How Digital Collections Strategy Is Transforming Compliance in Receivables | John McNamara (Avtal) | Ep. 251

Adam Parks (00:01)
Hello everybody, Adam Parks here with another episode of Receivables Podcast. Today I'm here with an industry legend and somebody that you all will recognize if you've been to a conference in the last 15 years or so, Mr. John McNamara. How you doing today, John?

John McNamara (00:18)
great. With an introduction like that, Adam, if I ever get famous, you have a spot in my entourage.

Adam Parks (00:23)
Fantastic, I look forward to that.

John McNamara (00:25)
No, I'm doing well. Thanks for asking me to participate.

Adam Parks (00:29)
Absolutely. Look, it's been a long time coming for us to be able to have one of these conversations. And I'm really excited for that opportunity. But for anybody in our audience who has not been as lucky as me to become your friend through the years, can you tell everyone a little about yourself and how you got to the seat that you're in today?

John McNamara (00:44)
Yeah. Wow. It's a little bit of a story. So I started as a collector out of college in 1983 when Ronald Reagan was president with a company called American Creditors Bureau, kind of roastered the ranks, was an executive with those guys, stayed with them right at 20 years. Then I worked for URS for a while, again, executive role, chief operating officer at Asset Management. Outsourcing was a. And then right before the Great Recession had the broad idea to start an agency with a friend of mine, Brett Crandall, and we co-founded Fidelis Recovery Solutions. ⁓ We were doing okay, but it wasn't growing fast enough and it wasn't throwing off enough cash for both of us. So we agreed one of us would get a day job while the other one ran the business. We thought that Brett would go get the day job. And about that time I met the guys at Livevox and I became a free evangelist for them and they called me looking for a chief marketing officer. said, I'm your guy. So I went from being a debt collector to being a chief marketing guy overnight and worked for them for about six years. And then we grew, we were having fun, we were growing fast. think that's when I became, well, I guess that would have been my second startup. I became addicted to startups. I really liked that, liked the vibe. I almost liked the sort of the terror of a startup, right? Cause you've always got to be clicking. Anyway, so.

Adam Parks (01:58)
I'm addicted to startups I really like that, like the vibe. I just like the sort of terror of the startup right? Because you've always got me clicking. Anyway, so

John McNamara (02:08)
I'm at Livevox, we're doing well. And I get a call from my friend, John Tonetti from the CFPB. And if you know John Tonetti, you'll absolutely know this is completely on brand. Tonetti calls me and says, John, the CFPB wants to talk to you. And, and they just went dead silent. And I, I

Adam Parks (02:08)
I'm at Livevox, we're doing well, and I get a call from my friend John Tonetti from the CFPB. And if you know John Tonetti, you'll absolutely know him. calls me and says, John, the CFPB wants to talk to you. And they just went dead silent. And I.

John McNamara (02:27)
mean, I'm panicked. I'm thinking, wait a minute, we are a large market participant. We're a servicer for large market participants for a number of them. And like,

Adam Parks (02:27)
I'm panicking, I'm thinking, wait a minute, we are a large market participant, we're a service for large market participants for a number of them. then

John McNamara (02:36)
And then I did a mental inventory of every egregious thing I'd done since kindergarten. And then finally, I'm sure it was only five seconds, but it felt like a minute. Tonetti sort of goes, no, no, no. goes, John, I'm leaving the CFPB. My kid's going to college. I'm going back to

Adam Parks (02:37)
I get a mental inner for you, every outrageous thing I've done since kindergarten. And then finally, I'm sure it was only five seconds, it felt like a minute. So then he sort of goes, no, no, no, go, John, I'm the CFPB, my kids want to college, I'm going back.

John McNamara (02:51)
work for a large bank. I need to make more money. You would be ideal for this role. And then I just, I think I almost collapsed with relief. At the time, like, at the time I knew the CFPB was going to create Reg F.

