From A Non-AI Guru’s Perspective
I am not an artificial intelligence (AI) guru. In fact, I am that annoying person who must use my watch to find my phone, only to discover it’s been in my pocket all along. What I do understand, however, is the intricate world of auditing Collection Agencies. My expertise lies in ensuring that these agencies have dedicated resources and oversight for all their processes.
What is AI?
If you’re looking to understand what artificial intelligence is, remember, I am not the AI guru. You may want to explore the internet by entering some general terms, like artificial intelligence, chatbot, machine learning and omnichannel routing. You’ll find a wealth of resources ranging from beginner-friendly explanations to more in-depth articles and tutorials.
Creditor’s Policy
Before you dive headfirst into the AI revolution, there’s a crucial checkpoint: your own policy. Does your organization have a strategy in place that welcomes the use of AI by collection agencies? If not, it might be time to sit down with your legal counsel and reevaluate. After all, in this rapidly changing landscape, being ahead of the curve isn’t just an advantage – it’s a necessity.
The Good News
The days of manually dialing the phone to talk with a customer are long gone. With the rise of cutting-edge technologies like predictive dialers, scoring algorithms, blast message campaigns, and text message services, the Collection Agencies are pros at implementing new technology. Collection Agencies have learned to navigate changes in regulatory requirements, and many have dedicated teams to oversee compliance.
Just for fun, using a popular chatbot, I typed in the phrase “how are collection agencies using AI”. The popular chatbot provided the following:
- Predictive Analytics: AI-powered algorithms analyze vast amounts of data to predict which accounts are most likely to default. By identifying high-risk accounts early on, collection agencies can prioritize their efforts and allocate resources more effectively.
- Advanced Scoring Models: AI-powered chatbots and virtual assistants handle routine interactions with debtors, such as payment reminders and account inquiries. These automated systems can engage with debtors via email, SMS, or online chat, freeing up human agents to focus on more complex tasks.
- Automated Communication: AI-powered chatbots and virtual assistants handle routine interactions with debtors, such as payment reminders and account inquiries. These automated systems can engage with debtors via email, SMS, or online chat, freeing up human agents to focus on more complex tasks.
- Speech and Text Analysis: AI technologies analyze conversations between debtors and agents to identify patterns and sentiment. This analysis helps agents tailor their communication strategies and negotiate more effectively with debtors.
- Skip Tracing: AI algorithms scour vast amounts of public records and online data to locate debtors who have changed addresses or contact information. This automated skip tracing process saves time and resources compared to traditional manual methods.
- Payment Protection: AI can forecast when debtors are most likely to make payments based on historical data and behavioral patterns. By anticipating payment timing, collection agencies can optimize their collection strategies and improve cash flow.
- Compliance Monitoring: AI monitors collection activities to ensure compliance with regulations such as the Fair Debt Collection Practices Act (FDCPA). By flagging potential violations and providing real-time feedback to agents, AI helps collection agencies maintain regulatory compliance.
Caution:
It’s incredibly straightforward! Even if you’re not well-versed in AI, you can still access pertinent information.
It is crucial to understand that chatbots operate differently than humans. They lack an understanding of your business and specific requirements.
Chatbots rely on previously entered data, essentially regurgitating information.
For instance, many businesses utilize chatbots to assist in drafting policies and procedures. Chatbots do not possess the knowledge of your business or the policies and procedures that you need. Chatbots may be used as a starting point; however, it’s imperative to customize it to align to your specific requirements.
Much like information from the internet, television, or even from other people, chatbots may not always provide 100% accurate responses.
What to Audit
There are a variety of areas to include in your audit of agencies as it relates to AI. You’ll want to identify how it is being used; and specifically, how employees use AI. Understanding the risk assessments and monitoring and compliance is also important. And, a thorough review of the policies is imperative.
How AI is Being Used
When questioning Collection Agencies, it’s crucial to focus on how AI is being utilized, rather than if it’s in use. Often, it’s about enhancements to existing products or services. For instance, many predictive dialer platforms have integrated AI for more intelligent predictions of Collector availability and real-time adjustments. Understand how AI is integrated into the Collection Agency’s operations. This includes:
- Predictive dialer platforms.
