These New Innovations Will Change Debt Collection, One Way or the Other

A recent blog post from the Federal Trade Commission warns consumers of the latest government imposter scam. The bottom line? They say, if the caller asks for personal information, hang up. This is really good advice if indeed the caller is a scammer. However it also puts another barrier in front of an already difficult-to-bridge conversation between a consumer and a legitimate debt collector. 

I think at least two shifts could help to untangle this situation. One is a streamlined regulatory approach. The other is based in technology.

An excerpt from the FTC blog (emphasis added):

The Office of the Inspector General (OIG) for the Department of Health and Human Services (HHS) and the FTC want you to know about a scam in which callers posing as federal employees are trying to get or verify personal information. This is a government imposter scam.

Sometimes, the caller asks you to verify your name, and then just hangs up. Other times, he or she might ask for detailed information — like the last digits of your Social Security or bank account number. Imposters might say they need this information to help you or a family member. But their real reason is to steal from you or sell your information to other crooks.

…and what should you do?

Hang up. Do not give out any personal or financial information…

These scams are real, and people should definitely be warned about them. At the same time, however, one practice in particular the FTC calls out as a “red flag” (and has done so in prior blog posts as well) is actually required by law for legitimate debt collectors. Specifically, collectors must confirm they have the right person on the phone before they share any information regarding the reason for the call, lest they risk embarrassing the consumer by disclosing the existence of a debt to a third party, like a child, a roommate, or a guest. That verification often includes a request for the last four digits of a Social Security number. This situation already leads to an extremely awkward opening conversation for all involved.

Interestingly, on the same exact day the FTC posted the blog described above, the agency also held its third FinTech forum (it was quite interesting, by the way) – this one focusing on artificial intelligence and blockchain. These technologies may just hold the future keys to that awkward introductory debt collection dance. From the FTC’s announcement on the forum: 

Artificial intelligence focuses on the capability for machines to mimic human thinking or actions, including learning and problem solving. The technology may be used, for example, to provide personalized financial services for consumers, including providing money management tools.

Blockchain technology involves a distributed digital ledger for recording transactions that can be shared widely. It first emerged as the foundation for digital currency, and it is now being explored for other consumer-focused uses including payment systems and “smart contracts.”

The half-day event is designed to bring together industry participants, consumer groups, researchers, and government representatives, to examine the ways in which these technologies are being used to offer consumers services, the potential benefits, and consumer protection implications as these technologies continue to develop.

What if the future of the ARM process existed in a combination of these technologies? 

Imagine a scenario where a consumer’s identity could be automatically confirmed when she answers the phone (how about a voice match?). And then what if we could re-imagine the FDCPA-required Mini Miranda disclosure so that it didn’t sound like you were getting arrested? 

Then imagine a process where account information would be delivered through blockchain technology. A consumer could access all of her financial records, and those records could be trusted because 1) control and maintenance responsibility by a single centralized source would be eliminated, and 2) hacking would be far less likely because a perpetrator would have to alter each and every “block” in the “chain” of information. 

With these conditions in place, wouldn’t a conversation between two human beings be more productive in getting to the bottom of 1) whether a debt is owed and 2) whether a consumer has the ability – or willingness - to pay?

I may or may not have gotten the vision quite right, but no doubt the impact of these technologies will be far reaching, likely in ways we can't yet predict.