Adam Parks (02:58)
think I was collapsed with relief. At the time, I knew the CFPD was going to create reg-out

John McNamara (03:06)
and were going to the implementing rule for the FDCPA. And the bug was planted. OK. And I thought, wow, this sounds really exciting. But I had equity in the Fidelis Recovery Solutions. I had some equity in Livevox. So I kept my eye on the position. And then around January of 2014, Livevox

Adam Parks (03:06)
and they were going be implementing a rule for the FDCPA. The bug was planted, okay? And I thought, wow, this sounds really exciting, but have equity in the FDCPA. It also has couple of solutions. I had some equity in Livevox. So I kept my eye on the physician and then around January 2014, livevox

John McNamara (03:27)
was purchased by Golden Gate Capital. ⁓ I had sold the rest of my equity in Fidelis to Dennis Cunningham. And threw, I actually went home and I said to my wife, I said, what do you think about giving myself a six figure pay cut and then moving to a higher cost of living city? And she's like, do it. Cause I think she's, well, listen, loved Livevox Louie, Larry, Joe, all those guys, nothing against them. It's just, I wanted something different and I was worried. I was worried about our industry. So anyway, through my name, ⁓ like in January put my

Adam Parks (03:39)
about giving myself a six figure pay cut and then let me do a hard cost listen to it. She's like, do it. listen, love all those guys. Nothing against them, it's just I wanted something different and I was worried about our industry. So anyway, through my name, like in January, I my...

John McNamara (04:03)
happened to rain and it took like six months before they finally hired me. ⁓ I came into work on Reg F and that's where I spent maybe the first three years. Almost all of my time was giving a market perspective about how industry really works there. So and then I was going to leave after Reg F came out and it took longer than anticipated. And then I kept getting promoted. So every time I thought I was going to leave, I got promoted. ⁓ And finally, I'm the principal assistant director of markets running pretty much everything but mortgage and small business lending and loving the smart people I'm working with and the fact that we actually can be a voice of responsible industry. And I think that's so important that regulators get it right by knowing how things actually work. But we were infused with a lot of humility, too. While we knew a lot about how industry operated and I know a lot about collections, I'm aware of the fact I don't know everything. And so you would see the markets people use their networks to sort of ping people and say, is this really a thing or how do you operate here?

Adam Parks (04:34)
love it, the smart people are working with it, the fact that they actually can be a voice of response when this is happening. And I think that's so important that regulators get it right by knowing how things actually work.

John McNamara (05:03)
So did that. And then I was about ready to retire in September, actually this time last year, I was going to go ahead and pull the plug and retire because I could. ⁓ And I really thought ⁓ Kamala Harrison win the elections Rohit would stick around for a few more years. I didn't want to be part of that bureau. I just felt like Rohit did not listen to experts like he should. And I was tired of it. So. I was pretty much reconciled to retiring. And then when Trump won, I got calls from multiple staff members going, John, don't retire. Stick around. Please help with the transition to a Republican administration. They knew I had good contacts on the other side of the aisle, and they knew I'd help with that transition when during Trump won. So I thought, OK, I'll stick around. And so I talked to transition team. was talking to all the likely suspects making sure that they knew how important the markets group was, ⁓ that the markets group was not hyper woke, they weren't radicalized. These are basically fairly humble, former industry players and really good analysts that know how, that not only they either know how markets operates, private sector operates, or they're curious enough to want to know and they're willing to listen. So working at that, I thought we were headed towards a transition to have somebody like a Kathy Kraninger.

Adam Parks (06:07)
These are basically fairly humble, former industry players and really good analysts that know how to, not only pay their metal and metal market operations, sector operations, but they're curious enough to watch it.

John McNamara (06:27)
Probably the Bureau, I think, would have taken a significant cut, maybe 20 or 30 percent. ⁓ I just felt that. ⁓ And then they wound up firing everybody. It's like, holy crap, like, like what is going on? on the so I do my informed opinion is that there was a faction at the White House that was kind of Kraniger like, you know, policymakers kind of your sort of traditional.

Adam Parks (06:36)
then they wound up firing at me. It's like, crap, what's going on? on the, so I do, my informed opinion is that there was a fact that the White House.

John McNamara (06:54)
But you also had sort of a more radical faction that really wanted to get rid of the Bureau, which I think that thinking is absolutely misaligned with how responsible industry wants things for all the way from from small collectors all the way up to the biggest banks don't want a no Bureau thing because we know the states go crazy, not just blue states. Red states are more populous now and they're likely to do some things. And listen, nothing against the states. It's just they don't have the time and the budgets to do the kind of

Adam Parks (07:05)
agreed

John McNamara (07:23)
deliberative informed rulemaking that a federal regulator does.

Adam Parks (07:26)
No, and it creates a terrible situation of a patchwork across the United States where you can't have even treatment and like a credit score in Massachusetts and a credit score in Florida needs to be weighed the same way or I'm not going to use that to make credit decisions and now you got to send me all your pay stubs.

