The FDCPA Paradox of Targeted Voice Messaging Technologies

Most consumers, if given an option, would rather speak with a live operator than a computerized recording when seeking out customer service.  Computerized recordings, though programmed to sound human, empathetic, and helpful, often won’t bend the rules the way a live agent will.

When dealing with a live customer service representative, consumers feel like they have some control of the situation.  They can plead their special cases to a human being with feelings – feelings that can be appealed to, so that, when the tale of woe regarding the color printer that only prints in blue (though of course through no fault of the owner or the owner’s toddler) is told, there may be some sense of leniency (“Receipt?  But what if I didn’t keep that?”) and a satisfactory resolution for all.  If, by “all” one really only means the consumer.

That need for the human touch, for human interaction, dries up, however, when the topic of collections calls is raised.

Consumer debt growth shows no sign of abating any time soon; and with that debt comes delinquency.  Hence the collection calls.  The first step of almost any attempt to collect a past-due debt is to alert the customer, either by phone or by letter.  And when it comes to phone contact, most consumers would rather deal with a computerized voice mail recording than they would a live agent.

“A lot of that has to do with shame,” says Matt Edmunds, Vice President of Industry Marketing and Analytics at SoundBite Communications.  “A computer program or voice mail message doesn’t know or care what kind of debt you have.  Customers want to feel more in control.”

The emergence of debt purchasing as a true market force in the ARM industry has had an effect on the strategic thinking at traditional third-party collection agencies.  Both increased portfolio pricing and higher liquidation expectations are now factoring into collection agencies’ recovery strategies at an increasing rate.  The usual arsenal includes both manual and predictive dialing environments.  However, in a paradigm where over 50 percent of a collector’s time could be spent wading through wrong-party connections and answering machine pickups, these usual routes to recovery may negatively impact an agency’s bottom line.  As Edmunds explained, “Collection agencies are using dialers and manual dialing to contact debtors , both of which contribute to collectors talking to wrong parties.”

Which brings us back to SoundBite, and firms like it, which provides advanced/targeted voice messaging technologies.

Advanced/targeted voice messaging technologies offer an attractive and effective way of contacting debtors.  There are three common types: Alert Messages, which require no live agent and don’t solicit a customer’s response; Interactive Voice Messages, which are automated, two-way communications that generally guides the recipient through an agentless transaction, such as an automatic payment; and, Direct Connect Messages, which connects the recipient with a live agent after verifying that it has reached the right party.

In these cases, a computer program does the heavy lifting, leaving collection agents free from wrong number time-sinks and voice mail messages.  More than that, though, voice messaging firms suggest that these technologies actually boost revenue by ensuring optimal penetration.  SoundBite further suggests that, by making it easier to collect the same or more revenue with fewer full-time employees, agencies can realize greater profits by decreasing overhead expenses.

Consumers who may feel trapped, defensive, and intractable when dealing with a live agent on the phone – which, again, goes back to this idea of shame and embarrassment over debt – will often be more likely to either pay a debt back in full, or even make payment arrangements, if it means dealing solely with an advanced/targeted voice message.  Edmunds says that his product sees penetration to debtors around the mid to upper 20 percent range.

Debtors can be dropped into four buckets along the continuum of payments: 1) Able and willing to pay; 2) Unwilling and able; 3) Willing unable; and, 4) unwilling and unable.  The technology SoundBite and others is offering is most effective with buckets one and three, with some effectiveness with bucket two.  By alleviating the time-waste the folks in bucket four offer to a collections operation, it frees up collectors to pursue and collect on more debt more effectively.

But is it legal?  That question hints at a paradox contained in the adherence to the Fair Debt Collection Practices Act.

Foti v. NCO Financial Systems, Inc. is the first fly in the ointment of pre-recorded and answering machine messages.  In the Foti case, the answering machine message left on Paul S. Foti’s answering machine – “Good day, we are calling from NCO Financial Systems regarding a personal business matter that requires your immediate attention” – was deemed to be a violation of FDCPA Section 1692e(11) because the caller’s name “Did not adequately disclose that the caller was attempting to collect a debt,” according to an article by Adam J. Olshan in the January/February issue of Collection Advisor.  Section 1692e covers “False or misleading representations.”

Voice mail and collectors have had a tough time with each other ever since the FDCPA.  While in the Foti case, Section 1692e(11) was violated, had NCO included language that identified itself and the message as agents of debt collection, NCO could have found itself in violation of Section 1692c(b), which prohibits disclosing the existence of a debt to a third party.

SoundBite’s Press and Analyst Relations Manager, Marie Ruzzo, when asked about advanced/targeted voice messaging technologies and third-party disclosures, said, “SoundBite does not provide legal guidance on this subject so ultimately, it’s up to our clients to determine how they interpret this legislation and whether they choose to leave a voice message on an answering machine or voice mail box.”

The ACA was little help in the legality of it all, either.  In July of 2006, the ACA requested an advisory opinion from the FTC regarding “Sections 1.1-1.4 of the Commission’s Rules of Practice, 16 C.F.R. §§ 1.1-1.4 (“Rules”).”  Specifically, the ACA had asked, in part, “[M]ust a debt collector identify a corporate name in order to meaningfully disclose the caller’s identity in a telephone call that results in an electronic message for the debtor?”

The FTC declined to respond to the ACA’s question, stating that the ACA’s “request for an advisory opinion does not satisfy either of the prerequisites prescribed by the Commission Rules of Practice.”  And without a legal backing from the FTC, the ACA has been less than helpful to collectors in resolving the issue of voice mail messages – and ultimately, advanced/targeted voice messaging technologies.

When contacted by insideARM.com to comment on some of the questions raised in this article, a spokesman for the ACA said, “Foti is an extraordinarily touchy subject around here.  We are not comfortable giving an opinion about the Foti compliance of a product or service offered to the industry.”

Which ultimately amounts to a waiting game for collection agencies using advanced/targeted voice messaging technologies.  So far, there hasn’t been a court case that has provided legal precedent.  For the most part, collection agencies have been left on their own in interpreting the law while balancing the effectiveness of advanced/targeted voice messaging technologies and the legality of using them.