[00:00:00] Rich: Good afternoon. This is Rich Alterman, the host of GDS's The Lending Link, and we're broadcasting live today from FinTech Meetup in Las Vegas. And I'm pleased to be joined today by Javier Alvarado, who is the Director of Financial Services with TransUnion in charge of outbound communications and collections. And he's been with TransUnion for almost 10 years now. Welcome.
[00:00:24] Javier Alvarado: Hello, Rich. Pleasure to be with you. Thank you for having me.
[00:00:26] Rich: Oh, it's great to have you. And interesting title, Outbound Communications and Collections. Why don't we dig in a little deeply about what that's all about?
[00:00:34] Alvarado: You bet. So, in addition to providing our customers with market-leading solutions based on consumer credit, we'll be happy to help you. We also now provide contactability solutions so our customers can maximize their outreach to their customers. So with our acquisition of New Star, 2 plus years ago, we brought to the market unique capabilities that enhance our customers' ability to maximize their omni-channel strategies. So solutions like caller name optimization, which registers their outbound phone numbers with over 800 mobile service providers in the U.S. And then also when that call is delivered to a mobile device, we have a 2nd solution. That is a sister solution. We just called a branded call display, which delivers enriched caller ID information. So it'll say Rich From GDS link, it'll provide the phone number where you're calling from and then also a logo so it improves the efficacy of those outbound dialing campaigns. Because Rich, as you know, many of us consumers do not answer the phone if it's labeled spam likely or unknown or if it's blank with no caller ID information whatsoever. Or in a worst-case scenario, it has the information about the previous owner of that phone number, which is a disaster. So that's what outbound communication means, is that we help our customers be more successful in their outreach to their customers.
[00:02:16] Rich: So that's not just a collection play, that's any, any outbound or inbound?
[00:02:20] Alvarado: That's right. That's why we decided to change our name once our charter changed for our team. Okay, so we help customers at every stage of the account life cycle. So when they are starting a lead generation campaign, when they are starting marketing campaigns, when they have account boarding needs, account servicing, loan servicing needs, and then eventually, if it happens, delinquency management, when they are calling their customers. We help them. So you're right. It's not for collections at all. Good.
[00:02:59] Rich: So collections, it's a hot topic right now. Sure is, and it's probably going to get a little hotter, so certainly we saw a lot of improvement during COVID as people were getting funds from the government. And, people were able to pay down debt, and we've been seeing a big uptick in frequencies right now. I don't see that that's anything that's going to come down soon. So, you know, we both have a background in collection. So let's get a little geeky here and talk about collection. So 1 of the things I always like to pose to people. And we don't actually have the collection background, but talking about the use of data and analytics, I'll say, if I handed you 10, 60-day delinquent accounts that all owed $1,000, and in absence of any other information, I said, which ones to call, it's a crapshoot, but if you can add analytics and decisioning, then you can get more prescriptive on what you want to do. And then also, depending on what that collection company, what type of treatment strategies they have, be it send a text, send a letter. So let's kind of talk about how some of the tools, scores that are delivered from TransUnion can help in that process.
[00:04:14] Alvarado: You bet. So you and I are both recovering collectors, and you know, in a more realistic example, it's more like 50,000 records that we have to make decisions on. And so typically whether it's first-party or third-party collections, my customers need insights into how to manage that inventory of delinquent accounts. And so typically they come to TransUnion and they start with a segmentation scrub of that portfolio, right? So, we offer solutions that identify pockets of inventory that need specialized treatment. For example, how many accounts in that file are for customers that are recently deceased, or that are under bankruptcy protection, or maybe incarcerated, or maybe serving our country in active military service. Or there may be a litigious consumer who professionally likes to ensnail a collector. So for all those important reasons, mostly compliance, mostly operational efficiency, they come to us to gain insight into that portfolio. Once those accounts are identified and moved from the general file, for the collections team to work, No collection team has unlimited resources, you know, so they have a set number of collectors that can make a set number of dials per day, so they need to help identifying, low hanging fruit. You know, it may be a distracted consumer who missed a payment, who otherwise has the ability, willingness to pay. Yep. So those are the accounts you want to prioritize. And so we offer account prioritization solutions based on a consumer's information in our credit file, you know, so we have the payment history and we have devised analytical tools to help our customers prioritize their accounts. And then those are our pre-dial strategy, searches, and scrubs. Now, when it comes to actually making that dial, our customers want the best phone number. And now with the addition of Newstar capabilities, we are able to provide not only the best phone number for our customers to dial but also the best call window. So we provide the best time to call. So it's a two-hour window every day of the week that they choose to call, and that helps tremendously. In this compliance environment we live where many of my customers are watching the 7 and 7 guidelines, you know, 7 dial attempts, 7 days. Once they make that first dial connection, then they have to wait an additional 7 days before they can actually follow up. And then, you know, in the first-party space, there are UDAP considerations, and so no financial institution wants to delve into those dangerous waters, so. However, we can help them identify. Operational efficiencies where they're to help.
