ARM Compliance Business Solutions | Sara Woggerman talks AI from a Compliance Perspective | Ep 191

Adam Parks (00:01.42)

Hello everybody, Adam Parks here with another episode of Receivables Podcast. Today I'm here with my good friend Sarah Wagerman with Arm Compliance Business Solutions and who is also one of the most fun compliance people you could ever hope to meet in our industry. And I know a lot of people don't put fun and compliance in the same sentence, but I think Sarah has perfected that balance.

Sara Woggerman (00:15.217)

you

Adam Parks (00:25.964)

But for Sarah, for anybody who has not been as lucky as me to get to know you through the years, can you tell everyone a little bit about yourself and how you got to the seat that you're in today?

Sara Woggerman (00:34.424)

Sure. Thanks Adam. And I appreciate being on the podcast for sure. So I'm Sarah Waugerman and I opened my business Arm Compliance Business Solutions four years ago now, surprisingly enough. But my journey on how to, how I got there was not your traditional story for sure. I started at, I worked for many debt buyers, three to be exact, two publicly traded ones and sort of had this niche for really going into companies and understanding where their gaps were, whether that was from a performance operational standpoint, or then I transitioned into compliance when the CFPB came around. And so I leveraged that, I had this amazing opportunity because I was always working with our outsourced service providers, whether those were collection law firms or whether those were collection agencies.

Adam Parks (01:11.19)

Mm

Adam Parks (01:30.58)

Mm

Sara Woggerman (01:31.692)

had this opportunity where I had literally stepped foot in hundreds of agencies and saw so many different ways people were doing things and learning kind of what was working for certain types of programs versus others. And so I finally decided to leverage all of that wonderful experience. And I became a consultant under the umbrella of Roseanne Anderson at Ontario Systems.

Adam Parks (01:58.38)

Mm

Sara Woggerman (01:58.414)

going on like nine years ago now. So I spent five years at Ontario doing this and sort of building up that consulting sort of book of business. And then I took it out on my own in 2020. And so I have a great passion and love for this industry. love the, not only just the people and all the wonderful things, you know, going to conferences and just, I enjoy our group of people, but I also love the advocacy side, the...

Adam Parks (02:08.876)

Mm

Adam Parks (02:22.208)

Mm -hmm.

Sara Woggerman (02:25.72)

trying to find solutions to complex issues, whether that is the use of new technology, new compliance regulations, but also driving your operational practices while being compliant. That is something I'm extremely passionate about. So that is my little bit about me.

Adam Parks (02:44.983)

It's the Sarah Wagerman story. No, and it's really great because it provides you with an opportunity as a reformed consultant myself. You know, it's going into all those different, going into all those different organizations and getting a better feel for all of the different ways in which something can be done because there's more than one way to do any particular task and to get to learn from all these different experiences and then to be able to help other organizations.

Sara Woggerman (02:54.86)

performed. I like that.

Adam Parks (03:13.256)

learn from what you've learned and not only to look at the challenges that come across from a regulatory standpoint, but to help find solutions to those problems, right? Finding ways to still get things done when there's new walls and borders being put up around you constantly, whether that be on a state or a federal level. But for anybody who's not familiar with Arm Compliance Business Solutions, can you tell us a little bit about what you do there? I know that you're doing Arm AI certification.

Sara Woggerman (03:24.194)

Yes.

Sara Woggerman (03:33.496)

Mm -hmm.

Adam Parks (03:41.986)

audits, but you guys do so many different things. What's the core of the business?

Sara Woggerman (03:46.572)

We have a wide spectrum to sort of meet the needs of every size organization and each complexity of each organization, right? So we do things, yes, we're an authorized auditor for the RMA certification program, which I am a huge advocate of, obviously, I've been a certified auditor for many years, almost since its existence, actually. But beyond that, we...

do things from both sides of the spectrum. So for the larger companies who might be preparing for say a regulatory exam, specifically maybe the CFPB, we have very robust compliance risk assessments that go through not only everything that's in the Bureau's manuals, know, their examination procedures, but also factors in the other laws that the CFPB doesn't touch like the TCPA under the FCC and things like that.

Adam Parks (04:25.697)

Mm -hmm.

