Debt Resolve Receives Fourth Patent for System

The White Plains, N.Y., online debt collector Debt Resolve Inc. has received another patent to protect its system for managing repayment plans.

Debt Resolve's fourth patent, issued July 24 and announced Tuesday, covers the use of multiple online payment methods, including checks, electronic funds transfers, and the systems operated by PayPal Inc. and Western Union Co.; settlement by one debtor with multiple creditors; and the process of making an immediate payment through online mechanisms.

James Burchetta, a cochairman of Debt Resolve and its chief executive, called it "a landmark, historic patent in this space."

His company's earlier patents — the first one was issued in December 2001 — cover aspects of negotiating settlement terms online and managing repayment. The latest patent takes care of "the other end of the process," covering the methods of repayment, he said.

Debt Resolve's underlying dispute-resolution patent has been accepted in 19 countries, from the United Kingdom to China, he said. Its system, which went live in February 2004, now processes 1 million live accounts containing debt with a face value of more than $1 billion on behalf of 20 large creditors, including three of the top 10 U.S. banking companies, he said.

"When banks push everybody to online banking, it's just natural that you have a system to self-cure and self-resolve these debts," Mr. Burchetta said.

The system operates as a blind auction, with debtors receiving three chances to offer acceptable repayment terms against a creditor's undisclosed "reserve price."

Borrowers "feel like they're in control" in such a system, and creditors typically collect 15% to 20% more with the system than they would using typical collection techniques, Mr. Burchetta said.

Christine Pratt, the research director for consumer banking and credit at the research firm Financial Insights Inc., said that banks need a high-tech way of reaching delinquent borrowers who are increasingly tech-savvy.

With features such as Caller ID, "there's no reason to answer a telephone call any more if you don't want to," Ms. Pratt said, and an anonymous, online loan workout can protect debtors' dignity.