AI in Debt Collection: Opportunities, Risks, and the Importance of Data Governance

Alan Kaplinsky (0:08)

Welcome to the award-winning Consumer Finance Monitor podcast, where we explore important new developments in the world of Consumer Financial Services and what they mean for your business, your customers, and the industry. This is a weekly show brought to you by the Consumer Financial Services Group at the Ballard Spahr Law Firm. And I'm your host, Alan Kaplinsky, the former practice group leader for 25 years, founder, and now Senior Counsel of the Consumer Financial Services Group at Ballard Spahr. And I'm delighted to be moderating and hosting today's program. For those of you want more information, either about the topic that we're going to be discussing today, which I will describe to everyone in a moment, or anything else in the world of consumer finance, don't forget about our blog, which is called Consumer Finance Monitor. Yes, the same name as our podcast show. We hosted our blog, we have hosted it since actually the very same day that the CFPB became operational on July 21, 2011 So there is a ton of relevant industry content there. We also regularly host webinars on subjects of interest to those in the industry. So to subscribe to our blog or to get on the list for our webinars, you can visit us at ballardspahr.com. If you like our podcast, please let us know about it. You can leave us a review on whatever platform you use to access your podcast shows. If you have any idea for any other topic that we should consider covering or a speaker that we should consider inviting as a guest on our show, please let me know about that.

So before I introduce our speaker today, I'm going to talk a bit about the topic that we're going to be covering. We're going to be revisiting a topic that we've discussed on an increasing number of occasions and is rapidly transforming virtually every aspect of Consumer Financial Services. And of course, I'm referring to Artificial Intelligence or AI.

We've previously discussed on other podcast shows, a number of common use cases of AI in the Consumer Finance world, such as consumer lending, deposit-taking, payments and activities, such as marketing, origination, operations, complaint resolution and much more. Today, we're going to focus on AI use cases in first-party and third-party debt collection and the legal, compliance and regulatory issues that are raised by this technology.

And I and I'm sure our listeners are going to be delighted to be enlightened about the subject by really one of the leading experts in the country about debt collection. And I'm referring to John McNamara. Let me give you a little bit of John's background. John recently concluded a very distinguished career at the CFPB.

Where he served as principal assistant director of markets and assistant director for consumer credit payments and deposits markets. In that role, he oversaw subject matter experts and analysts covering a wide range of markets, including debt collection, credit reporting, fintech, and the use of AI in machine learning in consumer financial services. Earlier in his CFPB career, John served as the Bureau's debt collection program manager, and later as assistant director for consumer lending, reporting, and collections markets. Prior to joining the CFPB, John spent more than three decades in the debt collection industry, including senior executive positions with collection technology and servicing companies. Today, John is chief growth officer at Avtal.

John is uniquely qualified to discuss both the operational realities of debt collection and the regulatory expectations surrounding the use of an emerging technology like AI. So John, a very warm welcome to our podcast.

John McNamara (5:22)

Thanks, Alan. I can't tell you how happy I am to be your guest. I sort of feel like I've made it. I'm finally on the Alan Kaplinsky podcast.

So happy to be here. Again, thanks for inviting me. And listen, with a build up like that, Alan, if I ever get famous, you have a spot in my entourage.

Alan Kaplinsky (5:42)

Thank you. All right. So first of all, let me give you a real easy question to begin with, because I'm not sure how many of our listeners are familiar with the company that you joined after you left the CFPB. Namely, I think I pronounced it right, Avtal.

But what does Avtal do?

John McNamara (6:04)

Yeah. So Avtal is a digital engagement service for third-party debt collectors. And I'm here at Avtal because I'm pursuing my passion, which was all the way back to when I was out of college, took a job as a collector.

First time I talked to a debtor, I thought, wow, this debt collections is a marketing problem. And I've framed debt collections that way, ever since. So I followed the rise of players like True Accord and others that tried to reinvent debt collections around marketing engagement versus traditional models. And at the CFPB, I was part of the team that wrote Regulation F. And we clearly tried to spell out how that could be used to engage consumers. I think it's a kinder, gentler way to do that. So anyway, roll the clock forward to 2025, Alan.