John McNamara (07:42)
No, absolutely. And that's terrifying. So anyway, ⁓ things are going along the Thursday before Easter, I start getting emails and calls from staff who being fired. Like, the end of the day, like Jason Brown, who was the head of research and I were both in the building. And, you Jason comes over to my office about seven o'clock. That's when supposedly everybody that was going to be fired was fired. And Jason goes, John, were you fired? I said, no. So what about you? goes, no, we both looked at each other and said, shit. mean, like we were left over and we didn't necessarily want to be because it was just too crazy. As it turned out of the 1700 people, 1500 have been fired. Leslie Parish by really awesome senior deputy and I were the two people in markets out of at the time, maybe 40 that weren't fired. It was at that point that I just thought, you know, can't do this.

John McNamara (08:37)
So that was when I decided to leave Leave For Good. But on the way out, I tried to talk to, I think, some very reasonable politicals who were actually on the ground inside the building, ⁓ Mark Calabria, ⁓ Joe Gamelo, ⁓ Ellie Greenbaum, and make sure they knew that regulations, research and markets were very, very professional, sort of fact-based, fact-driven policy and rule makers. And I think I was pretty good at that.

John McNamara (09:07)
but I'm not even sure as things turn out whether they'll run things. So at the time I had like three different offers to do other stuff. It all kind of interesting and from good companies, good people. And then I've been following my friend Joe Gelbard from the Livevox days who founded this company called Avtal. So Joe calls me about the time that I decided to pull the plug and I was weighing the other offers and says, John, we got a nice round of funding. I can afford you if you'll take a pay cut. I'm like, I didn't even. You

John McNamara (09:36)
I didn't even ask him what the pay was. I said, I'm in because I'm at a point in my career, once again, where I can take a pay cut, who cares? I can do something that's fun and exciting. And again, once again, I'm at a startup. And I will tell you this, Adam, the Bureau was a startup when I got there too. And people that thought I would describe it as a stodgy, like stuck in the mud, Department of Transportation, ⁓ bureaucracy, it wasn't that at all.

Adam Parks (09:41)
Yeah.

John McNamara (10:04)
⁓ Richard Cordray was the director then, we could do things pretty fast. And I think if you've got the ability to do things fast, you have the obligation to do things right, which means highly informed. So it was fun. was startup like. So then here I am at another startup.

Adam Parks (10:09)
That's a way to put it. So what motivated you to stay in the space? overall, I know that this is kind of this is where your career path has been. This is all about the people and you've been seeing the same people at the same conferences in the same cities for 20 years. But like when you hit that point of like, okay, I'm ready to retire. What is it that kind of you almost got out? What brought you back in?

John McNamara (10:46)
Yeah, no, no, that's a great question. ⁓ Okay, so I talked to my first debtor in October of 1983. His first name was Romeo. I will not reveal his last name. It was a Macy's account for $234. It took me three days to get the guy on the phone because we're manually dialing, dialing literally like this. And I read my script to him. And Romeo responded to my script by saying, I laugh at you, you stupid asshole. And then he hung up.

John McNamara (11:16)
And that actually said I laugh at you, stupid asshole. He did laugh and then he hung up. I got to quit. This is a tough business. but but even then I realized getting people on the phone was hard and we consumers never want to hear from us. We're always even legal calls or unwanted calls. So even then I thought there's got to be a better way. So it livevox we had outbound bursting that allowed for it making it easier to to get consumers on the phone. I used to joke with folks that.

John McNamara (11:45)
At Livevox we could provision so many outbound lines that once a year, we got Jimmy Hoffa on the phone, and about every other year we got Amelia Earhart's crazy ass on the phone, because we could basically call, blast out so many lines. And that helped with the of the declining ability to use voice. during Reg F, we watched New York State enact their collection rule. And it clearly envisioned.

John McNamara (12:15)
digital, but then it broke my heart because it made the hurdle to get into digital so high that nobody was using it. And then when we issued the sub-brief for Reg F, like we heard from industry that said, you guys didn't talk enough about digital. And so we went back to the drawing board and we really, really wanted to make sure that we could create an environment that would steer in modern technologies to communicate with debtors.

And so we did. I'm kind of proud of what Reg F did is trying to bring some clarity to the market. And it did. So that we saw this gradual adoption of digital. We still had TCPA out there. We still had some ambiguity out there and still a lot of caution. And then so while I'm still at the bureau, I swear debt collectors don't know they want to do this now. But at some point, they're going to want to hug.

Senator Warren and Mark Zuckerberg. ⁓ Senator Warren for Reg F. ⁓ I know they'll be conflicted about that. And then Mark Zuckerberg for the SCOTUS Facebook case ⁓ that basically allowed for, that basically created a tier of of SMS and other messages that allowed for sort of this entry to full digital communication. anyway, Joe, Joe Gelbart, his company, I'm listening to him as he's building the company out.

