Say goodbye to dreaded debt collection phone calls—collection agencies are starting to go digital.
In an era when consumers can conduct virtually all financial transactions on their computers or cell phones, debt collection agencies are finally catching up. That may spell good news for debtors and creditors alike.
"You're taking some of the emotion out of the process by interacting with a computer," says Bruce McClary, a spokesperson for the National Foundation for Credit Counseling and a former debt collector. "We've all heard stories about debt collectors that get angry or hang up or repeatedly dial over and over. The chance of that happening is eliminated when you're dealing with artificial intelligence, and that can help put people at ease. If used correctly, digital debt collection has the potential to streamline the process and help debt collections agencies remain in compliance with the law."
One in three Americans has a debt in collections listed on their credit report.
That's welcome news to the one in three Americans who have a debt in collections listed on their credit report, according to a study from the Urban Institute. A debt goes into collections after a consumer has missed several payments and the creditor decides it's unlikely the consumer will pay it back. That's when debtors are contacted by collections agencies, typically by phone, to resolve the debt.
While the debt collection process is governed by the Fair Debt Collections Practices Act—which lays out rules about how and when a debt collector can contact you and bars them from abusive practices—the phone call method doesn't exactly have the best reputation.
According to a Consumer Financial Protection Bureau survey, a third of all Americans have been contacted by a debt collector, and 27% of consumers said they felt threatened by the collector's conduct. About 40% of consumers said they asked the collector to stop contacting them, while three out of four reported that the collector did not honor such requests. (See also: How Do I Deal With Debt Collectors?)
How digital debt collection works
Enter the digital debt collector. Several companies like TrueAccord and Collectly now offer computerized platforms that allow the consumer to interact with an automated system in order to negotiate and resolve an outstanding debt. In April, Experian launched eResolve, a digital platform available to lenders in which consumers can negotiate and pay their past-due accounts online.
"The eResolve platform negotiates with the consumer… to resolve their obligation in a frictionless environment," Paul DeSaulniers, senior director for risk scoring and trended data solutions at Experian, told USA Today this summer. "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."
The process with most digital collections programs is similar: a lender or collector contacts the consumer about an outstanding debt, sending a web link where the consumer can negotiate their debt payment. Through that link, consumers can accept an offer to make payments on a debt; if they decline, they are typically presented with another set of terms that might be more attractive. (See also: Can I Negotiate With Debt Collectors?)
The debt collection process: know your rights
Consumer protections are in place for all debt collection processes, whether they're with humans or computers, says McClary. While the Fair Debt Collections Act is a federal law, states may also have their own rules. But the bottom line is that you should know your rights.
"Anytime you're communicating with a debt collector, whether it's a human representative or an AI, the same basic rules apply. You're still protected by the Fair Debt Collections Act," he says.
The law prevents debt collectors from contacting you during certain times of day, prevents collectors from harassing you or offering misleading information, or threaten you with jail time or wage garnishment.
"And you still have to be mindful of the things you're saying, actions you're committing yourself to, and the questions you need to ask the debt collector as you're working on the repayment of what you're settling or what you owe," says McClary.
Protecting yourself from fraud
McClary suggests that the first thing you should do when you're contacted by a debt collection agency, whether it's by a person or a computer, is to verify that they are legit. A collections agency is required to give you, in writing, information about the account that's past due, the original owner, the balance owed, and other details about the account.
"In the verification, they will also send you information about the agency and its address. Be sure to check them out," McClary says. "You don't want to send money to a collection agency you're not familiar with. Going through these steps can protect you from falling victim to a fake debt collector scam." (See also: How Can I Tell If a Debt Collector is Legitimate?)
Once you've verified the debt collector is legitimate, keep accurate records of everything that's said or offered—and of all the information you provide in the process, he continues. If you're negotiating with a digital debt collector, capture screenshots or print your screen interaction.
"This helps on the consumer protection end—if you ever have a situation where you think your rights have been violated, you have to have proof," McClary says. "And unlike a human being, the robot will be more likely to capture and store every piece of information you relay to it. So it's important to make sure during the process that you're not relaying any info that is inaccurate, whether it's intentional or unintentional."
Finally, if you do want to speak with a real person during the digital collections process, you should be able to. Look for information on the collection agency's website for a phone number that can connect you to a real human being.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.