Are the days of debt collectors sitting in cubicles “dialing
for dollars” numbered? Debt collection, like many sectors of the
economy, is starting to go digital. So if the idea of talking with a debt collector automatically
puts your stomach in knots, you may be in for a pleasant surprise: In
the not-too-distant future, your debt collector may be a computer.
William Lowe, director of operations for Gluu.org, a firm that writes
and supports open source security software, has experienced this
firsthand. A billing glitch with a vendor resulted in a rather large and
unexpected balance that couldn’t be paid off immediately. The debt was
turned over to TrueAccord,
which calls itself an “automated debt recovery platform.” His first
interaction with them was by phone, he says, but after that, he said it
was “very automated — more a 2.0 experience.” Instead of cold calls, he
says, he got emails. “Rather than that back and forth haggle between a
debt collector,” an online dashboard let him customize a plan, he notes.
Debt collection firms use technology today, including automated
dialing systems (aka “robocalls”), skip tracing to find consumers, and
predictive scoring to help them identify which consumers are most likely
to pay. But in most debt collection operations there is still largely a
human component, with collectors trying to talk consumers into paying
as much as possible. Sometimes that works well; when collectors can
establish a rapport with a consumer, they may even persuade them to pay
their firm before others. But at other times, it can backfire, and
result in angry consumers who are unwilling to pay, or even lead to
violations of federal law designed to prevent harassment.
By contrast, the TrueAccord system is centered around an online
dashboard that allows both the creditor and the debtor to view account
balances, set up and manage a payment plan and track progress toward
paying the debt 24/7. The approach appears to be working: In a March
2015 press release, the company said that in the past six months, it
increased the amount of debt under management to $45M and is working
with over 60 major companies to collect from more than 40,000 debtors.
Steven Mathis is one of those using the platform to pay off a debt.
When Mathis left his corporate job to start his marketing company,
Mathis Marketing, he dealt with the growing pains many new firms
encounter and accumulated some business debt. He had every intention of
paying back what he owed, and was turned off by the collection process
in general, which he found “threatening, harassing, combative.”
‘I Felt More Motivated’
But when one of his debts was turned over to TrueAccord, he says the
interaction was much more positive. Working with them via email and
online, he was offered a range of payments,
and was able to customize them to fit his financial situation. It was a
“completely different experience,” he says. And because it was more
positive, “I felt more motivated to take care of it,” he notes.
New regulations around debt collection are expected to be announced
by the Consumer Financial Protection Bureau and may open the door to
approaches such as this by clarifying, for example, when and how consumers can be contacted by email.
Some consumer advocates hope new regulations will require debt
collectors to provide consumers with more information about balances and
payment activity, and if that happens, this kind of technology could be
poised to fill the gap. Of course, there are drawbacks: some consumers
don’t have reliable Internet access, for example. Others may be trying
to avoid dealing with their debt and no amount of technology will change
that. And still others may prefer to talk with someone by phone. Yet
that still leaves plenty of consumers would would welcome the
opportunity manage a collection account the way they do other
bills — online and automatically.
“The preference for digital is stronger with younger and
tech-oriented crowds, and they grow in numbers and overall population,”
says Ohad Samet, co-founder and CEO of TrueAccord. “However, the
advantage of an automated and data-driven platform is that it can
identify and use the consumer’s preferred channel — be it email, SMS or a
phone call with a live representative — all channels that our system
utilizes when appropriate.”
This isn’t the only company trying to change the industry though
technology, of course. Another, Global Debt Registry, is working on
creating a central repository of consumer collection accounts, and
making that information available to consumers through a free consumer
It currently allows consumers to research collection agencies and
verify debts they owe to help them avoid scammers. It can track their
debts even when they are sold to multiple collection agencies.
(Consumers can also see how collection accounts are affecting their
credit by getting their free credit report summary on Credit.com.)
How fast and far-reaching these changes will be remains to be seen.
But for at least some debtors, it’s already night and day. Lowe, for
example, says he’s never had a debt collector send him chocolates for
Christmas. TrueAccord did.
Having a bankruptcy flagged in your credit file can make obtaining a
credit card, taking out a car loan or applying for a home mortgage a
nonstarter for years. It can also affect your ability to land a job.
in a move that’s certain to be scrutinized, the Obama administration is
weighing whether to loosen bankruptcy laws so some borrowers drowning
in student loan debt could unload those burdens and start fresh.