Adam Parks (13:32)
Joe, Joe Gelbar, this company, most of you do this to build a company.

John McNamara (13:39)
And I liked what it was because it was three basic things and nothing more. that is SMS and email working together with a payment portal that's frictionless, intuitive and easy

Adam Parks (13:39)
And I like what it looks because it's three days, not more. And that is SMS and email working together with a payment for a prescriptionless intuitive.

John McNamara (13:50)
for the consumer. It's white labeled to whatever agency or entities using it. I thought, okay, with all the hype about AI and this and that and digital, these are the three things that really like ring the cash register literally. So

Adam Parks (13:59)
AI, this and that, digital. These are the three things that really bring the cash register to the surface. So

John McNamara (14:06)
I thought, okay, you're onto something here because you're

Adam Parks (14:06)
I thought, hey, you're onto something here because you're...

John McNamara (14:08)
not trying to be something shiny. You're trying to be something useful. And then what really two other things sold me. One is it was designed that if you could create a file to send to Lexus or to a dialer, you could probably create a file that could engage with the Avtal product. And then the best piece was it was success based pricing so that the only time the optimal product and then the best piece was it was success-based pricing so that the only time we recognized revenue is if the money goes through that portal. So, can you know which debt collection place is better at?

John McNamara (14:35)
we recognize revenue is if money goes through that portal. So debt, and you know this, debt collectors are facing headwinds.

I guess they're not headwinds anymore because they're coming at them from all directions and they're getting stronger. But I thought, gosh, the idea that you could actually help an agency lift their revenue, reduce costs ⁓ without them investing or fixing themselves in cement with a legacy system.

Adam Parks (14:46)
Yeah. for fixing themselves in a symmetrical legacy system is brilliant. It's fun, just what the industry needs right now. So we're seeing agencies adopt this pretty quick. We save money. There's a model where agencies pay money from email.

John McNamara (15:02)
is brilliant. And it's probably just what the industry needs right now. So we're seeing agencies adopt this, like pretty quick. We save money. There's a there's a model where where agencies pay money per email or per SMS, whether it generates money for them or not. And I don't think that's a sustainable model. So I like I like what I believed in.

Adam Parks (15:22)
There's a lot of challenges that come into that model like domain who's responsible for domain reputation management? Right if we're just gonna outbound all day long like there's a whole other level of responsibilities that I think organizations tend to not think about

John McNamara (15:28)
So, You know, you're exactly right. that's so I'm probably the anti sales guy for this. And I'm sure they that Joe and Khalid Bittar, the CEO, they're probably cringing. like, what we do is the most boring. It's not mindless, but it's boring. And it's it's hard work that nobody wants to do. And that is so SMS is nice. And it's sexy. Payment portals are nice and sexy.

Email is not sexy, but that's where the hard work is done. That's why I that's a great astute question, Adam, is the hard work is warming up and maintaining and monitoring the reputation of this email domains. And that's really where the magic of Optel is. And it's it's something that no real agency, even a big one, should build out, because that's infrastructure. That's something that's never going to give you a competitive advantage. Yeah, no, no. I can tell you that most organizations don't understand it. Most of the IT departments don't have DNS expertise. I I'm managing DNS for hundreds of sites.

John McNamara (16:35)
So you know what I, you know, it's a bureau, there's a, I have an analog at the bureau. The hard thing about the debt collection rulemaking is everybody has a debt collection story. I mean, so when we're trying to do the, yeah, exactly. Like every meeting on policy when it came to Reg F, somebody that wasn't, that was outside the, the, the rulemaking team, run by the very apt, very competent, wonderful Kristen McPartland at the time.

Adam Parks (16:45)
There's a lot of antidotes out there.

John McNamara (17:04)
Like, but every day it's something new about these freaking debt collectors. They're doing this. No, that was a headline by, you know, a suspect outlet. But everybody can relate to debt collections because they're experiencing themselves or know somebody. Email's even worse, right? Everybody thinks they're an expert on email. Everybody thinks they're an expert on text. And what I found in my, gosh, I'm not even two months in the new gig, Adam, but what I found is

Adam Parks (17:13)
You

John McNamara (17:33)
sort of three types of agencies. There are sort of the digitally naive, they just, they don't have a digital presence. We represent a free digital presence for them. That's cool. ⁓ At the other end, we have the digital sophisticated that are pretty good at it. And what I tell them is we represent a free AB testbed or a free challenger to your own thinking about your the efficacy of your digital efforts. But the big middle is the email, the digital spurn.

