The year was 2007. I Am Legend was #1 at the box office, Taylor Swift’s first album was #8 on the Billboard Top 200 and America was heading into a financial crisis. Irresponsible and predatory lending practices, coupled with skyrocketing interest rates, wiped out retirement accounts and caused housing values to plummet. The financial crisis impacted all Americans — not just those who had taken out complicated and risky loans. By the time the dust settled in 2009, the US had lost nearly 9 million jobs, there were 8 million home foreclosures and American households had lost roughly $19 trillion dollars in net worth according to Investopedia.
One of the many factors that led to this Great Recession was a lack of government oversight. This prompted President Obama to sign the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the Consumer Financial Protection Bureau (CFPB).
Almost two decades later, it’s déjà vu. The trailer for I Am Legend 2, still starring Will Smith, is racking up views on YouTube, and Taylor Swift is wrapping up the most successful world tour in music history. In the intervening years, the CFPB has worked hard to protect consumers from deceptive lending practices and financial hardship. In fact, since its creation, the CFPB has provided the American people over $21B in financial relief.
As part of those efforts, the CFPB created legislation directly impacting the third-party collections industry. In 2021, the bureau passed the Debt Collection rule, which clarified how debt collectors can communicate with consumers when attempting to collect payments.
A significant element of the ruling is the so-called Regulation F "7-in-7" rule which states that a creditor must not contact the person who owes them money more than seven times within a seven-day period. In addition, creditors are not allowed to contact the individual within seven days after engaging in a phone conversation about a particular debt.
This rule has had an impact on the operations of third-party collections companies. Debt collectors previously tended to employ a “quantity over quality” approach. Their call centers were set up to continuously reach out to debtors with little regard for the frequency or timing of their outreach. This new legislation forced them to pivot their call center strategies to focus on quality over quantity. Knowing which phone number to call, what time to call and getting the debtor to trust the phone call became increasingly important once the outreach frequency of collections companies was limited. With fewer available attempts to collect each week, every call needed to accomplish more to maintain the same return on investment (in an industry with already very thin margins).
In addition, a debt collector must not place telephone calls or engage any person in telephone conversation repeatedly or continuously with intent to annoy, abuse or harass any person at the called number.
Since its creation, the CFPB has been a hot topic of debate in Washington, D.C. How active should the CFPB be in regulating financial institutions? Is there too much red tape or not enough? With the newly installed Trump administration, the bureau is once again in the spotlight. Some have speculated that as part of their plans to reduce government regulations, the administration might take steps to reduce the role of the bureau or possibly eliminate it altogether. But even if the Trump administration allows the bureau to remain in place, it will likely look a lot different in the coming months and years.
Some third-party collections companies are no doubt hoping that the Regulation F 7x7 rule is adjusted or even eliminated, so they can go back to the old days of robodialing. However, the robodialing tactics used before will not be as effective as they were years ago. Even if the 7x7 rule is rolled back, collections organizations should probably not return to their previous “quantity over quality” strategies and look to incorporating multi-channel communications if they want to remain successful. Here’s why.
Consumer communication preferences continue to evolve
A recent TransUnion Debt Collection Industry Report found that consumer communication preferences continue to evolve and the debt collection industry is starting to move more toward with emails and text messaging as viable channels for communicating. Letters (87%) and telephone (86%) followed by email (74%) continue to be the most widely used communication channels for debt collectors, partially driven by legal and regulatory requirements focused on these channels.
Email communications have continued to grow quickly with 6% more companies responding they’ve started using email as a channel this year, while text/SMS messaging experienced 5% growth between 2023 and 2024
Solutions that increase email effectiveness improve delivery rates and protect brands by providing insights on email verification, deliverability, engagement and email type.
The phone is most important outbound channel for customer service and revenue goals
Recent research from TransUnion and Forrester Consulting found that the phone remains the top channel used for urgent customer service issues and discussing personal matters. Organizations must meet consumers on their preferred communication channel.
Multi-channel communications are an optimal approach to reaching consumers on the channel they prefer and enables a coordinated and trusted outreach strategy.
People will pay debt, even if they don't answer — but only if you give them appropriate context
It may seem counterintuitive to an industry that thrives on phone communication, but getting a pickup may not matter as much anymore. A collections agency that displays their location, logo and reason for the call on the phone’s display helps customers understand who they are and why they’re calling. Studies have shown even if the debtor doesn't pick up — which they increasingly won’t — that extra bit of calling context will make them more likely to head over to the portal to make a payment, which, in the case of one collections firm, increased promises to pay (PTP) by 123% with 180 fewer dials per PTP.
Customer experience does matter in likelihood to pay
A customer bombarded with constant calls is more likely to be frustrated. A customer who feels they’re being treated respectfully and is contacted via their preferred channels is more likely to make payments — meaning better collection rates and fewer complaints.
Even if 7x7 goes away, there are other regulations to consider
By no means is the CFPB 7x7 rule the only regulation that addresses the permissible quantity of collections outreach. The FTC’s Fair Debt Collections Practices Act (FDCPA) prohibits harassment or abuse which includes repeated phone calls. State laws may also limit the number of calls per week. And the Telephone Consumer Protection Act (TCPA) opens up significant liability for a collections organization if they dial a number that doesn’t belong to, or is no longer in use by that particular consumer who provided consent to contact.
Administrations come and go, and policies will change. Only time will tell what the future holds for the CFPB and the Regulation F 7x7 rule. But for third-party collections companies, one thing is certain: continuing to focus on a quality over quantity approach will help them achieve their growth and profitability targets. By providing consumers with context about who’s calling — including their location, company logo and reason for the call — collections organizations will get more value out of each outgoing call, driving higher right-party contact rates and more promises to pay. The industry might very well be having the same conversation about 7x7 in another couple of decades. And that timing could align nicely with the release of I Am Legend 3 and Taylor Swift’s 25th album.
