Understanding Debtors in a New Technology Environment

The past 15 years has seen one of the largest shifts in personal communications behavior in the history of mankind. Although certain technologies like telephones, radio and television were massive breakthroughs that eventually saw near universal acceptance, nothing has enjoyed a rapidity of adoption like the Internet and wireless communications devices.

Interactions with consumers have changed dramatically due to the adoption of these new technologies. Marketers have certainly adjusted their practices to accommodate shifting consumer behavior. Accounts receivable management companies would be well-served to take a page from the marketers’ book.

Wireless Substitution

According to CTIA, a leading wireless industry association, at the end of December 2008, there were 270.3 million wireless communication service subscribers in the United States, up from 109.5 million in December 2000. But the explosive growth in wireless subscribers is not the real story.

In the preliminary results of a landmark study released in May 2009, the Centers for Disease Control and Prevention (CDC) said that 20.2 percent of American households had only wireless telephones. The CDC’s National Health Interview Survey (NHIS) also found that 14.5 percent of American homes with landlines “received all or almost all calls on wireless telephones.” Perhaps most shocking, 41.5 percent of adults aged 25-29 lived in households with only wireless telephone service, along with 21.6 percent of adults aged 30-44.

The fairly recent phenomenon of consumers giving up their traditional landline service in favor of wireless communications – dubbed “wireless substitution” – has unique consequences for the collection industry. As lawmakers cling to antiquated regulations surrounding wireless phone service, communication with debtors is becoming increasingly difficult.

But creditors and ARM companies secured a victory in January 2008 when the Federal Communications Commission (FCC) released a declaratory ruling that the prior express consent requirement of the Telephone Consumer Protection Act (TCPA) is satisfied when a debtor provides a cell phone number to a creditor during the transaction that results in the debt owed (“FCC: Collectors May Call Cell Phones with Autodialers, Prerecorded Messages,” Jan. 7, 2008).  The ruling eliminates the need for collection agencies to obtain separate consents before placing automated collection calls to debtors via their wireless phones.  The January ruling was subsequently challenged by a consumer advocate and potential revision of the FCC’s position on the matter is still pending (“FCC Asks for Comments on a Challenge to Collectors’ Use of Autodialers to Contact Cell Phones,” March 26).

Regulations are still in place that make contacting a debtor by cell phone an unclear legal proposition. But most wireless devices are enabled to send and receive a new kind of communication medium: text messages. While contacting debtors with traditional calls on their wireless phones is an area that needs to be ironed out, texting opens a new channel for collectors’ interactions with debtors. (More can be found on leveraging text messages in the Ask The Experts feature, "Using New Technology to Reach Debtors."