Global Debt Registry, a tech startup working to provide clarity to the murky world of debt collection, is starting to build momentum. It announced a credit bureau partnership this week and is preparing for a possible jump into payday loans.

The startup uses a national reporting and tracking system to follow consumer debt in the same way that Carfax tracks used cars. Once banks register credit cards and other consumer loans in the database, Global Debt Registry maintains an audit trail of the debt buyers and collections agencies that buy and sell it. When a debt has been paid, the registry provides an "extinguishment report" that acts as proof.

But the registry's usefulness depends on wide adoption. On Monday, Global Debt Registry announced a significant step: a partnership with TransUnion through which the credit bureau will help the registry grow beyond its current 55 members (four banks and 51 debt collection agencies).

The deal will let TransUnion sell the registry's services to its banking, debt buying and debt collection clients.

"Global Debt Registry has designed a software platform that helps those same organizations manage risk specific to inventory controls, vendor management, consumer communication and document retention," said Peter Ghiselli, vice president in TransUnion's specialized risk business unit.

When customers ask about such issues, TransUnion's salespeople will tell them about the registry. In return, it will receive some of the revenue GDR gets from banks and debt collection agencies.

"Their network is really broad, and they saw us as an extension of what they do, enabling consumers to validate who's contacting them and to be able to see the account information," said Mark Parsells, chief executive of Global Debt Registry and a former card executive at American Express and Banc One. "I think this really marks the recognition that consumer debt really needs to be securely stored and shared with consumers."

The partnership with TransUnion gives added legitimacy to the registry, industry observers said.

"Not only does the partnership give GDR access to TransUnion's vast sales force, but on the surface the partnership just seems to make sense," said John Ulzheimer, president of consumer education at CreditSesame.com. "Now the challenge is to change the current model of debt validation and convince banks, collectors and consumers that there's a better way."

The registry may also soon be expanded to track payday loans.

"There's debt collection and then there's payday lending, which is worse," said Parsells. "There are more payday lending storefront outlets than there are McDonald's and Starbucks combined."

Global Debt Registry's move comes as the Consumer Financial Protection Bureau is cracking down on payday lending. It unveiled a plan last month about how it plans to regulate the sector going forward, including placing limits on how often payday lenders can make loans to borrowers.

In theory, payday lenders could use a central repository like GDR's to track payday loans and make sure they're not in violation of the CFPB's requirements. Global Debt Registry would need to capture additional types of information to accommodate payday loans, but it is set up to handle all the parties that would need to access the database.

"My tech team is already building this," Parsells said. "We don't think it will be difficult to capture the information."

Overall, the registry is seeing more interest from banks and debt buyers. For financial institutions, the risks are apparent. A loan for which a bank has outsourced collection could still come back to haunt it.

The borrower might not realize, for instance, that the loan was sold and hold the bank accountable for any harassment or unfairness they experience. The borrower also might name the bank in a complaint to the CFPB, or vent to family members and friends who are bank customers.

Banks could vet debt buyers by looking them up in the registry — in addition to basic information about the companies they can see any CFPB complaints against them. Global Debt Registry is about to add a litigation feed and may add alerts on collections agencies' anti-money-laundering and Know Your Customer rules violations as well.

Debt Lookup, the consumer-facing portion of the site, meanwhile, lets consumers search for their own debt records. They can access bank statements, card member agreements, registrations, transfers of ownership and a loan chain of title. They can see how much they owe and who actually owns their debt. They can use their extinguishment to prove they've paid off a debt, and thus fend off zombie collectors.

Collections agencies use the site to prove they own the debt they're trying to collect on.

If broadly adopted, the debt registry could protect banks from reputational and compliance risks, drive nefarious debt collectors out of business and give consumers a practical way to deal with collections calls.

A debt blockchain like this is sorely needed, observers said.

"Other than identity theft, debt collectors are the cause of the largest number of complaints to the FTC," said Ulzheimer. "Giving consumers the ability to do their own independent research about debts is smart business. Today if a debtor who is in collection wants to learn more about the debt they're limited to calling the credit reporting agencies or the collection agency, and neither is generally a pleasant

experience."

Creditors and collectors are often asked by consumers to validate the debts they're attempting to collect, he noted.

"Having a normalized source where creditors, collectors and debtors alike can get more information about the chronology of debts, whether or not they've been paid, and who is the then current debt owner would be a step in the right direction," Ulzheimer said. "The use of a unique debt identifier will allow anyone with an interest in learning more about the debt to easily search for the debt's attributes."