Debt Collection Is Going Digital. Here’s What it Means for Debtors

Your next debt collector may never say a harassing thing to you at all. That debt collector might also not be human.

The next time you speak to a debt collector, you might find yourself negotiating with a computer. And you might actually prefer that.

Consumers buy toothpaste and bread without talking to a person. They get boarding passes for flights with a few swipes of a credit card or mobile phone. Why not pay off debt with a click or a text? After all, many consumers expect self-service now, and would rather perform these kinds of transactions without ever interacting with another human being.

Debt Collection Is Going Digital

In April, Experian announced a self-service platform named eResolve, which it says will let consumers negotiate and resolve past-due obligations without ever talking to a debt collector.

“The eResolve platform negotiates with the consumer on the client’s behalf and direction to resolve their obligation in a frictionless environment,” Paul DeSaulniers, senior director for risk scoring and trended data solutions at Experian, said in an email. ”eResolve is providing a way for the consumer to interact on their terms, at any time of the day or night using a digital channel that is more preferred over the traditional phone call and avoids aggressive collection tactics.”

A firm named TrueAccord attracted a lot of attention in 2014 promising to create a similar digital debt collection platform. CEO Ohed Samat says that since then, TrueAccord has generated plenty of success stories. He claims more than 60 clients with 1.4 million consumers are “on the platform.” There have been “hundreds of thousands” of resolutions — including consumers who could easily click and tell the firm they’d been victims of ID theft, or had filed bankruptcy, so collections efforts should stop.

Adios, Debt Collector Misbehavior?

It’s easy to see the potential advantages of digital collections. For starters, the obvious: Misbehaving debt collectors top most lists of consumer gripes, so getting rid of the “human element” can get rid of the illegal threats. After all, computers don’t get frustrated.

“Debt collection is a powder keg. There are explosive situations,” Samat said. “A computer doesn’t get tilted (frustrated). You can’t yell at computers and scare them.”

The old-fashioned method of debt collection resembles telemarketing, and when done badly, adds a layer of badgering that can violate the Fair Debt Collections Practices Act. While more phone calls don’t mean higher collection rates, they do mean greater risk for harassment allegations. Both Experian and TrueAccord claim their technologies work to optimize the timing and method of communication with customers to get the best results.

“Consumers desire a more seamless and convenient way to resolve their debts, without what is often felt as an uncomfortable exchange,” DeSaulniers said. “The process is about making the experience less threatening for consumers and gives them the flexibility to access their account at any time. Doing so increases the consistency and efficiency of the debt collection process.”

ACA International, a trade association that represents collection agencies, did not immediately respond to request for comment for this article.

Negotiations Are Straightforward

Negotiating debt with a computer is exactly what it sounds like.

“First, the lender or collection agency contacts the consumer to remind him of his debt owed. At the same time, a website link is provided to the consumer, who can negotiate the payment of his debt without human interaction,” DeSaulniers said, describing the process. “Next, the consumer logs on to the website to submit a reference number associated with their account and then explores repayment options. Here, the consumer may negotiate payment amounts, terms and dates within parameters set by the lender.”

For example: Debtors get an email with an offer such as making three payments with 0% interest, or 90 cents on the dollar if paid in full. Depending on what lenders say they’ll accept, a consumer who turns down that offer might get a subsequent pitch for an 80-cents-on-the-dollar settlement. (Do you know your state’s statute of limitations on debt collections? Check them out using our handy map on debt collection statutes of limitations by state.)

Samat says machine-based debt collection solves several problems. Chief among them: thorny regulatory issues. Computers don’t call or text at the wrong times. They don’t use forbidden language, such as threat of law enforcement.

“Because of our machine-based approach, almost every line of text we send (to consumers) is pre-written and preapproved. It’s much easier for us to be compliant,” he said. He claims TrueAccord gets 66 times fewer complaints than traditional collection agencies (the sample size is still small).

Digital debt collection also fits into modern consumer behavior, Samat said. More than 60% of the interactions his firm has with debtors happen after hours, when it would be illegal to call.

“It’s people at 2 a.m., on their mobile phone, looking at their options,” he said.

Collection Efforts Tailored to Your Behaviors

But there’s more going on than just staying on the right side of the law. TrueAccord’s computers watch consumer behavior and learn when best to ping them for a resolution. If someone has spent several nights clicking through settlement options, perhaps that’s a good time to send a text, or even make a better settlement offer.

“People are different. Some need encouragement. Some need inspiration. Some need to be pointed to the facts,” he said. “We reach out in the right channel at the right time in the right language.”

Some of that language is funny – one note tells a debtor that a bill feels neglected and is “listening to breakup songs and eating ice cream” because it is unpaid. Per one consumer’s report, however, some were more sanctimonious, or even menacing.

“(It) feels like you’re taking advantage of (the debtor), and they ‘re kind of right,” says a consumer who posted a note quoting a TrueAccord email. “Let’s just take care of this balance now and be done with it. It’s not like we’re going to give up.”

When asked about the complaint, Samat said that if the cited email was really from TrueAccord, it was probably “very old and long decommissioned.”

“It did take us a while to find the right type of honest and clear communication that consumers respond well to,” he said. “And, of course, we have unfortunately seen cases where consumers confused us with other agencies.”

Dealing With Robot Debt Collectors 

Of course, even robot debt collectors have to obey federal law. Send a cease-and-desist letter, and the emails and texts must stop.

But digital debt collection might have a secret weapon: embarrassment – or rather, the lack of it.

“Consumers feel less judged,” when talking to a computer, Samat said. “Consumers in debt are afraid and overwhelmed. We speak to them in a tone they appreciate … we give them more flexible choices, so they feel like they aren’t being harassed.”

If you have debt that has gone to collections that you’ve either paid or should have aged off, you may want to check out some of our tips on ways to remove collection accounts from your credit reports. You may also want to see if the account if affecting your credit. You can view two of your scores for free on Credit.com.

Image: Geber86

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