[00:07:33] Rich: I'm thinking through your comment about the best time to call. So is that looking at activity on the phone? The person seems to be available because we're seeing that they're texting or making phone calls between 2 and 4 during the day.
[00:07:50] Alvarado: That's exactly right in a world of unlimited resources. And unlimited dial attempts, sure, you could just call as often as you wished, but those days are long gone. And now our customers are telling us that staffing through the pandemic and now post-pandemic periods is a challenge for them. And so they have to maximize, you know, their staff. And so the ability to make a better outbound dial attempts, it's paramount, and so we help them in that regard as well.
[00:08:27] Rich: You see that most of your clients are implementing scores at each level of delinquency, so they'll rerun. I know when I worked at America's Express, every cycle of delinquency, we would rerun that score and we had it tell us exactly what to do with that application.
[00:08:43] Alvarado: That's right. Selecting an account. In the collections and recovery space, the consumer is in financial distress. That's why they're, you know, delinquent, you know, more often than not. So the ability to see with a numerical number, which works like a credit, a risk score, right? So the higher the recovery score, the higher the propensity to pay of that consumer. And it helps our customers quickly prioritize. The thousands of accounts that they have to work because at the end of the day, they're measured internally by the promises to pay and the unbroken promises to pay. So they have to recoup the capital so that they can put it back into their organizations. Right?
[00:09:34] Rich: Right. Have you developed any tools specifically designed around the settlement process to make sure as a lender that I'm not leaving money on the table?
[00:09:43] Alvarado: Not directly, so what we do is provide attributes from a consumer credit database, which are signals to our customers that say, you know, which has a new credit card. Or Rich is out shopping for an auto loan, which may give an indication that Rich is in a better financial position, which may help our customers improve their negotiation, if you will, to maximize the amount that they can recover from an Olympic consumer.
[00:10:18] Rich: Yeah, I think there's a big opportunity to combine data from like TransUnion and open banking data in the settlement process, right? And say to that consumer, Hey, if you want me to consider a settlement, you need to commission yourself in. So I could see your banking data and buying that with my TransUnion data. And now I get a far more holistic picture of what that customer looks like. That's right. And if there's an unwillingness to do that, that's almost like self-selection, right? Well, I don't want to see, I don't want you to see my bank account data because it's going to show you that I can afford to pay this well. So we're sitting here at fintech meetup, right? And a lot of the lenders here are marketplace lenders that do personal loans. And you and I both know that if a consumer is having to prioritize payment and they have a credit card, a mortgage, a car loan, and an unsecured installment loan, that unsecured installment loan typically is going to fall to the bottom of the queue, right? Because it has really no utility anymore to me. I've already taken out the money. I've built my deck and put my mortgage, my credit card and my auto loan. Any insights on conversations you've had with marketplace lenders about that challenge?
[00:11:39] Alvarado: So last summer, TransUnion conducted a survey about payment hierarchy. Because you're right. I mean, it's a popular topic, generally speaking. But in times of increasing delinquencies, you know, our customers, especially FinTech customers, want to know how consumers are reacting. To have less cash on hand, certainly, as you mentioned earlier, during that pandemic, those consumers that received federal stimulus, did take the opportunity to pay down in the leverage, but that's the savings rate seems to be. Decreasing consumers seem to have less cash and wallets and savings, but they still need to spend, you know, on, you know, on ordinary things. And so they're turning more to credit products and in particular to, you know, this industry in the FinTech space, to be able to pay for, you know, their goods and services. So, you're right. We have a great slide that I'll be happy to share with you that shows, you know, from the top to bottom of, you know, the current consumer payment hierarchy. Choices and as you mentioned home mortgage and rent and auto are the top of the list, followed by credit cards, but then you get down to telco, you get down to utilities and personal loans are towards the bottom. Yea, you know, consumers need a place to live. They need mobility, and they need to pay for their mobile device. And their internet access.
