"I've been sitting here listening to breakup songs and eating ice cream because I feel like you're avoiding me." A message from a jilted lover? No, it's a dunning notice.
The message was customized for a delinquent consumer based on data that suggested she's a millennial, and therefore receptive to ironic humor. It is one of many such messages generated by TrueAccord, a startup collection agency that is working to infuse technology into a service that most creditors require and few Silicon Valley types have dared touch.
TrueAccord, which formed in 2013, announced Tuesday its official launch along with the close of a $5 million venture capital funding round. Co-founder and CEO Ohad Samet aims to use data and behavioral analysis to transform an industry he considers broken. By automating debt collection, he said, the company can make the experience less intimidating to the consumer through an intermediary that "doesn't get angry or go off-script."
The startup is tackling one of the most controversial corners of the financial services industry, one that has been scrutinized and circumscribed by regulators for years. Debt collectors have gained notoriety for practices like attempting to collect on debts already paid or well past the legal expiration date, or posing as attractive women to get a debtor to "friend" them on Facebook.
Yet strict rules have had the byproduct of discouraging experimentation, or anything that could conceivably lead to heavy penalties. Some long-standing collection agencies have shied away from even communicating with consumers through email for fear of running afoul of old laws. The Fair Debt Collections Practices Act was written in the 1970s, well before social media and the smartphone existed.
"Laws haven't caught up with technology," said Tom Gavinski, vice president of debt collection firm IC System. "Until laws get updated, [regulations] tie the hands of what collection people can do."
At the same time, companies need to recoup money owed to help avoid raising the cost of credit for all consumers. Properly used, technology might help the agencies working these accounts achieve results.
The idea for TrueAccord came to Samet in 2012, when he received an unpleasant phone call about an arrear. A veteran of PayPal and the European payments company Klarna, he realized someone "has to take a dip as a debt collector" and apply modern tech to an experience still widely associated with snail mail and phone calls from caller ID-blocked numbers.
"Nobody said 'I want to be a debt collector,'" Samet said. "You don't choose to get in."
Like any collection agency, TrueAccord, based in San Francisco, works with creditors to recover debts and takes a cut from the amount recovered. It makes phone calls and mails letters.
But in addition to venture capital backing, TrueAccord has something else most collection firms don't: a team that includes talent from tech companies rather than collections veterans. The company also deploys a number of communication strategies that set the startup apart from fellow contingency collectors.
For starters, it offers debtors an option that younger consumers expect: digital communication. Consumers can negotiate a payment or file a dispute on its website capabilities not yet common among collection agencies, especially smaller ones. (Mailing checks remains a prevalent way to pay a debt, after all.)
TrueAccord has created an algorithm-driven collections process that serves up tailored campaigns to people, often beginning with an email rather than a mailed letter. It uses behavioral analytics and machine learning to build a profile of the consumer and figure out the right course of action to collect on a debt.
For example, the agency will, for now, only work accounts associated with an email address (data that collection agencies won't always have from their creditor partners). The address can not only provide a clue to where the consumer works but also serve as a way to drive people to TrueAccord's website. Then, the debt collection firm can uncover more about a consumer such as how far the person got in the process of paying a bill before leaving the website. Such information determines which message to send next.
TrueAccord counts among its 20-odd customers trendy payment services providers like Stripe and WePay. John Canfield, vice president of risk management at WePay, got up and running with TrueAccord after a traditional collection agency gave up on collecting the payments service provider's accounts within a few weeks. (The debtors were small businesses, not the previous collector's specialty).
TrueAccord has managed to produce results for WePay, which Canfield attributes to the way it deploys quantified marketing techniques. The strategy makes it worthwhile to try to collect on low-balance accounts normally too small to bother with, since if nothing else the files contain information to feed TrueAccord's algorithm.
"That is more data points," said Canfield. "To get an idea of what messages are working and not: it's a volume game."
TrueAccord says it seeks to create a consumer-friendly culture, replacing the term "debtors" with "consumers in debt" and rewarding the staff for solving problems rather than how much they claw back.
"We don't want to get people to jump off the proverbial cliff" and resort to unethical practices, Samet said. "We are very serious about our values."
Some creditors, like BBVA Compass, have also made online resources available to delinquent borrowers to make a payment or ask for help. And other collection firms have pitched their services as kinder and gentler.
For example, Collection Services Inc., a self-described "Christian-based national collection agency," touts its "courteous, and professional staff." Phillips Cohen has trained collectors in bereavement a skill particularly important for a firm that collects from the dead's survivors. Others heavily monitor the tone of voice a collector takes on phone calls.
"Our saying is 'just be nice,'" said Raf Leszczynski, director of operations and dialing systems at collection agency Diversified Consultants Inc. "In my opinion, it's very rare to bully somebody into paying a bill."
To avoid dunning consumers for debts already paid, TrueAccord works only for creditors "that provide proof of ownership and will not assign to multiple companies," Samet said. The technology plays a role here as well.
"We also make it extremely easy to report that a payment was made, both by the creditor and the debtor," he said. "Mistakes might happen but the problem starts when they're hard to report or are disregarded. Our automated system tends to that" automatically.