Sara Woggerman (04:45.666)

will also weave in their litigation risks and state laws, right? So when we assess a specific component, for example, of risk, we're looking at, okay, here's your regulatory risk, here's your potential litigation risk. And we all know in this industry, those two don't always speak to each other or coincide well. So, you know, we actually have an algorithm that provides you with a risk scale, and then we provide you with recommended remediations

Adam Parks (04:45.919)

Mm

Adam Parks (04:49.227)

Mmm.

Okay.

Adam Parks (05:05.026)

Sure.

Sara Woggerman (05:15.362)

based on our risk analysis, right? we, so there's a nice framework. So that's one side of the spectrum. The other side of the spectrum is there's a lot of smaller and mid -sized companies that, you know, can't afford maybe the type of chief compliance officer, or they don't have the skillset within their existing organization that they might need to attract new clients, to meet the regulatory demands.

Adam Parks (05:18.614)

Okay.

Sara Woggerman (05:43.992)

that, you know, maybe they want to grow and they want to become bigger. So we can act as a fractional chief compliance officer for companies. We can build their compliance management system from the ground up. We can help with one -off projects. I work with a lot of debt buyers and I run their service provider oversight program because that is what people know me as being like something that Sarah Wagerman did the most in the industry and was, was good at. So.

Adam Parks (06:05.776)

Mm.

Sara Woggerman (06:13.366)

you know, they're like, help us build this framework. And we know if you're a passive debt buyer, the CFPB is going to really hone in on your service provider oversight program, right? So there's a lot of things within there. And we do customized one off projects. know, some some companies say we want you to come in once a year and talk to our board of directors about the state of the union of the industry and kind of make sure that they understand where things are going. Because maybe it's maybe it's better to hear it from a third party.

Adam Parks (06:21.271)

Mm

Adam Parks (06:34.604)

Mm

Adam Parks (06:37.879)

Yeah.

Sara Woggerman (06:41.496)

So we support operations of all sizes and I've got this really amazing team that has been around for a long time that really can hone in and we try to match the right consultants with the right needs. And sometimes we're tag teaming that, right? So we've got a really cool projects going on right now where one of my consultants, Deborah Siskie is building the compliance management system.

And then the other consultant, Irene, is coming in and she's implementing it all. She's got this great energy. She's talking to the collectors. So Deborah's doing the building while Irene is doing the implementing. And this client is like over the moon with, we could not have asked for a better way to do this, right? And so there are, and we're able to move the needle really fast as a result of leveraging a team with all sorts of different personalities, skill sets.

Adam Parks (07:16.287)

Mmm. Mm -hmm.

Adam Parks (07:30.242)

Sure.

Sara Woggerman (07:39.542)

and backgrounds and experience.

Adam Parks (07:41.836)

putting the right people in the right role, Sarah. That sounds like an amazing opportunity. And look, having policies and procedures on the shelf is not helpful. Having policies and procedures that are being implemented across your organization is what you're supposed to be doing and how you build success. But bringing us back to kind of the compliance guardrails of the industry technology and those pieces, one of the journeys that people are starting across the industry right now is their journey into artificial intelligence. And so that has been

Sara Woggerman (07:43.886)

It's really cool.

Sara Woggerman (07:55.661)

Yes.

Adam Parks (08:11.554)

Very interesting to see in the TransUnion 2023 survey, they had said that I think it was 11 % of organizations were actively using artificial intelligence. I know that that needle has only moved a little bit to this point, but there's a lot more people that are looking at it. I wanna say it was only 17 % of groups that were like interested in looking at it last year. Now I wanna say it's up in that 40 % range.

Sara Woggerman (08:29.005)

Yes.

Adam Parks (08:35.22)

And so knowing that more organizations are getting to go down that path, what advice can you give to somebody as a compliance professional that's looking at implementing that new type of technology?

Sara Woggerman (08:45.506)

So this is a fascinating one, right? And so I've been obviously trying to keep up with all the moving pieces of AI. The first thing I kind of just wanna, we're gonna keep calling it AI because that's the word we all know, but there actually is nothing real about artificial intelligence in today's world. Like there is no actual artificial intelligence, but we do have as machine learning, we have large language models. And when we get to a point where generative AI,

Adam Parks (09:03.81)

Agreed.

