Integrative Technology Remains a Controversial Topic for Debt Collection Agencies

Key client service markets, such as the healthcare and financial services industries, have increasingly integrated new technology systems to improve revenue models, back-end processes, and customers’ experiences. As such, adapting to, and adopting new, software and platform integration efforts, all while remaining in compliance with federal, state, and local regulations, has become more important for the accounts receivable management (ARM) industry. In response to these developments, the ARM industry should continue expanding their capabilities to take advantage of the many benefits that technological innovation provides, while being cognizant of the added risks involved in these endeavors.

In recent years, technological innovation has been critical towards the growth of very large, multi-service private collection agencies (PCAs), while simultaneously ensuring the survival and profitability of smaller operations. At its core, technology has dramatically increased the efficiency and accuracy of consumer contact and communication, a vital aspect of ARM. Some of the most widely known technological innovations were the introductions of automated dialing, scripted voice recordings, and predictive analytics, which have eliminated the downtime spent dialing and waiting for consumers to answer on phone and allowed PCAs to better pinpoint peak call times, estimate call durations, and quantify other key performance indicators (KPIs) that increase operational efficiency and – potentially – enhance debtors’ experiences. However, PCAs have faced significant compliance difficulties, monetary penalties, and confusion due to outdated Telephone Consumer Protection Act (TCPA) and other regulations following their adoption and utilization of these and other new technologies.

Additionally, with the rise of increased technological advancement in communication, comes the increased possibility and instances of phone scams and other imposters trying to steal debtors’ information and data. Since its inception, the Bureau of Consumer Financial Protection (BCFP) – formerly known as the Consumer Financial Protection Bureau (CFPB) under former director Richard Cordray – received about 1.5 million consumer complaints for a variety of different financial reasons. In the graph below titled BCFP Consumer Complaints, by Type, we see a breakdown of the six most prominent consumer complaints, led by those related to debt collection. It is quite evident that for nearly half a decade, consumer complaints across product groups, such as mortgage and student loans, have faced either a steady decline or stagnation. Alternatively, debt collection-related complaints have trended upward over the past year. The BCFP further reports that 17% of debt collection complaints arose from poor communication tactics, from which consumers stated that they felt uncomfortable disclosing personal information to unverified collectors and automated calls. This should signal to agencies that, although many PCAs have integrated new, consumer-friendly, and compliant – to the best of their abilities – technology, there is still room to improve in order to benefit both the company and the consumer. It must be noted, however, that it is unjust to condemn the entire ARM industry for the harmful actions of a few bad actors and outliers, which is what many consumer-rights associations, regulators, and media bodies have done over the decades.

These poor customer service experiences are only worsened by the societal stigma surrounding social media and cell phones, where more consumers are increasingly wary of phone calls and may even hang up in response to a legitimate collection agency. To help address this issue, the Federal Communications Commission (FCC) has approved new mandates designed to limit and even shut down robocalls, or at least dramatically reduce the frequency of robocalls that consumers receive. Still, the onus is on telecommunications companies to work hand-in-hand with the FCC towards implementing the new mandates within their service and calling plans, something that hasn’t always happened as fluidly as one may hope.

Outside of providing automation opportunities in consumer communications, a large proportion of debt collection agencies have turned to technology to streamline and improve the payment processes of debtors and the company’s back-end internal functionalities. It is no secret that consumers rely on their mobile devices for everyday actions and responsibilities, such as personal finances. In response to the changing culture, PCAs have created online payment methods and applications that allow for consumers to repay debts within a matter of seconds without the hassle of paper and stamps. A recent survey by BillingTree found that while 84.3% of PCAs have integrated an online portal into their payment processes, 30.4% of agencies still utilize traditional lockbox (e.g., paper checks, money orders, etc.) methods for which debtors can complete payments. Interestingly, alternative payment methods, such as PayPal and Bitcoin, as well as mobile device payments, hover at approximately 11.3% and 10.41% of PCA utilization, respectively. Comparatively, Mobile Ecosystem Forum’s recent Mobile Money Report revealed that about 61% of consumers use mobile banking apps to handle their personal finances, as we alluded to earlier. These contrasting data suggest that PCAs are under-utilizing alternative payment methods, most notably via mobile apps, indicating that there are sizable and more efficient growth opportunities – while potentially garnering greater consumer satisfaction – available to the ARM industry.

Furthermore, as consumer data and technological developments remain ever-changing and dynamic, PCAs remain responsible for remaining up-to-date on new innovations and maintaining compliant. By incorporating current system software, companies can accurately monitor information changes and alternative operational processes, while also increasing transparency with their consumers.

With technology greater influencing society and the economy, many PCAs can improve their operations by introducing new innovative systems and products to their business practices. However, although many PCAs have already capitalized upon the benefits of technology to overcome difficult barriers, such as connecting with their consumers, they have faced compliance and public perception issues, as stated previously. Regardless, some agencies have made progress in improving consumer satisfaction by creating payment alternatives for debtors through the utilization of mobile- and user-friendly applications and web-based platforms. Looking into the future, as more technologies bridge the gap between company and consumer, PCAs and their vendors can adopt new systems to capitalize on and increase business opportunities, but must remain aware of the increased risks associated with, and exploitation by bad actors of, rapid change and introduction of new capabilities.