John McNamara (18:03)
They're convinced it doesn't work. And that's where we go in and start working with them and say, let's take a look at the reputation of your domains. ⁓ that, it's so easy. Yeah, I mean, and when Google dropped the spam ⁓ threshold, the 0.3%, like a lot of people, that was what a year ago, they got knocked out. So that is the hard thing. I could tell you if, well,

Adam Parks (18:09)
That's where it always starts.

John McNamara (18:28)
I'm old, but I think I'm young at heart. mean, I've got about every every FinTech app you can think of on my phone. ⁓ A lot of people operate out at home just like they do at work. They operate largely out of their inbox. If you can get the emails into the inbox, you get engagement that parallels rivals SMS engagement if it works well. And if you've got SMS and email working together with a really easy to navigate payment portal, I mean, that's where consumers want to be. And again, I talk to advocates all the time in my old role. you know, in their mind, all calls are unwanted calls. And if it's unwanted, it's illegal. You and I know that's not true. There's your call may be unwanted, but it's still legal. most, you know, from responsible industry, that is the case with all the phone calls. But the fact they're unwanted tells you that consumers want to engage asynchronously via digital. And I told you I'm old. I'm 66. I'll be 67 in October. But

John McNamara (19:28)
I've had the same credit unions since 1989. I've only talked to them twice. I mean, they're great people, but I've

Adam Parks (19:33)
But look, a lot of consumers are going the route of take, they're borrowing the money digitally, they want to communicate digitally. And as you look at the age brackets, or even just cultural differentiation, you can really see how different subsets of groups my wife and I communicate totally differently. She's all WhatsApp and she's texting voicemails back and forth with her friends. I haven't listened to a voicemail since 1996.

So like, it's just a, there's a different approach to these. Now, I an interesting question for you though, because we talk a lot about, you're talking about getting the people into the channels, and I think that's absolutely the first step, is getting these agencies and debt buyers and organizations into these digital channels so that they are communicating on the channel. But now the next question starts to become, where's that differentiator? Three to five years from now, the channel isn't the differentiator, it's gonna be your strategy and your content.

So building out those content libraries, ensuring not am I sending the right message on the right channel right now, but am I sending the right message content to the right person at the right time? And I think that's where the differentiators in strategy become separators between organizations in the next.

John McNamara (20:44)
No, no, I could not agree with you more. And then the other wonderful thing about servicing, and that's what we're all doing. my worldview is collections has always been just extended servicing, right? It's part of the same chain. When you service, you collect all sorts of helpful data along the line that.

John McNamara (21:10)
lends itself initially to data-driven decisioning, but also AI decisioning down the line about how they work together. And I'll tell you what the other thing that you just triggered something else, what appeals to me about Avtal ⁓ is like I met Ohad Samet, who founded True Accord very early. And I loved the model. I love what he was doing because he's is a rookie collector at 83 under Reagan. When I talked to Romeo and he hung up on me without hearing me out, it hit me. Collections is a marketing problem.

Adam Parks (21:40)
Yeah.

John McNamara (21:40)
with a little bit of sales. You're taking somebody like Romeo who doesn't want to talk to anybody about his Macy's account, but you're trying to elevate his energy level or his level to engage. And any raise in that level is success. So even him hanging up on me was a success ⁓ because I had way more information than did before. So when Ohad was building out True Accord, treating it as a marketing challenge, that's the first time I heard anybody that talked about collections the way I did that you're trying to create an environment where the consumer is getting enough impressions that they feel like they're comfortable and they want to engage with you somehow. Whether it's a letter, I mean, even a letter that tells you to F off is a level of engagement and you know something more about that consumer. So digital is that. And again, the more data that you have, the more you're able to work with those templates ⁓ to find the right mix at the right time.

John McNamara (22:36)
based on the right age and type of portfolio, all that comes together to really optimize that. And then I think eventually, like not now, but eventually I think people want to engage in apps.

Adam Parks (22:48)
I think there's some level of app, but I'm more of a proponent of the web-based application rather than having the localized app because I always have struggled with the idea of a consumer wanting to add a debt collectors app to their phone.

John McNamara (22:49)
And that's hard. Yeah, no, no, that's, that is a crazy hard challenge because

Adam Parks (23:09)
From a privacy perspective, I can see some interesting

challenges, but you bring up something really interesting here when you talk about, know, every communication is success because you're collecting information, you're collecting these signals and you're compiling signals to create intelligence to predict next behavioral action is kind of your objective. And as I've started really playing with that over the last year or so, I've been spending hundreds and hundreds of hours of prompt engineering and just trying to understand how to dissect some of this data.