Sara Woggerman (09:13.614)

can actually create new things and make new decisions based on all those things that your large language models and your machine learning and all this stuff, it kind of builds on. Then we will be in a place of true AI. But that is, I'm gonna say that and then I'm gonna contradict myself. I'm gonna be kind of, know, a pain in the butt for a minute, but that's because our government, I know this is going to be surprising, is going to put a definition around this and it's likely going to be very broad. And so,

Adam Parks (09:24.56)

Mm

Adam Parks (09:35.445)

Yeah.

Adam Parks (09:39.845)

Mm

Mm

Sara Woggerman (09:42.772)

AI is going to become the umbrella word that we use for all of these things, even though it's not actually probably the right word to be using. So, all right, clear that off the plate now and say that AI technologies and their implications is something I asked about on such a regular basis. And one of the first place, and I think the challenge for chief compliance officers is, is by nature, we're not necessarily technology geeks, right?

Adam Parks (10:01.751)

Mm.

Adam Parks (10:11.394)

Sure.

Sara Woggerman (10:11.938)

We are getting to the weeds of the laws and regulations, figure out how to comply geeks, right? But we aren't necessarily the first people you think of when you think about technology innovation. And so we're going to have to challenge ourselves to truly understand what is happening with the technology, which means we're gonna have to maybe get into the room of a place that feels maybe above our head, but we're gonna have to say,

Adam Parks (10:15.671)

Yeah.

Adam Parks (10:34.005)

Mm

Sara Woggerman (10:42.336)

vendor who wants to sell me this tool, help me understand what the implications of this are. Where's the data being, you we're going to have to ask all those questions. So thinking through a good place for chief compliance officers to start or companies to start in general would be, and we can go through the actual, like what that questionnaire could actually include. But I think a good starting point is making sure that you have the right people in the room to ask those questions.

Adam Parks (10:59.223)

Mm

Sara Woggerman (11:11.672)

to understand exactly how that's going to work in the background. And that might mean you feel stupid because you ask them, you think you're asking dumb questions, ask them, because you're gonna have to explain it at some point. So, I mean, you have to understand that. Right.

Adam Parks (11:11.852)

Hmm.

Adam Parks (11:22.722)

That's exactly it. Whatever is in the black box is going to have to be explained. The CFPB and other regulators have been very clear about that. Whatever is in the black box is going to have to be explained, whether you're a creditor making lending decisions or you're a collector driving workflows. You're going to have to explain what's inside the black box. And I think that from our industry standpoint, there's a lot of different use cases potentially for artificial intelligence.

Sara Woggerman (11:33.495)

Yeah.

Mm -hmm.

Sara Woggerman (11:41.41)

Yeah.

Sara Woggerman (11:50.84)

Mm -hmm.

Adam Parks (11:51.862)

there's different ways in which it can be used that are gonna come with different risk levels, right? Having artificial intelligence communicating directly to a consumer comes with a different risk level than having it drive workflows comes with a different risk level of it notating your meetings, right? So, or converting your notes into structured data. And I think the part of our industry's challenge has been these two worlds of structured and unstructured data. And how are you going to start to leverage

Sara Woggerman (11:56.12)

Correct.

Sara Woggerman (12:06.979)

Right.

Sara Woggerman (12:10.541)

Mm -hmm.

Sara Woggerman (12:15.785)

yes.

Adam Parks (12:19.756)

value here from an unstructured data.

Sara Woggerman (12:23.298)

I think that's an amazing opportunity, right? It's an amazing opportunity from an operational standpoint, but it's an amazing opportunity from a compliance standpoint, right? So from a compliance, I mean, we could speed up some of these processes, right? We have a lot of teams that feel like in the compliance space, we got to keep adding bodies because we inherently don't necessarily trust systems. But if there's certain elements of that that we can gain a confidence level of,

Adam Parks (12:29.794)

Mm

Adam Parks (12:42.71)

Mm -hmm.

Sara Woggerman (12:52.724)

and then we can use our human intelligence for the actual decision making or the final steps or the checkbacks, then we can reduce our time. Like, I don't know a single compliance person who's twiddling their thumbs, right? Like, we're all really busy. There's never something not happening in our space. So when we can free that up, that allows us to have

Adam Parks (13:05.76)

Mm

Yeah, fair.

Sara Woggerman (13:20.17)

stronger compliance management systems, maybe focus on other areas. I think there's a great way we can use this from an auditing perspective. I'm interested to see how some of those use cases get adopted and implemented. I know those are conversations in some of the circles I'm talking with that are being discussed right now, for sure.

