After years of commentary and discussion, the Consumer Financial Protection Bureau (CFPB) issued a ruling to modernize the Fair Debt Collection Practices Act (FDCPA), originally established in 1977. ‘Regulation F’ went into effect on November 30, 2021, tightening many restrictions already in place and making a litany of updates to how debt collectors and creditors can communicate with consumers regarding overdue accounts. New regulations like these inevitably supply plenty of obstacles for businesses as they work to comply, but Reg F compliance also has the potential to encourage businesses to think outside the box about debt collection and realize big benefits as a result.
What is Regulation F?
If you’re unfamiliar, the CFPB made these updates (and more, not covered here) to the FDCPA as part of Regulation F:
- Limitations on the number of calls that can be made to consumers
- Green-lighting electronic communication for debt collection
- Giving consumers the right to stop specific types of communication, including the option to opt-out of electronic communication
- Requirements around providing expanded disclosures to consumers at the beginning of collection communications, including third-party disclosures via email or text
Long story short: communication with consumers about debt collection got a little more nuanced with the introduction of Reg F. Rightfully, gone are the days of debt collection agencies peppering consumers with dozens of phone calls every week in hopes of getting them to repay an overdue account.
Tips for Businesses to Leverage Ref F for Improvement
But – there’s opportunity here. Businesses can use Reg F as a jumping off point for creating a customer-centric experience. By following these tips, you’ll be on your way to modernizing your debt collection strategy while ensuring compliance with Regulation F. And as an added bonus, you’ll create a positive feedback loop with your customers, helping to make them customers for life.
Tip #1: Leverage a debt recovery vendor with a modern, digital-centric approach
There are big benefits to working with a third-party debt recovery resource, and the benefits multiply when your resource takes a modern approach to debt collection, keeping both your business’s and your customers’ best interests in mind.
Therefore, it’s essential to thoroughly vet a debt recovery partner to ensure they’re not only compliant with Regulation F, but that they take it one step further and align with your business’s standards for customer service and experience. Businesses that prioritize both of these qualities in a vendor enjoy:
- Increased Customer Satisfaction: Nearly 80% of Americans list efficiency and convenience as the most important elements of a customer experience. Businesses utilizing a digital-first collections strategy can meet customer expectations for ‘fast and convenient’ throughout the debt collections process.
- *Decreased Risk: *By leveraging a partner well-versed in Reg F, you can rest assured knowing that while you’re getting high value, you’re not increasing liability for your business.
- Better Data: A digital-centric approach lends itself to better data collection, benefiting both the customer and the business. Data can be used to personalize the experience for the customer, as well as give the business stronger insights into the collections process.
Tip #2: Keep the customer experience at the forefront of your debt collection strategy
There are nearly 80 million millennials in the United State alone, officially taking over as the largest consumer group and packing over a trillion dollars in spending power. Needless to say this is the generation businesses should be most concerned with establishing a line of communication with.
So while Regulation F is a forcing function to ‘hang up the phone,’ it may be in creditors' best interest to abandon voice calls as a primary mode of communication for even more practical reasons. Namely, getting any semblance of attention from their highly-likely-to-be-a-millennial consumer.
Technology company BankMyCell recently conducted a survey in an attempt to understand this phenomenon – and the results make a pretty strong case for abandoning phone calls as a medium for outreach:
- 75% of millennials surveyed avoid phone because it’s time-consuming
- 46% of millennials surveyed are avoiding a verbal confrontation
- 64% of millennials surveyed are avoiding a whiny/needy person
Ironically, this generation is always on their phone, they’re just not using it to make a phone call. Millennials want to communicate efficiently, and are more familiar with the infinite modes of digital communication than any other generation. If businesses want to not only get in touch with their millennial customers, but also ensure that communication experience is a positive one, voice calls aren’t it.
This applies to the debt collection process as well – companies must adapt to how their consumers want to be communicated with to maintain a delightful customer experience. Adapting your communication strategy to the consumer’s preferences can take an unsavory experience like a request to repay an overdue debt and make it a little sweeter.
Tip #3: Leverage intelligent debt collection practices
Intelligent debt collection practices add AI and machine learning to debt collection operations, using data to time communications more effectively, personalize the customer experience, and eliminate manual processes.
Intelligent debt collection puts the power in the consumer’s hands, enabling them to communicate in their own time and on their own terms (remember that whole phone conundrum? Solved with intelligent debt collection!). By improving the timing of these communications, increasing personalization, and diversifying communication channels, businesses can improve debt resolution rates by up to 40%.
How is InDebted handling Reg F for its customers?
InDebted has been prepared for Regulation F from the get-go, applying an omnichannel strategy from the start and leveraging a consumer-centric approach largely rooted in digital communications.
Additionally, InDebted prepared an in-depth analysis of Reg F and created a Reg F Committee to ensure that all potentially impacted business practices were investigated and ensured to be in compliance. InDebted continues to audit for compliance to ensure all company policies and procedures are working as designed.
To learn more about how InDebted provides intelligent debt recovery solutions to its customers, solidifying their compliance with Regulation F and improving returns, read the paper, “Hanging Up on Traditional Debt Collection” or request a demo.
It’s essential to thoroughly vet a debt recovery partner to not only ensure Of course, debt collection agencies that operate outside the law by performing unfair business practices not only hurt the consumer, but also hurt the collectors that perform collections services with integrity. These agencies deteriorate the public’s confidence in the debt collection industry and could have an adverse impact on your customer’s experience with your business.