I'm curious as somebody who was intimately involved with Reg F and there was really, artificial intelligence was a pipe dream as you were going through that process. How well do you think we are positioned going forward with the rule set that we have now as compared to the technology available? And I equate it back to looking at FDCPA in the 70s, right? By the 90s, it was very different and that time block was 20 years, but Reg F was only not five years ago, not even. And so the technology is moving at such a faster pace. How do you think that plays out over the coming decade?

John McNamara (24:12)
Yeah, no, it's a good question. So we had a battle cry on the the reg F rulemaking team, the team, great people, awesome attorneys, ⁓ with a couple of PhD economists. And at first, it was me. And then Gandhi as water mercy, the senior program manager that I hired, he eventually replaced me as I got promoted up. The battle cry was, there will be no telegram in this rule. And if you recall, the FDCPA, it's a very short statute. As a matter of fact, I might have a copy of it here. I do. So, Adam.

Adam Parks (24:41)
That's awesome. That's awesome. The first time I read it, I thought to myself, can't believe that we had to write this down.

John McNamara (24:53)
Yeah, no, no we wanted to make it, but it was a good reminder to us that we wanted to make this technology agnostic so the rule would stand the test of time. By the way, side note, ⁓ I went out to industry one time and I was talking to somebody who, I overheard somebody who didn't know me and they said, yeah, I just got back from a visit with the bureau. It was a bunch of children with a copy of a blue book and one old guy. I was the old guy. But ⁓ so, yeah. I think I've been in that room.

John McNamara (25:22)
So in any case, ⁓ you're kind of making me replay the rule. ⁓ Phone calls could almost sound anachronistic at some time. And I think there was some gnashing of teeth and rending of clothes over the 7x7 initially, but I think most collectors are kind of like, yeah, we've got cell phone numbers and we have place of business numbers. We don't necessarily need to call the same number eight times a day.No, but data providers had to improve the quality of the data that they were selling. I'm really glad that they didn't really get sucked in under this data broker rule and that that didn't move forward because it felt like there was some pretty serious unintended consequences that were going to come from that because it would restrict the ability to maintain and to communicate seven and seven.

John McNamara (25:56)
Yeah! And we did know that a seven by seven rule would cause collectors to stop using all the possible phone numbers for the debtor. And they would use the two best that they had, which would be the cell phone number and the work number. And I think that's worked out pretty well. So, to date, I've heard no one ... I think the rule ... You're going to drive me to reread it, but I think it's very technology agnostic.

John McNamara (26:39)
Digital sort of talks about digital broadly enough that it encompasses sort of communications, ⁓ personal message within apps like LinkedIn, Facebook. I think that's spot on. ⁓ The AI thing, I'm flashing back to my early days. Like when I joined Livevox, cloud was scary. Like I had to convince

Adam Parks (27:00)
But that's exactly my point when like when you went through rulemaking, the level of artificial intelligence that we're that I'm going to use to process this podcast is significantly stronger than anything that was available when you wrote that rule. I'm just curious because you know, like I know the rule. I don't know it as well as you do. You lived it. ⁓ I was just curious to get your take on whether or not there's any restrictions that we need to be concerned with or what that looks like in the future.

John McNamara (27:13)
Yeah, and I- Well, yeah, I was.

Yeah, I was well, what I was getting at is early days of cloud. There was so much hype ⁓ and everything was cloud based. And there wasn't that much cloud early on. Now cloud is just infrastructure. ⁓ I'm going to sound like a curmudgeon and I am on some things. AI is on its way to being infrastructure where it's just there. It's less scary when it's infrastructure. ⁓ For collectors, the thing about AI I worry about the most is there.

John McNamara (27:56)
just data governance, where they begin sort of collecting data willy nilly, and they don't really know the provenance of the data, or whether they were supposed to have it. ⁓

Adam Parks (27:59)
Thank how many layers of the model are there? What's the privacy impact statements look like? I've done a couple of in-depth episodes talking about that data security challenge.

John McNamara (28:18)
Yeah, I mean, think, I think, well, and the other thing is, I think most collectors are going to be disappointed by AI because maybe they're expecting it too much where that their employee talks to the debtor. mean, AI is going to be contract review, preparing for RFPs, churning through contract, well, as I said, contract reviews, those sorts of things. Certainly, the increasing use of AI to look at how consumers engage, to find sort of better ways to do that. I think that's important and it's a great use case. I don't know how a collector gets in trouble with that.