Adam Parks (13:22.283)

Mm

Adam Parks (13:33.45)

Mm

Adam Parks (13:40.802)

It's exception management from my perspective, right? So if you want to use artificial intelligence from the perspective of, let's say, auditing calls, that's great because it's been, at least my opinion, that you can only have so many live calls listened to on a monthly basis. If I've got 3 ,000 people that are making phone calls, I cannot hire enough people to listen to all of those calls. And yes, I can randomly sample the calls and I can do what most organizations have done historically.

Sara Woggerman (13:43.799)

Mm -hmm.

Sara Woggerman (13:56.366)

Mm -hmm. Mm -hmm.

Sara Woggerman (14:03.533)

Mm

Adam Parks (14:10.05)

Or I could try and leverage a piece of artificial intelligence to identify the exceptions that require manual review, right? I can't have the system ding in the collector because they said something. I have to make sure that we've interpreted that correctly in that I've I've now put that list of exceptions together. So instead of trying to listen to, let's say, 10 calls per collector per month, now I'm listening to the 10 calls where there's a problem. But you also have to change your expectation of.

Sara Woggerman (14:11.992)

I don't know.

Sara Woggerman (14:16.663)

Mm -hmm.

Sara Woggerman (14:24.632)

Correct.

Adam Parks (14:37.858)

what you're expecting to get because if you're only listening to 10 calls and it's not a 10 random sample, you're only listening to the 10 exceptions, well then you can't hold them to the same standard right from a scorecard perspective that you once held them to. I'm not saying you shouldn't hold them to a standard, but you have to kind of, yeah, there's a little bit of a give and take there, yeah.

Sara Woggerman (14:52.174)

correct.

that yes, you have to adjust for that. There's an adjustment there. That's absolutely correct. And so we have seen this with, you know, things like speech analytics for some time. and, it is like that with everything. So, you know, let's just go to what I do with service provider oversight, right? I am looking at things like call frequency exceptions and exceptions to those rules. And did the third party actually comply with say the presumption of compliance within regulation F.

Adam Parks (15:05.872)

Mm

Adam Parks (15:13.058)

Mm

Adam Parks (15:24.688)

Mm

Sara Woggerman (15:25.614)

So, you know, I have built a tool to quickly get down to those exceptions, but it'd be great if we didn't have to always build a tool and we had something a little bit smarter behind that, right? So, you know, I could say, okay, here's my data set, show me where the potential nonconformities might be or those exceptions, as you said, so that I can go validate if we really do have an issue, you know, maybe dispute timeliness or

Adam Parks (15:35.446)

Yeah

Adam Parks (15:47.157)

Mm

Sara Woggerman (15:54.786)

the language and complaints. I mean, we can start drilling down, you know, there's this expectation that we as an industry, regardless of our size, are doing this very in -depth analysis on our complaint and dispute data, right? The Bureau very specifically expects us to do this trend analysis. And, you know, I often find this gets missed. Well, what if, what if we had a tool that really helped us identify that? So that didn't feel like,

Adam Parks (16:03.998)

Mm

Adam Parks (16:09.665)

Mm

Sara Woggerman (16:24.908)

Well, like this manual process.

Adam Parks (16:28.642)

It's also one of the greatest uses of artificial intelligence, right? And again, we're going to use the the air quote artificial intelligence, but that ability to identify trends from large data sets is the most valuable use, I think, in the short term for artificial intelligence in the space, because you've got a large language model, you've got a model that you're able to start identifying how things are happening over a period of time instead of just seeing kind of a scattered plot.

Sara Woggerman (16:33.187)

Mm -hmm.

Sara Woggerman (16:42.894)

Mm -hmm.

Adam Parks (16:58.754)

type diagram, you're able to see a much more smoothed out, trended diagram. And you don't have to sit there and do the math. You don't have to sit there and start calculating your standard deviation from the norm, right? Like when you can start putting more of that into the hands of the computer, it does save a lot of intelligent time because that's not a thing that you, that's something that you got to hire a Sarah Wagerman for. That's not something that you can hire, you know, some random person in another country, outsource that kind of thought. That's, that's a thought.

Sara Woggerman (17:10.872)

Great.

