  3. Buying cheap goods 41%
  4. Defaulting on payments and ending up in debt collection 41%
  5. Overspending on credit cards that I can’t afford to repay 38%
  6. Buying a car without knowing what’s involved 37%
  7. Letting student debt accumulate 36%
  8. Getting locked into fixed interest rates 29%
  9. Not investing money while I’m young 26%
  10. Not buying a home/property while I’m young 25%

TrueAccord Announces Results Confirming Effectiveness of Digital-First Retain Product for Early-Stage Delinquencies

By on January 25th, 2022 in Company News, Machine Learning, Product and Technology

With more than 1 million consumer accounts now managed through the intelligent, client-branded product, results show 40% more effective than leading “call and collect” vendors

LENEXA, Kan., Jan. 25, 2022 — TrueAccord Corporation, a debt collection company offering machine learning-powered digital recovery solutions, today announced results following the September 2021 rollout of Retain, the client-branded product that addresses early-stage recovery challenges for organizations with customers with delinquent accounts. TrueAccord Retain is now being used by creditors to manage more than 1 million consumer accounts and has shown to be 40 percent more effective at repayment than traditional “call and collect” debt collection vendors. 

TrueAccord Retain, which harnesses digital technology and machine learning to deliver a personalized, effective early-stage recovery strategy, significantly outperformed three traditional “call and collect” agencies across several of an anonymous client’s portfolios. Relative to the best-performing “call and collect” vendor for each product portfolio, TrueAccord Retain drove a 24 percent improvement in roll rate, a 28 percent improvement in early-stage gross flow through rate and a 40 percent improvement in late-stage gross flow through rate*.  

“With more than 1 million consumer accounts now being managed through Retain, we’re able to see the robust results of the product on improving early-stage delinquencies for our clients,” said Mark Ravanesi, CEO of TrueAccord Corp. “The results of our client’s evaluation were unambiguous: Retain’s machine learning-powered, digital-first approach resonated with consumers and drove significant growth for the early-stage recovery business. With a lingering worker shortage, especially in the call center space, we expect these performance numbers to continue to grow as more consumers are brought into the Retain ecosystem in 2022.”

Powered by TrueAccord’s industry-leading tech stack, key benefits of Retain 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. Retain implements e-commerce-based innovations like the focus on digital experience and outreach, machine learning-based personalization, and deliverability at massive scale for early-stage use. 

To learn more about TrueAccord and its digital-first recovery solutions, visit www.TrueAccord.com and follow @TrueAccord on Twitter and LinkedIn.

*This data comes from an anonymous client’s evaluation of performance of different delinquency  approaches  side-by-side. The client randomly assigned credit and retail card accounts to TrueAccord Retain and the other vendors. Key success metrics included roll rate, or the percentage of dollars that became progressively delinquent, and gross flow through rate, or the percentage of dollars that flowed from one delinquency category across multiple subsequent categories.

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 16 million consumer journeys, that dynamically personalizes every facet of the consumer experience – from channel to message to plan type and more – in real-time. Combined with code-based compliance and a self-serve digital experience, TrueAccord delivers liquidation and recovery rates 50-80% higher than industry benchmarks. The TrueAccord product suite includes Retain, an early-stage recovery solution, and Recover, a full-service debt collection platform.

How the collections industry can serve consumers in times of economic uncertainty

By on July 13th, 2020 in Industry Insights

Debt collection is a highly regulated industry and as such, is notoriously slow to change. While there are a number of reasons for this, the end result is a growing gap between consumer’s expectations and the services creditors offer.  

TrueAccord’s recent report, Consumer Debt in the Age of COVID-19, found that during times of economic uncertainty, this gap can grow even wider. Repayments may be irregular for the foreseeable future, so when consumers do choose to pay, it’s up to collectors to make the process as simple as possible. Now more than ever, it’s clear that the collections industry needs to catch up with other financial services and provide modern solutions for the consumers it services.

Debt collectors can pave the way for an improved consumer experience with context-aware messaging, flexibility, and opportunities for consumers to engage on their own terms.

Use Context-Aware Messaging

A consumer’s relationship with a debt collector begins well before any payment activities. While this relationship has traditionally been built on a series of letters and phone calls, today, it’s crucial to leverage digital channels and a context-aware approach. 

Consumers expect a personalized experience from their financial services, and debt collection should be no different. Customizing communications based on context improves engagement and enhances the customer experience. To succeed, digital debt collectors must leverage their messages from robust content libraries, selecting the right communication at the right time.

A key part of finding the “right” message is striking the right tone. Financial hardships are challenging to navigate and as a debt collector, being patient and offering solutions can make a world of difference. 