I think the challenge here is not necessarily going to be the collector coming into trouble. And I'm to take a little bit of a different approach to the question. But I start looking at what happens when the consumer has a bot that answers the phone. And I have that today, Like any call that comes into my line that I know is not a line that like you would have, for example, Like all of that stuff goes into a bot before it ever comes near me.

John McNamara (29:19)
Well, now this. This gets back to digital engagement. Again, one thing that made this attractive to me is when it comes to voice, mean, I think iOS 26, which is due out this fall, you know, everybody with an iPhone that upgrades to it, it'll answer their phone with, you know, a voice. ⁓ And, you know, they might be apocryphal, but I've heard a few tales from collectors where their collector is talking to the consumer's bot. So if you owe any debts, I'd hate to be a debtor, a collector trying to... Yeah, exactly. It's called RoboKiller. I have it on my phone right now. It won the FTC call blocking challenge, I want to say four or five years ago. So I bought a copy of it and I've been using it ever since.

John McNamara (29:52)
Yeah. And you know, the best way, the best, one of the better ways to deal with phone fraud is to create a bot that will actually engage the fraudster and make them think that, you know, it's a juicy target and literally soak up all the resources. they, mean, the fraud, yeah. I mean, and it will make, it'll, well, it'll make the fraudsters.

Adam Parks (30:07)
That's what RoboKiller does. That's exactly what it does. It'll have a whole conversation with them. And because I taught the bot that I was a scuba diver, it would talk about them on the water right now. And you hear the water in the background. And it was unfortunately one of my friends from the industry whose call, you know, because the numbers are, it's crowdsourcing for determining the quality of a call. So it's based on how many people are receiving it and marking it.

John McNamara (30:24)
That's. Yeah, the first the first time I heard like an answer to fraud that got me hopeful was it was an email context where you basically had a bot that would engage every fraud email and tie up the resources. So then you're forcing the fraudsters to be like the rest of us and work hard for their money. ⁓ But yeah, exactly. ⁓ So, you know, that's good. but also And build infrastructure.

John McNamara (31:05)
When I see what's in the marketplace right now, it's just like cloud. It's just like the early days of blockchain, where it's overhyped as being useful everywhere, when in fact, it's not useful everywhere. And so, there's a reason Gartner has a hype cycle. And I think there's so many people that are headed for the trough of despair.

Adam Parks (31:08)
You I Well, I look at the I look at artificial intelligence and I see six use cases for the debt collection industry specifically like here's here are the six that I think are most impactful. And then there's plenty that are general business, the contract reviews, HR applications, accounting applications, or just general business applications in general. So I think it'll be interesting to see how people start to move towards that type of technology.

But as we looked at what FDCPA originally was and how the technology changed over that 20 year period, and now we get clarity on the rules, within five years, there's a whole other layer of technology starting to come out faster. I mean, at an exponential curve, I look at the AI growth right now, similar to the growth of data storage, which since 2008 with the invent of the iPhone has been on an exponential growth curve that no one could have ever predicted.

John McNamara (32:21)
You know, so one thing I'd urge listeners that are agency folks, it's I think back in 1990, I bought a Zenith, loggable computer and took it on the road with me as a regional VP. It had an 8088 processor, 8088. And, but I was able to write reports faster, include some graphics when I was doing office audits and reviews, but

Adam Parks (32:30)
Luggable. like that phrase. Luggable.

John McNamara (32:46)
I wanted to embrace that early technology because I wanted to know what the frontier of possibilities, the possibility frontier was. Everybody needs to be playing with and using AI to know, to get a sense of the frontier of the possibilities. And that's something they can do right now. And quite frankly, it be helpful. I'm on a panel next Wednesday in New York City with ⁓ Kelly Cochran, who was the head of Regs to Bureau and Richard Cordray. And I mean, the first thing I did is,

John McNamara (33:13)
is Jim and I, said, Jim and I, tell me everything that Richard Cordray has ever said about open banking and Dodd-Frank Section 1033. ⁓ that's my weekend reading. ⁓ But,

Adam Parks (33:23)
John, literally went and bought an Android. I'm an Apple guy through and through. went and bought an Android just to be able to use native Gemini and to be testing these tool sets on their native iOS.

John McNamara (33:36)
Nice. That is nice. ⁓ But I think people need to engage there. They need to understand the Gartner hype cycle to understand that it's... Listen, when you get disappointed by your plans for AI to get rid of all your collectors, you've got plenty of company. Literally every technology coming down the pike goes through this hype cycle. ⁓ So be ready for that. but one thing, and this is where, using coding and developing, like Yeah.

