Even though more consumers prefer to be contacted through digital channels like SMS, there’s been a hesitancy from many debt collectors to embrace it. The industry has seen confusion around whether or not a text message is as intrusive as a phone call. It’s a gray area that hasn’t seen much legal clarity, until now.
A recent court decision in Robertson vs. TrueAccord Corp established key precedents for the debt collection industry. In this post, we’re going to break down this key court ruling, the power that text messages offer debt collection strategies, and an example of recovery results this channel offers.
Clarity on Text Messages in Debt Collection & the Mailbox Rule
In Robertson vs TrueAccord Corp, the court ruled that text messages are not as intrusive as a phone call. One main reason behind this decision was that the court stated text messages can be more easily ignored, and consumers have control to stop them via opt-out actions. TrueAccord spearheading this new case law brings some much needed clarity to this highly preferred digital channel. When sending text messages in compliance with frequency limits and honoring opt-outs, text messages do not inherently constitute harassment under the FDCPA.
Another facet of this case was the court confirming once again that the mailbox rule applies to email. It was recognized in the Robertson court decision that a debt collector can prove they sent an email (with no bounce backs), a legal presumption of receipt is created.
Additionally, the court’s opinion helped clarify what is and what is not an automatic telephone dialing system (ATDS) under the TCPA, which prohibits the use of an ATDS to call or text cellular phones without prior express consent.The ruling found that since the text messages TrueAccord sent contained personal information like specific debt amounts, it was implausible that they were sent using an ATDS. In other words, the message’s personalization was evidence of the system’s lack of capacity to generate numbers using a random or sequential number generator. It signifies how important personalization is for debt collection, and the value data-driven outreach offers businesses.
Now’s the Time to Use Text Messages in Your Recovery Strategy
Did you know that text messaging (referred to as SMS) is becoming the favorite channel for consumers to receive communications from businesses? In fact, roughly 90% of consumers prefer a text message over a phone call. SMS gives debt collection strategies the opportunity to honor consumer preferences while being direct.
A core benefit of using SMS for debt collection is that the channel tends to have a higher engagement rate. On average, SMS has a 98% read rate with most messages being read by consumers within three minutes of delivery. SMS also gives consumers a more streamlined experience, with a direct line from receiving a message to making a payment. It’s a nonconfrontational channel that empowers consumers to engage on their own terms. McKinsey research shows that digital-first outreach to consumers can lead to a 12% increase in payments.
Text messages are a “soft” touchpoint that also carries the benefit of helping to preserve brand relationships. It’s also important to note that digital debt collection software like Retain are designed to keep SMS compliance top of mind. The Robertson case provides significant legal clarity and a clear framework for mitigating risks associated with SMS outreach.
How Adding SMS Led to Higher Repayment Rates
A leading neobank came to Retain looking to add SMS to their debt collection strategy. Their customers expected a seamless digital experience across all aspects of their business. Even though much of their collections outreach had switched to email, there were still customers who weren’t responding. The neobank and Retain wanted to introduce SMS since it was highly likely that customers preferred this channel. The results were more than the neobank was expecting.
By leveraging SMS across a portfolio of Demand Deposit Accounts (DDA) and short-term loan products, the neobank saw payment rates increase by 9% after just four months of adding SMS to their collections communications strategy. The neobank then increased the number of text messages sent and collected nearly $2.6 million in four months. This equated to a 83:1 ROI due to SMS outreach being automated, which lowered operational costs and increased repayment rates.
Retain Makes Using Text Messages for Debt Collection Easy
There’s never been a better time to leverage SMS in your debt collection strategy. Retain helps your business achieve personalization at scale and unlock the benefits of SMS to increase recovery rates. Retain’s white-label debt collection software automates digital communications including SMS so you can recover more while spending less. Sign up for your demo today to learn more.