Sara Woggerman (17:17.538)

Yes.

Sara Woggerman (17:24.28)

Right.

Adam Parks (17:28.822)

driven requirement. it kind of.

Sara Woggerman (17:30.062)

Correct. Right. No, it's a lot. And so let's say if I, you know, if it's analyzing all of my complaint data, for example, and it's saying, here's the most commonly used words. Now, probably the first 20 are like what you would assume they're going to be, right? But like, what are those other ones? What are the ones that are the ones that should be standing out to you? So the number one issue with this artificial intelligence and from a...

Adam Parks (17:53.292)

Mm

Sara Woggerman (17:58.438)

regulator standpoint is they are convinced there is going to become bias in the decision making, which we know exists as humans also happens already today. We know that's very obvious in the lending space. And the argument for good reason has been made that in our industry, kind of discrimination kind of gets flipped. So like your protected classes are more likely to get better deal, you know, things like that.

Adam Parks (18:04.64)

Mm -hmm. Mm -hmm.

Adam Parks (18:25.921)

Mm -hmm.

Sara Woggerman (18:26.606)

is our argument. But unless we test it, we can't stand on that rock, right? So we have to be able to show that we have a testing model back. So an interesting thing I have seen develop is these vendors who say that they are offering an AI solution, they are asking the user in a questionnaire how they're going to test for that. And then

Adam Parks (18:44.35)

Mm

Adam Parks (18:56.386)

Hmm.

Sara Woggerman (18:56.854)

The user is saying, wait, isn't that your responsibility? So this is an interesting thing I think we should be looking at as an industry is who is liable for what? And the answer is likely going to be both, both parties. Right. But so that's one of those things. So I'm getting questions about that going, wait a minute, why are they asking me this? Shouldn't I be asking them that? Well, you should be asking them that. But.

Adam Parks (19:12.118)

Yeah, was gonna say it's likely in the contract.

Mm

Sara Woggerman (19:25.77)

Likewise, you're probably going to share some liability with this and making sure that it doesn't start getting so much of a mind of its own that it does create, because keep in mind, we are training the machine, the tool. And if we have unconscious bias, we are going to just teach unconscious bias, right? Like that is an inherent thing that...

Adam Parks (19:30.06)

Mm

Adam Parks (19:44.587)

Mm

Adam Parks (19:51.122)

Yeah. Fair statement.

Sara Woggerman (19:55.52)

Now again, I do think that's probably more likely on the lending side, but that is something we should consider and think about.

Adam Parks (20:02.87)

Yeah, Goldman Sachs had that issue when they rolled out the Apple card, right? Like that was very early on. That was one of the first I'm going to say that was the that was the first time that it really came out in public and said, hey, you know, there is some bias here in the way in which you're doing this, because me applying for given equal credit scores, me applying for it, my wife applying for the card are going to get two different credit limits. Well, why is that right? So I understand where the

Sara Woggerman (20:06.904)

Right?

It's a great example.

Sara Woggerman (20:14.254)

Mm -hmm.

Sara Woggerman (20:27.17)

Right. Right.

Adam Parks (20:31.574)

I understand where the government's going and trying to protect it. And I think it's important that we always keep an eye on that. I'm going to call it redlining from the real estate side of the world. Right. And I think it's one of those things that we always need to keep an eye on. But at the same time, when you've got this massive increase of accounts that's expected and we're all seeing what the charge off numbers and delinquency numbers look like across products right now, you've got lower liquidation capabilities on those same accounts.

Sara Woggerman (20:40.078)

Mm

Adam Parks (20:57.558)

we're going to have to start applying more technology because the margins have already been thinned out. can't thin the margins anymore, right? Not so much, right? You can't thin the margins for the agencies and the law firms anymore and still have them want to take your business, right? They might as well be going to do real estate transactions or something else or cost, you know, customer care work. It just doesn't make sense anymore. So.

Sara Woggerman (21:04.726)

Yes.

Sara Woggerman (21:15.32)

Yeah.

Adam Parks (21:19.04)

I think it's kind of a pivotal moment in time for the receivables management industry as it relates to artificial intelligence. And I think that the application within the compliance world identifying those exceptions is a great place to start the exploration, especially if you've got good compliance people watching out for you, because that's the key there, right? You've got to bake it into the whole thing. And like you were talking about having the testing models and being able to validate and

Sara Woggerman (21:41.55)

Mm -hmm.