The proposal is included in a recently unveiled White House initiative called the Student Aid Bill of Rights, which is aimed at providing more protections for federal student loan borrowers.
initiatives, including a new online outlet for filing loan complaints,
come amid growing concerns about the debt that college students are
carrying after graduating. The average amount of student loan debt for
2013 college graduates was $28,400.
Unlike most debts, federal
law prohibits student loans from government and private lenders from
being forgiven in bankruptcy proceedings, except in cases of undue
hardship. Even in those rare situations — and there are fewer than 1,000
people a year trying to get rid of student loans through the courts — a
bankruptcy action can be expensive and cumbersome.
Student Aid Bill of Rights directs government officials to explore the
possible expansion of bankruptcy options on federal student loans. No
details have been released.
Why has the idea been floated?
make sure that more and more young people can afford to go to college
and then afterward aren’t so burdened with debt that you can’t do
anything else,” President Barack Obama said in a speech earlier this
month at Georgia Tech University, where he unveiled the proposal.
Any bankruptcy law changes would have to be approved by the Republican-controlled Congress, so substantial pushback is likely.
possible scenario, according to financial aid experts, is to allow
borrowers with private student loans from financial institutions to take
That’s a small subset — only about 10 percent of
student loans are made by private lenders, according to the Credit Karma
online financial services firm.
Given that bankruptcy can be one
of the most negative items pinned to your credit report for as long as
10 years, why make it easier to enter the system, even as a last resort?
What’s the incentive to fight to stay current on student loans if the
problem can be wiped out in one fell swoop?
Better for former
students to focus on a host of flexible repayment options and even loan
forgiveness programs that have been expanded in recent years. Also,
don’t forget that many credit counseling services provide free loan
Other aspects of the new Student Aid Bill
of Rights plan could ease the pressure on student loan borrowers and
clamp down on lending industry repayment practices.
the plan directs the U.S. Department of Education to create a website by
July 1, 2016, so borrowers with federal student loans can file
complaints about lenders, servicing companies, collection agencies, and
colleges and universities.
Another benefit of the new program
applies to borrowers who make higher monthly payments than required.
Under the plan, the loan servicer will have to apply the extra funds to
the student loan with the highest interest rate, unless directed
otherwise by the borrower.
There’s another way to deal with all this student debt — one that gets lost in the policy debates.
starts long before the kids head to college and involves a family
discussion about money — the cost of attending college, the importance
of picking schools that are not financial stretches, zeroing in on a
degree that balances with the cost of education and understanding that
paying back debts even a little at a time requires commitment.
Over the past 25 years, the way individuals communicate with each
other has changed dramatically. From telephone calls and faxes to emails
and text messages, advancements in technology have made it much easier
for individuals to get in touch with one another. Today, individuals
communicate through text messages and emails more than they do through
telephone calls. Businesses have also adapted to new communication
preferences and developed strategies that allow consumers to be
contacted through their preferred choice. However, when it comes to debt
collection, debt collectors still operate under a set of laws from 1978 that
haven’t caught up with the technological advancements of the last
couple decades, making communicating with consumers through email not
nearly as easy as it should be.
The reality of today is that consumers who have an account in collections want
two things: to communicate with debt collectors through the method of
their choosing, and to communicate with debt collectors at a time that
is convenient for them. Because of the laws debt collectors are
regulated under, some debt collectors will not communicate with
consumers via email while some will. At the end of the day, whether or
not a debt collector communicates with consumers via email is determined
by their business and the risk decision the organization makes. There
is no clear right or wrong answer in regards to debt collectors
communicating with consumers through email, but there are certain
aspects of the process that a consumer should consider when doing so.
1. You Should Make First Contact
Most debt collectors will not initiate the first contact with consumers through email. Therefore, if you want to communicate with a debt collector through email it is important for you to send the first email to start the chain.
There are times when the first contact may be by telephone and during
that conversation the consumer may express their desire to be contacted
by email. Nowadays, most debt collectors record all phone calls so they
retain that authorization through recordings, but it is also not
uncommon for the debt collector to request the consumer send that
initial email anyway so they know for certain who they are replying to.
This process also ensures the debt collector has taken proper procedures
to communicate with only the consumer of record.