At TrueAccord, our machine learning engine, Heartbeat, chooses the “right” message to send from thousands of legally approved communications based on the millions of people TrueAccord has worked with in the past. We’ve found that the right content in an email can increase click-through rates by 20%. 

To be sure, optimizing content is about tone and timing — not increased frequency of communications. In fact, there are many safeguards in place to protect consumers from email overload. Not only will email service providers identify those who over-email as spam, but consumers can also independently unsubscribe or flag messages as spam if they feel harassed.

Provide Flexible Options

Offering consumers flexible payment options is not only better for customer experience, but it can have a dramatic impact on payment plan retention as well. Our research shows that consumers are 50% less likely to drop off of a flexible payment arrangement. 

While flexibility has always been a differentiator for debt collectors, it is especially important during times of economic hardship and uncertainty. Consumers are more likely to begin a payment plan if they are confident that they can adjust their payments to accommodate uneven or unpredictable cash flow. We’ve found that consumers are more inclined to pay off debts that they feel are manageable and are owed to a company they trust.

Introduce Self-Service Options

Today, consumers take care of most of their financial needs without ever talking to a human, and paying a debt shouldn’t be any different. Online self-service tools have become the norm across financial institutions and debt collectors need to follow suit to best serve consumers. 

All debt collectors should set up a payment portal so that consumers can seamlessly make payments online. This type of self-service tool reduces friction for the consumer by removing the need to speak to an agent and allowing them to pay at any time, not just during business hours. Our data shows that 17% of consumers access our website before 8:00 a.m. or after 9:00 p.m — times when they could never talk to an agent. 

To truly match the convenience of online banking, digital tools must also allow consumers to take a variety of actions including (but not limited to):

  • Adjusting the length and installment amount on their payment plan
  • Deferring a payment
  • Disputing all or a portion of their debt
  • Entering bankruptcy information
  • Applying for a hardship pause on their debt.

Implement Smarter Staffing

In times of national economic uncertainty, payments are likely to be inconsistent. For example, during the coronavirus crisis, we may see spikes in payment activity as individuals receive governmental aid or businesses are able to hire back their workers. Unfortunately, staffing becomes very complicated when there is uncertain demand. On top of that, operating a call center is currently harder than ever, with most states still requiring staff to work from home—a challenge for compliance, IT, and HR. 

One step companies can take is to prepare for spikes in payments based on leading indicators of future demand. These can include factors such as economic indicators (like unemployment rate), governmental aid programs (like the CARES Act), and consumer digital engagement trends (like click-through rates on emails). While these indicators won’t provide enough time to train a whole new team of agents, they may signal a good time to bring in your seasonal staff.

But in order to succeed in the long-term, debt collection agencies must introduce a digital-first model. Once someone decides to pay a debt, having digital payment options alleviates pressure on the call center. At TrueAccord, 95% of consumers resolve their debts without ever speaking with an agent. 

Needless to say, humans are still crucial. While machines are great at handling routine requests, there is no replacement for a well-trained agent to help customers with more complex situations. However, with the help of digital tools, each agent is more efficient. At TrueAccord, each agent is able to service more than 80,000 accounts (and counting) vs. a traditional agency’s 1,000-2,500. This type of hybrid model provides the best possible customer experience, even during busy times.


During times of economic uncertainty, debt collectors must adapt to an operating model that empowers consumers to manage their debts in the way that makes most sense for them. Based on historical trends, as well as the consumer behaviors we’ve seen in the first few months of the coronavirus pandemic, we recommend that all companies collecting debt should use context-aware messaging, provide flexible options, introduce self-service options, and implement smarter staffing.

What consumer repayment trends can we expect from a recession?

By on April 23rd, 2020 in Industry Insights

Financial institutions around the world are seeing massive changes to the way consumers are engaging with their finances. The COVID-19 pandemic and the growing recession are also changing the way that consumers are engaging with their debts.

During the 2008 financial crisis, we actually saw that “charge-off rates for subprime consumers increased only moderately relative to pre-crash levels” according to a white paper recently published by 2nd Order Solutions and Boston Consulting Group.1

The recent historic and exponential rise in unemployment rates and the rapid onset of an economic recession, however, also means that there isn’t a precedent for precise predictions. Thankfully, based on current trends and existing data, we can see some patterns beginning to emerge.

Based on a survey conducted by Bankrate, roughly 25% of Americans expect to put their stimulus checks toward paying off a debt, and 50% plan to use their checks to pay monthly bills. TrueAccord’s consumer payment trends support this information. Our teams saw a 120% increase in contact rates as the government deposited consumers’ stimulus checks, and even amidst the crisis, we are seeing a change in the way consumers are approaching their payments.

