To
borrowers who owe money, it’s a living nightmare. To Ohad Samet,
cofounder and CEO of TrueAccord, a San Francisco debt-collection startup
that has raised nearly $30 million, it’s a software problem.
“We
believe that we can use technology to radically change the user
experience and really help people with their day-to-day finances,” he
says.
Instead of robocalls that go unanswered,
letters lost in a pile of mail, and pushy collection agents who work on
commission, TrueAccord contacts people through email, text, and the
occasional Facebook ad, nudging them to check their inbox for an email
from TrueAccord. Customers can adjust repayment plans online, changing
the amount week to week or canceling a payment with no fee.
The
company uses machine learning to analyze data collected from behavior
on its website and other information shared voluntarily. TrueAccord says
it does not buy any personal, financial, or demographic data, including
credit scores, does not use affinity data, and does not “creep crawl
the web.” But it does know how much a debtor owes, to whom, and how far
behind the person is on the payments. Over time, the company believes,
this data will help it predict preferences, like whether customers
prefer text versus email, days and times to send messages, and even tone
of voice, such as empathetic, friendly, or inspirational, but never
aggressive.
TrueAccord is part of a wave of tech startups that
claim they can increase the amount collected on debts and help consumers
at the same time by using technology to personalize the process. Y
Combinator’s demo day in August featured a pitch from the incubator’s
second debt-collection startup, Prodigal Technologies, which says its
software can make it easy for borrowers to explain their financial
situation by uploading unemployment or insurance forms. Y Combinator,
which is simultaneously developing a large-scale
basic-income study,
also backed a medical-debt company called Collectly, which has raised
nearly $2 million. The companies tout flexible repayment plans, but
lenders restrict what they can offer. Prodigal’s CEO Shantanu Gangal
says his company works with a lender’s risk, compliance, and operations
team to generate options modeled on the lender’s past data. “To the
extent possible, we will come up with another borrower-friendly
alternative,” Gangal says.
China has also seen a burst of
debt-collection startups,
including Ziyitong, which uses artificial intelligence to scrape the
internet for information on borrowers and their friends, and Yigou,
which provides collection agents with geolocation data on some
borrowers.
In
comparison, the American variety sounds more like ecommerce and less
like surveillance, which is part of their pitch. Treat debtors more like
online customers early in the process and you can save them from
less-friendly players down the line.
Venture
capitalist Hunter Walk, who invested in TrueAccord in 2013, said his
firm, Homebrew, was drawn to the idea of keeping debt out of the “hands
of increasingly aggressive, shady, and sketchy collection agents.” He
said the firm first mulled whether it wanted to wade into debt
collection, drawing a comparison to ecigarette companies. “Even if
vaping is healthier than cigarettes, I'm not sure I'd want to be in the
tobacco business, PERIOD,” Walk said via email. “But our research and
conversations with Ohad suggested that TrueAccord wasn't simply a ‘less
evil’ product but one that at scale could help consumers settle their
debts, improve their credit, and remove stress created by their previous
financial decisions.”
Ira Rheingold, executive
director of the National Association of Consumer Advocates, is
skeptical. “A kinder, gentler debt collector? I’m not sure I’ve seen the
beast,” Rheingold says. No matter how you slice it, “they’re simply
completing against other creditors to get your money quicker and
faster.”
Software may improve efficiency, but it doesn’t
address the underlying reason people fall behind on their bills.
“They’re not paying their debt, because they don’t have the money,” and
that won’t change without access to more income or job opportunities,
Rheingold says.
Venture-backed companies are not
your friend or your counselor. They are trying to get a slice of the
pie, and the information they collect about you “just makes them a
better salesperson” by refining the script for collection agents,
Rheingold says....
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