Adam Parks (21:47.83)

demonstrate for a third party who is not part of the secret conversations in the back room, how did you come to these decisions? How did these tools get put into place and what things are you doing to protect the integrity of the consumer?

Sara Woggerman (22:03.96)

That is exactly correct and ensuring that, you know, obviously that you can show that consumer harm did not come. you know, having that, so we said testing, that's really critical, but then doing a risk assessment on, okay, how are we leveraging this tool? Have we received feedback from our consumer engagements, you know, that says this is either working or it's frustrating or, you know, one of the things that

Adam Parks (22:13.538)

Mm

Adam Parks (22:28.546)

Mm.

Sara Woggerman (22:33.774)

So on top of the potential discrimination, the other thing the Bureau is very sensitive about is the consumer experience and if they get frustrated. So they put out some comments about chat bots specifically and making sure that if you're using any of these tools that are having conversations or trying to solve problems, whether they're not giving the consumer a run around, huge deal to them, huge deal.

Adam Parks (22:42.946)

Mm

Adam Parks (22:55.692)

Yeah.

Adam Parks (22:59.49)

Yeah, well agreed and I think that there's a lot of different things that we're going to start to see come out. I think there's a higher risk level in leveraging this type of technology to communicate with the consumer than there is to drive internal processes. At this point in time, California's already rolled out their rule as it relates to artificial intelligence trying to define some of these things. I feel like it's a rather broad rule. I mean, I feel like this computer mouse might be artificial intelligence based on their ruling.

Sara Woggerman (23:13.635)

Correct.

Sara Woggerman (23:24.556)

It's extremely broad. I know, I know, yeah. Right.

Adam Parks (23:28.896)

So, I mean, hey, you know, don't listen to me. But I think it's important that we continue to have these conversations. I would encourage anybody in the industry who's starting to go down the path of exploring with your artificial intelligence to reach out to Sarah, have a conversation, because I can tell you, I've learned a lot about what the guardrail should look like through our conversations. And I feel like the insight that she's able to provide through her experiences working across so many different types of.

organizations really does provide that first stepping stone that you're going to need to understand. Don't just throw it at IT. Right. This is a this is a conversation that has to happen between IT executives the compliance department. And if your compliance department is not prepared for it then talk to somebody who is.

Sara Woggerman (24:06.115)

Right.

Sara Woggerman (24:15.692)

which before we, know we're getting close to wrapping up, but saying that one of the best ideas I've heard that if you haven't thought about this, I wanna share, create an AI committee of cross departmental so that you're having these conversations with everybody at the table. I think that is very key. That's step one for your organization if you wanna take this path.

Adam Parks (24:30.59)

Mm -hmm.

Adam Parks (24:44.866)

I agree with you wholeheartedly. I attended a bankers conference, I wanna say it was back in March, where this discussion was, that was exactly the discussion. How are we gonna be able to leverage artificial intelligence? We can't just have chat, GTP writing things for us. What's that look like? How are we gonna build our AR guardrails for our organization? Sorry, I think you hit the nail right on the head. And I look forward to continuing this conversation in the near future. Thank you so much for coming on today and providing your insights. They are.

Sara Woggerman (24:53.742)

Mm

Sara Woggerman (25:06.336)

Absolutely. Yeah, appreciate it.

Adam Parks (25:12.134)

absolutely invaluable for the industry. And I think the experience that you're you lending your experience to me, I really do appreciate.

Sara Woggerman (25:20.686)

Thank you, Adam.

Adam Parks (25:22.54)

For those of you who watching, you have additional questions you'd like to ask Sarah or myself, you can leave those in the comments below as well as I'll have Sarah's contact information so that you can reach out to her directly to continue this conversation. If you have additional topics you'd like to see us discuss outside of artificial intelligence, you can leave those in the comments below as well and hopefully I'll be able to get Sarah to come back at least one more time to help me continue to create great content for a great industry. But until next time, Sarah, I really do appreciate all of your insights. This has been fantastic. What a great conversation.

Sara Woggerman (25:50.606)

Yeah, likewise. Thank you.

Adam Parks (25:52.832)

And thank you everybody for watching. We'll see y 'all again soon. Bye everybody.