- Automated text messages, emails or chat apps used for communication with Customers.
- Algorithms utilized to predict payment patterns.
How Employees Use AI
Understanding how employees utilize AI platforms within the collection agency is essential for ensuring proper usage and compliance. Here are some key inquiries creditors should make:
- Training provided to employees regarding the use of AI platforms
- How AI platforms are integrated into the daily workflow
- How employees interact with AI platforms (data privacy and security)
- Supervision and oversight provided for employees
Risk Assessments
What risk assessments were completed by the Collection Agency prior to implementing AI?
- What on-going risk assessments are completed by the Collection Agency?
- Does the Collection Agency have dedicated resources with the expertise to implement and assess AI risk factors?
- What legal or other resources does the Collection Agency have to ensure compliance with all relevant regulations?
Monitoring and Compliance-Employee Usage
Ensure proper monitoring and compliance mechanisms are in place for employee usage:
- How does the Collection Agency monitor AI usage?
- How does the Collection Agency ensure that customer information is not misused or entered into AI platforms?
- What are the prohibited uses of AI? What tests and controls are in place to ensure compliance?
Policies and Procedures
Evaluate the Collection Agency’s documented policies and procedures related to AI:
- AI Usage, Compliance Monitoring, and Management within the Organization – Scope of AI usage: Where and how AI is integrated into the collection process, how AI initiatives and oversight are managed.
- Compliance with Legal, Regulatory, Data Privacy Standards, and Non-Biased – Biases in AI algorithms: Ensuring fair treatment of all Customers, and adherence to relevant laws and regulations governing AI.
- Rules and Restrictions in Place for Risk Assessment and Employee Usage – Criteria and thresholds for assessing risk: Establishing rules, and restrictions for employee access to AI tools.
- Employee Training Programs Related to AI Usage – Data privacy: Training employees on data privacy considerations related to AI usage and proper handling of AI tools.
- Tests and Controls in Place to Monitor Accuracy, Non-Bias – Procedures for testing and validating AI algorithms: Implementing controls to ensure accuracy and mitigate biases.
- Change Process – Change management process: Involving stakeholders in the review and implementation of updates, considering potential impacts on operations and compliance.
- Complaint Handling – Reporting, investigating and resolving complaints related to AI usage: Establishing procedures to address consumer concerns promptly and fairly.
Effectiveness Monitoring and Documentation
It is important to understand what is in place to monitor effectiveness. For instance, the utilization of propensity to pay scores in shaping collection strategies. How does the Collection Agency track outcomes to ensure that the right accounts receive attention? Moreover, what procedures are enacted if the Agency determines that the current strategy isn’t optimal? How does the Collection Agency ensure fair treatment of all customers, regardless of demographics, race, and all other protected categories? These effectiveness controls and monitoring processes should be thoroughly documented within the Agency’s policies and procedures.
Final Thoughts
Recognize that AI is here to stay and will continue to be an integral part of the collection industry. By focusing on understanding the Collection Agency’s AI strategy, Creditors can conduct thorough audits of Collection Agencies’ AI usage, as well as regulatory and ethical practices.
Author: Bev Evancic
Bev.Evancic@ResourceManagement.com
As a consultant for Resource Management Services, Bev provides consulting, training and mentoring in all phases of collection and recovery, in addition to auditing third party vendors (financial reviews, collections, repo and more).
Bev Evancic is a Senior Vice President at Resource Management Services, Inc. Prior to employment at RMS, Bev worked as the Collection and Recovery Manager at AT&T Universal Card, Citi, and Federated Department Stores. She has managed all phases of collection and recovery operations, including automated dialer units, bankruptcy, and legal units, skip tracing units, internal collections, outside collection agency networks, and Consumer Credit Counseling. As a Consultant for Resource Management Services, Inc., Bev has spearheaded collection and recovery best practices reviews for many top credit grantors. She is well known and regarded as a specialty expert in the areas of: Repossession, Bankruptcy, Estate, Litigation, as well as Pre- and Post- Charge-off. She is the author of “Recovery Management: Collecting the Uncollectible Account.”
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