[00:13:35] Rich: And of course, October 2023 with the reinstatement of student loans. I did a podcast on that. I don't remember the statistics. Uh huh , but the numbers were pretty outstanding. Amazing. About what percent said, I have to start paying back my student loan of $400 a month. I'm gonna be making choices about what I can pay. A large percent said, I will not be able to pay.
[00:13:58] Alvarado: Right. So it'll be interesting when we redo this survey. Last summer, it was still TBD. On the impact of payment hierarchy choices being made by consumers on student loans. And it was, at that time, it was towards the bottom. Now, with the reality of having to remake payments, but they have options to delay, if you will. Yeah, with Little to no consequence, let's not be reported for 12 months. Right. Right. So that may help them with their prioritization. Right.
[00:14:33] Rich: And then of course, now with the change in the laws on medical debt, right. I mean, I read where in New York, the law, the, the federal law is $500 or less. You can't report, but I read where some states, like New York, are talking about zero medical debt, has to become a pain to the credit bureaus on how they have to deal with all these different state regulations. So, you know, as we think about it. The rest of 2024, give you that opportunity or are there any new solutions that you're able to talk about that you want to share with the audience?
[00:15:02] Alvarado: Yes, thank you. So, you know, we speak to many of our customers on a regular basis and they're telling us that, you know, they're updating their playbook for collections. The days of just waiting for consumers to go delinquent and then being reactive seems to be a strategy of the past. More and more of our customers are asking for early signals as early as possible, so they can be proactive, maybe understanding the consumers and financial distress as early as possible. Maybe gathering alerts from us that say, okay. You know, we see consumers that have a delinquency at another financial institution, so this may be a signal for you to act on proactively. We have a solution known as aggregated excess payments where we look at. Amounts above the minimum pay, and many of our customers are using that as a signal as a measure, you know, for the, the healthiness of a consumer, you know, and then obviously with, our new star acquisition with, new contactability solutions, we are able to provide solutions that make our customers better, strengthen their outbound contact center strategies, So that they can communicate to, you know, with their customers in a channel that they prefer because there are over 50 billion robocalls a year, you and I and every other consumer is just simply not answering our phone if it's labeled spam or on note, just not doing it. And so we're helping our customers, you know, improve their efficiency there. And be more successful because these days where they distressed consumers, it really becomes a race who's going to be the first one to make contact. They get that promise to pay and actually their customers are actually appreciative that, you know, they have the ability to make early payment arrangements that can fit their budget. So, yeah, so I don't think so. Many of our customers are worried about a recession as they are about just the impact of inflation coming to a head, consumers having less cash on hand. Driving higher delinquencies to rates that are either approaching or surpassing pre-COVID levels. Exactly. And so they need to be able to communicate, you know, more efficiently with their customers.
[00:17:53] Rich: So, you know, quick, selfish plug for GDS. Yes. So you talk about real account monitoring. And we actually. In conjunction with you guys, we have an offering where we have clients that will actually send us all their billing, billing cycles. They run that data, they pull a refresh bureau file, run it through the decision platform. They may do nothing because, hey, the guy looks good everywhere else. Or they may say, well, wait a minute, he's currently with us. We're seeing these foreshadowing events. That's not a problem. Right. Or maybe it was a personal loan. He's 46 months into a 48-month loan. Maybe I should offer up a refi. And then on the collection side, it's really more about collection strategy management, right? Not a collection software package. Right. But taking in this data, applying scores and saying, hey, do nothing, send a letter, send a text. You better accelerate this to see your collector or you know what? You only have so much human capital. You should just send it out to a collection agency, even at 60 days. Right. Because you're not going to collect on it. Right. So that's a good use of our data and our tools together. So, I want to thank you for hooking up today and join our conversation. Once again, this is Rich Alterman and I've been talking to Javier Alvarado, who is the director of financial services with outbound communications and collections at TransUnion, where he's not too far away from celebrating his 10-year anniversary. Thank you. It's a real pleasure. Thank you for joining me anytime.
