Executive Q&A: How Convoke Solves Third-Party Oversight for Creditors

In this episode, Stephanie Eidelman, insideARM President & CEO, interviews Dave Pauken, CEO of Convoke. Watch Stephanie's conversation with Dave, or read it below.

Stephanie Eidelman:

Hello and welcome. I'm Stephanie Eidelman, President and CEO of insideARM, and the iA Institute. I'm here today with Dave Pauken, CEO of Convoke for our latest Executive Q&A. So Dave, welcome. And why don't we start out with ...just define your market for Convoke. Who are your customers?

Dave Pauken:

Thanks, Stephanie. It's a pleasure to be with you here today. Convoke's market is credit issuers who loan money to consumers and use third-party debt collectors -- and that would include collection agencies, collection attorneys; if they sell debt, debt buyers, or have consumers who end up with debt settlement agencies. That's our market.

Stephanie Eidelman:

Okay, terrific. Now that we've established that, let's go to the next step. What are the pain points that you solve for your customers?

Dave Pauken:

The pain points we solve for credit issuers who use third-party collectors relate primarily to two areas. When they're using third parties, they've got to get information to validate the debt to these third parties. And that's often a complex process with numerous artifacts, statements, terms and conditions, and applications that need to be provided to these third parties. On the other side, they have a business and a regulatory requirement to oversee these third parties, their collection performance, how they're managing compliance with business standards, and how they're managing compliance with regulatory requirements -- all of which involve obtaining information from that third party. So they can measure these performance activities.

Stephanie Eidelman:

Okay. Excellent. So, and gosh, today with the new developments of potentially the Hunstein case and regulation F, obviously this becomes even more important, all that third-party oversight.

Dave Pauken:

It does, it does become important. The regulatory community made it clear, I think around 2012, that credit issuers had responsibility for the activities of these third-party collectors. And so that created a business problem for them. And how were they going to efficiently and effectively do that oversight? And Convoke has solved that problem through some sophisticated data engineering, where we obtain daily evidence of the collection activity. And that evidence manifests itself either in data, there are hundreds of different types of data fields, whether it's a phone call or a text or a DMDC scrub, a military scrub, a bankruptcy scrub, all of these activities are occurring every day. And the engineering involved to gather this information, standardize it and make it useful. So a credit issuer can make wise decisions on how the business is performing is a very difficult task that we saw.

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Stephanie Eidelman:

I suspect that one of the pain points generally is that all this information probably exists, but it's in disparate systems, different databases managed by different organizations, and hard to pull together when needed.

Dave Pauken:

That's a really good point. Take a typical credit issuer that's got 10 collection agencies. They might have 20 collection attorneys that work for them around the country. So here, they've got 30 different businesses that are using 30 different systems and have their own nomenclature and business process internally. And so you can very quickly imagine the challenge involved to perform the business and compliance oversight for those 30 different systems. And Convoke has built a very elegant solution for these third parties to easily upload this information in a secure manner and communicate it back to the credit issuer in a way that they have business intelligence that is actionable, to monitor the performance of these third parties.

Stephanie Eidelman:

Okay. All right. Let's talk about regulation F. What parts of the new CFPB rule can Convoke help creditors issuers with?

Dave Pauken:

Yeah, there's a lot to that rule, right? It's over a thousand pages, but let's bring it down into three buckets. One of them is communication caps. The second one would be communication preferences and the third would be the debt validation tear-off. So those would be three areas. Let's, let's go through each one of them briefly. On communication caps, we all know there's a seven-call limit on a seven rolling day, and that's a hard cap. And then there's a soft cap on total communication attempts, whether it be text chat, email. So credit issuers want information on compliance with that requirement. And all these third parties are using dialers or other mechanisms to make calls and various software products to be emailing, texting, and chat.

We gather that information and present it to the credit issuer in a way that they can monitor the compliance with those communication caps. Similarly, for communication preferences, there'll be a time, day, place, other preferences that consumers will have, as well as medium. Do they want email, chat, or phone? All of that will be housed within the collection systems or dialer systems of third-party collectors. And again, that will be uploaded to Convoke so the credit issuers can monitor the compliance with those communication preferences. And then finally, on the debt validation tear-off, those will come into the agencies or the attorneys, and that will kick off a process for either a fraud investigation or a debt validation process. That again needs to be monitored and we'll have a clock to it. And we'll provide that information to the credit issuer so they can ensure that the third party is meeting their responsibilities to respond to that tear-off.