2. You Must Identify Yourself
It is important that consumers clearly identify themselves in the
email by providing the debt collector with their full name, address, and
either date of birth of last four digits of the Social Security number.
The reason why these identification measures should be taken is because
before the debt collector engages with a consumer, they are required to take appropriate steps to
ensure they are speaking with the right person. Until they confirm they
are speaking with the right person, it is highly unlikely the debt
collector will engage in resolution of the debt by email or phone. Keep
in mind that sending sensitive personal information via email carries
its own security risks, which you should seriously consider before
sending information digitally.
3. You Shouldn’t Expect Many Details
While some debt collectors have become more comfortable over the
years communicating with consumers through email, all debt collectors
still have reservations about doing so because there is no clear cut
rule or law governing electronic communications in an attempt to collect
a debt. Therefore, some debt collectors will utilize email to respond
to and provide direct and clear requests, but don’t expect them to
engage in any back and forth conversation like they would in a phone
If the exchanges become more complex or if there are more than a
couple of emails back and forth, it is not uncommon for debt collectors
to let consumers know they will cease emails and request to be called at
the office to complete the resolution of the account.
4. You Should Avoid Emailing From a Work Account
Most companies have safeguards and policies in place requiring work
email accounts to be used for work-related purposes only, and that they
may be monitored and reviewed by the company at any time. So be careful
if you decide to contact a debt collector through your work email
because your personal business matters may get uncovered during routine
work email account audits. Furthermore, some debt collectors will not
communicate with consumers through the consumer’s work email account in
order to protect the consumer’s privacy.
In the end, the number one goal for debt collectors is to help consumers resolve their account.
So it is important to debt collectors that they communicate with
consumers in the method that the consumer chooses and at a time that is
most convenient for them as well. However, because of dated regulations,
debt collectors are generally still leery about fully embracing email
to handle the entire debt collection process — and those who do may
ultimately be conservative in their approach.
Nick Jarman is President & Chief Operating Officer at Delta
Outsource Group, Inc. located in the metropolitan St. Louis, Mo., area.
He currently serves on the Board of Directors for ACA International and
also serves as the 2014-2015 Missouri Collectors Association President.
He is adamant that the collection process is done the right way and that
collectors always remain professional, respectful and compliant. He
also uses analytics to develop proprietary scorecards that evaluate
collector, client and overall company performance. He believes in
management through open communication, creating a positive work culture
and establishing clear expectations with accountability.
If you're like many of us, you need your
car to get to work or school, carpool kids or grandkids, or to do your
shopping. But what happens if you are getting calls
from debt collectors who you can't pay? Can a debt
collector take your car?
Our reader, Marbella, who lives in
California, says a collection agency told her she must appear in court over a
debt of $1,200 that she defaulted on a while back:
I'm not working right now and I
don't think I am until about a year. Now the thing is that I have a car under
my name but my (boyfriend) also appears on the title. Could they go after the
"Like many life situations,
there's the formal, legal answer, and then there's the practical answer,"
says Northern California bankruptcy attorney Cathy Moran, who blogs at
BankruptcyInBrief.com. "Legally, a creditor with a judgment could reach
the share of a co-owned asset that its debtor owns. If there is a loan attached
to the car, there has to be enough value in the car to pay off the debt from
your share of the car before a creditor could have the sheriff tow the car and
sell it. They'd have to give the co-owner his share of the sale price."
But practically speaking, there are
a few hurdles. The first is the fact that some personal property is off-limits
to creditors. In our reader's case, the California exemption protects $2,900 in
equity in a vehicle. (In each state, specific property is "exempt" or
safe from creditors. Types and amounts of exemptions vary by state.) "So
the car would have to have enough value to pay the sheriff's fees to tow and
sell it and the exemption to which you are entitled before the creditor
gets anything from the sale," says Moran.
In fact, Moran says that in 37 years
of law practice, the only creditor she's seen try to seize and sell a car is
the Internal Revenue Service. (Note: the IRS has greater powers than other
creditors when it comes to seizing property.)
And there's another hurdle: Before a
creditor can go after an asset like a car they must first get a judgment in
court. And to do that they must sue the consumer and win — and again, only then
could they try to seize and sell the car.
