Digital Age: Modernizing Debt Collection

According to a Consumer Financial Protection Bureau (CFPB) report, Debt collection was the second most-complained-about product. This product comprised 27% of all consumer complaints, next only to credit reporting, which accounted for 37%.

Such findings suggest that creditors need to improve their debt collection methods. One suggestion is to modernize this process to keep up with technological advancements in the digital age.

Modernizing debt collection can include social media as one method for collectors to communicate with debtors. Digital Spotlight offers marketing expertise through social media like Facebook and search engine optimization (SEO).

What are the ways to help modernize debt collections? What rules and regulations must debt collectors abide by in the digital age? What is technology’s role in ensuring that debt collectors and people in debt can work hand-in-hand?

This article discusses the different ways to improve debt collection in the digital age and the various rules debt collectors must abide by.

Ways to Modernize Debt Collections

Debt collectors typically contact debtors through a written letter or phone call. While these are tried-and-tested methods to inform debtors of their debt, the digital age offers other methods for collecting and settling debt.

The Multichannel Approach

A multichannel strategy for debt collection involves utilizing several channels like email, chat, and text messaging to elicit successful communication between collectors and debtors.

Leveraging the power of omnichannel digital communications can allow debt collectors to utilize channels with which debtors are more familiar. So if you’re collecting debt, you’re more likely to gain a positive response.

Some debt collectors use debt recovery software that utilizes multichannel tools like SMS (short messaging service), live chat, and VOIP (voice over internet protocol) integration.

Machine Learning and Artificial Intelligence

Artificial intelligence (AI) and machine learning (ML) are technological advancements that allow machines to process data and come up with solutions with little to no human intervention.

Utilizing AI and ML can help improve the overall debt collection performance, and creditors and debtors can benefit from these technologies.

For example, debt collection software that uses AI and ML can recognize rules and historical patterns to present the optimum time of day to send digital communications to a debtor.

So if creditors can only send communications between 8:00 AM and 9:00 PM on weekdays, the software will contact the debtor within those times only.

AI and ML can also help identify the appropriate channel to contact the debtor. This feature can increase the likelihood of a response, potentially leading to improved collection rates.

Nowadays, AI can run chatbots or automated chat programs using simulated human voices. These programs still run on automated workflows. Still, the human voice may help the debtor on the other end of the line to establish a more personal connection, improving the debt collection success rate.

Self-Service Portal

Traditionally, debt recovery specialists use phone calls, letters, and field agents to communicate with debtors. Nowadays, many debt collection software features a self-service portal.

This tool provides debtors a means and location to manage their debts by themselves without constantly getting nagged by debt collectors.

This self-service portal allows debtors to make payments and manage their debt anywhere, at any time. This sense of autonomy can help improve customer service and debt recovery rates.

Social Media

Debt collectors can now send private messages to debtors on social media as part of debt collection modernization efforts in the digital age.

But communicating through social media still has its limits. For example, debt collectors aren’t allowed to post messages on social media pages or anywhere that the debtor’s friends, followers, or the public can see.

Debt Collection Rules in the Digital Age

The Fair Debt Collection Practices Act (FDCPA) sets the rules prohibiting debt collectors from repeatedly contacting debtors to the point of harassment, oppression, or abuse.

Under the FDCPA’s debt collection rule, collectors violate the law if they:

Call you about a specific debt more than seven times within seven days.
Communicate with you by phone within seven days after engaging in a phone conversation about a specific debt.

These rules apply only to phone calls and not to emails, text messages, and other media types, which have other limitations.

For example, while debt collectors can contact you on social media, they must follow specific rules and inform you how to opt-out of social media communications:

The message must be private: A debt collector can contact you on social media about a debt as long as the message is private. The message must not be viewable by the general public or the debtor’s friends and followers.
The debt collector must provide identification: If a creditor or debt collector sends you a private message requesting you to add them as a friend or contact, they must identify themselves as the debt collector.
They must provide you with a way to stop receiving messages from them: Even if the debt collector identifies themself as a legitimate entity through a private message, they must still provide you a way to opt out from receiving further communications from them on social media.

If you have a debt collection issue, contact the CFPB by calling 855-411-2372 or submitting a complaint online at ConsumerFinance.gov.