We’re seeing a shift in consumer preferences toward long-term payment plans, rather than one-time payments. While only 30% of payments made in April 2019 were from payment plans, a year later, we now see a near-even 50% split between plan creation and single payments.

Evolving technology meeting consumer needs

Another trend outlined by Boston Consulting Group’s whitepaper highlights the role of technology amidst a recession. 

“[Financial institutions] with a more sophisticated approach to communication fared better than their peers during the crisis. Multi-channel strategies spanning phone, SMS, and email, underpinned by predictive analytics and integrated data acquisition, are commonly seen at these financial institutions.”

TrueAccord’s digital-first collections strategy is showing us first-hand the power of enabling consumers to manage their own finances, at their own pace, even in a crisis. 

Wnat to learn more about how we’re reaching consumers? Get in touch with our team today!

Citations

  1. Boston Consulting Group, 2nd Order Solutions (2020) Winning in the Next Era of Collections: Preparing collections for a recession

4 ways collections can help consumers in a recession

By on April 1st, 2020 in Industry Insights

Consumer debt in the United States continues to climb into the tens of trillions of dollars, and as unemployment numbers continue to rise consumers are expected to continue to pay for essential services such as rent and utilities, companies are likely to see an exponential rise in delinquencies. All of these things together can cause financial spirals, especially for those already struggling to pay their bills.

In the midst of troubling economic downturn, it is the debt collection industry’s responsibility to remain a financial service and not create more damaging burdens. Here are four things you and your company can do to continue collecting and maintain customer relationships and loyalty even through challenging economic hardships.

Acknowledge the challenge

Communication is key. Your consumers have to know that they are seen and heard. Your mission has to help consumers navigate the challenges they’re facing.

Visitors to TrueAccord’s consumer website immediately see a banner drawing direct attention to the economic crisis. The banner links to a page with resources for those impacted (and available to those who are not impacted by COVID19) helping to answer the most frequently asked questions related to those with upcoming payments and in settlement plans. 

Provide non-collection related communications

Send communications that do not imply the existence of a debt. Do not mention any account, the balance due, or a demand for payment. Instead, provide other resources that can help anyone during this pandemic, like work from home opportunities, childcare assistance programs, and local resources for those in financial distress, including area food pantries and safe shelters. By providing tools that can aid consumers in need of help, you can be a guiding force for overcoming their financial burdens. 

Individuals in debt often need these resources year-round, not just in the middle of a crisis. These can include tools such as budgeting resources, debt payment calendars, or links to job boards for companies still hiring.

You may also consider sharing less direct financial resources such as educational tools that may be especially helpful to individuals seeking to improve their situation and parents hoping to address their family’s needs.

Extend payment plan lengths

One step that creditors can take that is simple but impactful and can help to alleviate financial concerns is to extend the length of consumers’ payment plans. Agreeing to longer payment plans gives consumers more time to pay, creating lower monthly payment rates, and leaving more dollars they can allocate to more immediate needs. 

Machine-learning and artificial intelligence can help to guide meaningful payment plan offerings. Read more about how new technologies are shaping digital debt collection.

Another step allows consumers to defer a payment. For many consumers in settlement arrangements, deferral may provide the assistance they need while not resulting in the loss of the settlement offer. In fact, North Carolina recognized this and passed this emergency law to make sure all consumers in the state have this option for the next 30 days.

Give consumers the power to manage their debts themselves

Implementing digital collections tools into your business can empower and educate consumers. Online portals and payment systems offer thousands of consumers the ease of access that they require of other financial institutions. 

Ideally, digital tools should extend beyond just payment options and should include opportunities for consumers to:

  • Make adjustments to the length and amount of their payment plans
  • Skip or defer a payment without losing a settlement
  • Dispute all or a portion of their debt
  • Apply for hardship pauses
  • Enter bankruptcy information

All without needing to speak to an agent.

The best debt collection practices should prioritize consumers’ needs and enable them to control their finances. It’s critically important to provide consumers with flexibility and the ability to customize when and how they pay.

Many in debt have tight budgets, live paycheck to paycheck, and sometimes are forced to choose between basic needs and paying bills. Leading the collections industry with compassion and empathy for those in need can make a lasting impact on consumers and creditors alike. 

Want to learn more about what we’re doing at TrueAccord and how we can help your consumers? Get in touch with us!

How can you help protect New Yorkers from aggressive collections?