"Going this route is expensive
for the judgment creditor and risky in that any procedural error could open the
judgment creditor to one or more federal or state consumer
protection law claims," says Atlanta bankruptcy attorney
Jonathan Ginsberg. "Since you are only part owner of the vehicle, the
seizure option is even less attractive, especially since the total debt is only
$1,200," he says. He agrees with Moran that the IRS is the only creditor
that would likely go after personal property like a car.
But that doesn't mean
Marbella — or you, if you find yourself in a similar situation —
should just ignore collectors. If you are sued for a debt and fail to show up in court, the
plaintiff (the collector or creditor who sues you), will get a judgment against
you which may open the door for them to go after property that is easier for
them to get, such as your wages or money in a bank account. Exactly what they
can do to collect a judgment debt depends on state law. A consumer law attorney
can tell you what's at risk and may be able to help you negotiate a settlement
or raise a defense to the lawsuit in court. "You can also talk to your
lawyer about possibly filing bankruptcy," Ginsberg says,
"which could make the problem go away entirely."
Also worth noting is the fact that
if a creditor already has a judgment against you, some property may be at
risk already. Credit.com commenters often tell us that they didn't even
realize there was a judgment against them until they got their credit reports
or credit scores (you can check your credit scores for free every month on Credit.com) —
or until they discovered their bank account had been emptied by a judgment
creditor. Here's how to get
your free annual credit reports to find out if a judgment is listed
there. If you find one, make an appointment with a consumer bankruptcy attorney
right away to discuss your options.
The most difficult part of a
debt collector's job has been, and always will be, establishing
communication with the consumer they are collecting from. Debt
collectors go to great lengths to establish contact with consumers
primarily through telephone calls and letters. In my experience, once
contact is eventually established with the consumer, one of their
biggest complaints is the claim they have never been notified about their debt being in collection.
This would always come as a surprise because we would send consumers
what is known in the debt collection industry as a "validation notice"
once we received the account. The validation notice outlines the
consumer's rights to validate their debt if they are unsure of it. So if
a debt collector is sending validation letters – and it's my experience
that the majority of debt collectors do — why aren't consumers
most likely is consumers are receiving them, but because the envelopes
from debt collectors are often vague and inconspicuous, they aren't
getting opened. These letters are often confused with solicitation from
marketing companies who keep the return address and envelope nondescript
in order to get the recipient to open the piece of mail. However, a lot
of recipients won't open mail if they do not know where the letter is
from or who sent it. The problem with that practice is if you are in
debt and a debt collector is contacting you, the last thing you are
likely to see on the envelope is anything related to a debt, most notably the name of the creditor or debt collection agency trying to collect from you.
Why the Secrecy?
So why doesn't a debt collector at least put their company name on the return address? Because that practice could be in violation of the Fair Debt Collection Practices Act.
The FDCPA clearly states a debt collector may "not use any language or
symbol on any envelope or in the contents of any communication effected
by the mails or telegram that indicates that the debt collector is in
the debt collection business or that the communication relates to the
collection of a debt." Therefore, in order to remain compliant with this
section of the law, debt collectors are prohibited from placing any
information on the envelope, including their business name that would
indicate they are a debt collector or that they are attempting to
collect a debt.
But while the
outside of the envelope may be vague and inconspicuous, the contents
inside the envelope are more descriptive and important. Debt collection
notices are often personal, confidential and time-sensitive in nature.
These letters provide information the consumer needs to know as it
relates to their debt, including the status of the debt and what might happen if the debt isn't resolved
soon. Debt collection letters also contain specific disclosures that
provide information about how consumers can dispute their debt along
with other state-specific disclosures the consumer should be aware of.
In addition, when consumers postdate payments with debt collectors, debt
collectors may be required to send payment reminders which would also
be sent within these envelopes as well.
are one of the biggest expenses for debt collectors, so they want to
make sure the letters are being delivered to the right consumer — and
being opened by that consumer, as well. However, debt collectors must
stay in compliance with the FDCPA and ultimately must hope consumers who
receive the letters are going to first open the envelope, read the
letter and establish communication with the debt collector
so the debt can be resolved. With more consumers preferring to
communicate with debt collectors non-verbally, letters will continue to
play an integral part of the debt collection and resolution process. So
the next time you get a piece of mail that you may not want to open
because you don't recognize the return address, be sure to at least take
the time to open the envelope to see whether it contains personal,
confidential and time-sensitive information such as a debt collection