Stephanie Eidelman:

How does Convoke get the communication instance data from all of the disparate systems? Is there an API feed, do you have to work with every single agency to accommodate that data standard?

Dave Pauken:

Good question. So over the years, we have developed a process that involves the combination of batch or in certain cases, API uploads, onto Convoke. There are over 350 third parties now on our platform. And daily, they are uploading information out of their dialers or out of their collection systems, or out of their media management systems. The various systems that third party collectors use to conduct their business we've identified and work with them on the data and the artifacts that credit issuers want to see to monitor the business performance and compliance with existing regs and soon to be Reg F. And this is extracted each day by these third parties and uploaded securely onto our servers.

Stephanie Eidelman:

Okay. So you're just taking the place of what they would have had to do direct to the creditor. You're basically acting as the creditor's system.

Dave Pauken:

Absolutely absent Convoke, credit issuers who don't use us and third parties who don't use us, they have other systems and processes to convey this information. Our thesis is we can do it better, faster, cheaper, and in a systemic standardized way. Often third-party collectors will ask us to work with other credit issuers to get them on Convoke because you can imagine a typical collection agency that's working for 20 different credit issuers, and there are 20 different processes and procedures that they have to manage to convey information. And if they could just do it in a standardized way through Convoke to communicate with all their credit issuers, it makes their life easier, lowers the error rate, and increases performance for them.

Stephanie Eidelman:

Right. If everybody would only just use the same system, people could probably deal with whatever that system was. Okay. So it sounds like you're almost a core utility for issuers. I know that issuers generally don't make a significant technology move without consulting their regulators. What process do you go through to onboard a new client? It must be a long one.

Dave Pauken:

Yeah, it is a long process. And you're right. We are a core utility to a credit issuer. They're using us every day. We become one of the main systems that they use to monitor and manage third-party collections. Many creditors use a recovery management system and they'll also use us, which we'll refer to as a collection intelligence system that sits alongside that recovery management system. And when they think about adoption, it does involve compliance risk, and the business to make a decision on whether or not to adopt Convoke because, in the end, they do need a system and a platform that meets their business and compliance requirements. And that's typically the process. It takes a long time, and credit issuers, once they adopt, typically will start in one or two areas initially. Either, say, debt validation, where that's a pain point for them, or legal collection oversight. And then over the years, adopt other features and functionality that we have to help them manage and monitor their performance. We're in a unique position where we solve problems that consumers care about, credit issuers care about, third-party collectors care about, and regulators care about.

Stephanie Eidelman:

Isn't that fun to have a consensus? That doesn't happen very often. All right, let's go to something even more fun. Any predictions for the next six or 12 months for our industry?

Dave Pauken:

Sure, I'll make some predictions. So volumes are depressed generally, but collection dollars have been high for many reasons that we're all aware of; the additional cash that consumers have because they're not out spending at the restaurants and movie theaters, and government stimulus. So I think that trend continues for a while. Volumes will stay low, but collections will remain robust. I think that in some form or fashion Regulation F will go through. Perhaps some of the regulators, the CFPB may do some amendments to it, but what I'm hearing is in some form or fashion, it will likely go through. And I think the transformation to digital is an important element. This industry is adopting digital collection strategies, email chat, text portals in a way that previously had not happened. And maybe the pandemic furthered them along.

So that creates some new challenges. Collecting money digitally is different than collecting it over the phone. And so I think there'll be some adaption that has to occur across the industry for collectors learning these new ways to collect and then for credit issuers overseeing and monitoring that. So they can optimize the performance of their third parties and compliance. Our role in that will be attaining all of the evidence and actions of these digital collection means and presenting it to a third party or to a credit issuer so it's useful for them. That will be our role in this transition.

Stephanie Eidelman:

Got it. Well, fabulous. I think we've reached the end of our stay so folks can move onto their next thing during the day. So thanks so much, Dave. And just before we sign off, if people want to learn more about Convoke, where can they do that?

Dave Pauken:

They can come to www.convokesystems.com and there's full contact information and we'll get back to you.

Stephanie Eidelman:

Terrific, thanks. It was a pleasure and I look forward to talking to you the next time.

Dave Pauken:

Thank you, Stephanie.