By on March 17th, 2020 in User Experience

The collections industry continues to expand its digital footprint as growing consumer preference for digital channels combines with stricter regulations on call volume and call rates. Digital communications are standard today, but a key law passed in 2014 by the New York State Department of Financial Services of New York limits third-party collectors’ abilities to connect with consumers via email. 

We’ve seen the impact that digital communications can have on people’s lives, and you can help your fellow New Yorkers by sending the governor and your local official an email using the template at the end of this article!

The law (23 NYCRR 1)

Many existing collections laws are rooted in the Fair Debt Collection Practices Act (FDCPA) from 1977, long before emailing, text messaging, and direct voicemail technologies existed. In an age of growing prefernece for digital communication, New York’s 2015 law—§ 1.6 of 23 NYCRR 1—states that collectors may only contact consumers via email if they have:

  1. Voluntarily provided an electronic mail account to the debt collector which the consumer has affirmed is not an electronic mail account furnished or owned by the consumer’s employer; and
  2. Consented in writing to receive electronic mail correspondence from the debt collector in reference to a specific debt. A consumer’s electronic signature constitutes written consent under this section. 

Shortly after the law took effect the New York Department of Financial Services compiled a list of answers to frequently asked questions. You can review them here.

These laws were put in place to protect consumers from collectors excessively emailing them, but consumers are not required to opt-in for debt collectors trying to call them on the phone. In the State of Collections 2019 report published by TransUnion and Aite Group, one collections industry leader said that “right-party contact has fallen off a cliff,” and for many debt collectors, this means that their existing call-based strategy is suddenly becoming unviable. 

On the other hand, we’ve found that consumers provide their email address opting into electronic communications with their creditors. In fact, 95% of accounts placed with TrueAccord come with an email address provided with the placement file. Of those we reach with our digital-first strategy, 65% of them open at least one email, and 35% click at least one link to begin the process of repayment.

When debts go unpaid, some creditors and collectors turn to legal action, and New York is suffering a resurgence of lawsuits since the passage of the 2015 debt collection law. In fact, 2017 saw a 61% increase in debt collection suits according to the New York State Unified Court System. In other states across the country, TrueAccord has seen dramatic growth in consumer debt repayment using email and other digital channels as the primary mode of communication. 

At TrueAccord up to 96% of accounts are resolved without speaking to an agent and nearly one-third of users prefer to manage their accounts outside of the “presumptively convenient” hours (8 am to 9 pm) legally outlined by the Fair Debt Collection Practices Act.

Consumers understand the ease of this digital management system and regularly share their positive experiences with a digital-oriented collection strategy. Here are a few:

  1. I liked that the email system was used rather than phone calls. I found it easy to use, and it helped me to gather information, figure out a plan, and get the bill paid. It was a small balance, but during this time, it seemed bigger to me. Thank you for your service.
  2. This was the best way for me to take care of my outstanding debts since I’m always on the road. Thank you for taking your time with me and not blowing up my phone!
  3. TrueAccord has been friendly and helpful, and your systems are always up and running for me to use. You should be proud!

The power of digital communication

Digital channels give people the power to access and manage their debts on their own time without having to work directly with call-center agents. Moreover, it provides greater consumer protection by providing a paper trail of debt communications, unlike aggressive phone calls that consumers most likely wouldn’t be able to record. The more hassle-free options that folks have to pay, the more likely they are to get out of debt and avoid aggressive call-and-collect agencies.

We want to encourage New Yorkers to make their preferences for easily accessible digital channels to be heard. Pay off your debts on your time, not on an emotionally charged phone call or in a courtroom. 

Reach out to Governor Cuomo by clicking here with the template below and make your voice heard. Once you’ve sent your email, share this information using #CollectWithoutCalls and let the governor’s office know that digital is easier for everyone!

Email template

The following text may be used as a template for reaching Governor Cuomo or other elected officials in your state. Please replace any content in the parentheses with your own information.

Subject: RE: 23 NYCRR 1

Dear Governor Cuomo,

My name is (your first and last name) and I am a (family member/service provider/advocate/community member) who resides in your district.

I feel that 23 NYCRR 1 concerning debt collection by third-party debt collectors and debt buyers places an undue burden on consumers in debt. It limits the ease and efficacy of digital communications and gives priority to intrusive and aggressive call-and-collect agencies. I prefer to use email and the internet to manage my own finances, and permitting 3rd-party collectors to email me directly (if / when) I am in debt gives me the ability to manage my accounts on my own time rather than at the collector’s discretion.

Please read here for more information about consumer preferences and see the movement on social media. #CollectWithoutCalls

Sincerely,

(Your name)

(Your city)