John McNamara (34:04)
That's a game changer because it used to be that you tried to buy this system of record that did everything. And I think what people are realizing now is if they can distill down the system of record and what it really needs to do, typically it's to count money and make sure exactly. And it's got to be something that clients rely on. The balance is 10,500. It links up, it syncs up, it reconciles. Once you've got that,

Adam Parks (34:20)
Source of truth. You need a single source of truth.

John McNamara (34:33)
you can plug and play about any cool stuff you want without literally cementing your feet in the ground. mean, I was an evangelist for Livevox because I hated premise-based dialers. And the fact that, you stroke a check for $2 million and buy premise-based equipment, you're locked in and your frontier possibilities just got reined in. ⁓ If you've got a system of record basic thing that does the money, then in the fact that you know.

John McNamara (35:00)
you're ready and nimble for whatever comes down the pike. And even in the bank world, think they're using, I want to say Jack Henry has products that create an abstraction of the underlying system of record that allows all kinds of cool stuff to be done. staying nimble to see where AI plays out. And quite frankly, you need to do it anyway for the sake of compliance.

If your system of record is not interconnected to the best possible use cases for each new technology channel that's coming out, you're on the wrong system of record because the days of wholly capturing an agency to only using my product, I think is long over because the AI race has just begun. And this is just, we're in the first steps of a marathon.

John McNamara (35:39)
Yeah, and it No, exactly. That's exactly right. So it's almost like instead of a highly complex system of record, you almost want something simple that does the minimum amount that you need, but they do it well. They do it rock solid. And that provider has no desire to be the troll under the bridge when you want to use anybody else. You need to plug and play.

Adam Parks (35:54)
That's it. John, you're gonna laugh. We created a marketing campaign for Latitude that was literally the AI hub. Here's how we sit at the center of all the best use cases instead of going out and trying to be the developer of every type of AI technology out there. you're never gonna be the best at everything. It's just like when you talk to an agency. If you talk to an agency and they say that they're the best at every product, you already know that they're not telling you the truth, They might be the best at auto files between seven and 9,000.

John McNamara (36:29)
You know what?

Everybody, think, well, not everybody, but most people have a Swiss Army knife somewhere in their junk drawer that they never use. It has a tool for everything, but they never use it because they have a specific tool for whatever it is they need to do. ⁓ You know, don't, don't have that. Yes.

Yeah, that's it. John that that is a that's the perfect insight john that is the perfect insight for us to end our discussion today. I really do thank you for coming on and sharing all of your insights and your backstory and really just everything that has been happening over the last year as you were exiting the CFPB and joining back to the industry and finding something where you had a passion, which clearly you've got a passion for the marketing and the communications. It's always a lot of fun to talk to you.

John McNamara (37:14)
Listen, if you got two more minutes, I want to put in my last plea. If my health is good, and we have a change in administration in the White House, I want to come back as a Schedule C to do one thing, and that is to urge the new Democratic appointed director to not feel like he or she needs to go crazy because the other folks tried to cut the Bureau down to nothing. A future Bureau, if they fire down to 200 people,

Adam Parks (37:16)
Sure, please.

John McNamara (37:43)
The only way to restaff that is with politicals and with fellows, which means you sort of doomed the CFPB to this constant cycle of being way left, way right, way deregulatory, overly prescriptive regulatory. No responsible industry can operate in an environment like that. The only one who wins are the folks who don't want to operate responsibly in the scammers.

Adam Parks (38:08)
John, I agree wholeheartedly with all of that. The political pendulum continues to swing and the harder it swings, the worse it is for the consumer.

John McNamara (38:18)
Hey, listen, I can't thank you enough for having me.

Adam Parks (38:19)
Wow, I really appreciate your insights, John. Clearly, we're gonna have to continue this conversation again. for those of you that are watching, if you have additional questions you'd like to ask John or myself, you can leave those in the comments on LinkedIn and YouTube, and we'll be responding to those. Or if you have additional topics you'd like to see us discuss, you can leave those in the comments below as well. And I'm to bet I can get John back here at least one more time to help me continue to create great content for a great industry. But on a personal note, John, this was a long time coming. are one of the very few guests that I've really wanted to interview for many years and we just weren't able to put it together. Now that we have that opportunity, I look forward to continuing the discussion.

John McNamara (38:56)
Absolutely. I'll come back and while I was at the Bureau, Adam, I would have been a lot probably less candid.

Adam Parks (39:03)
It would have been a little bit more prescriptive. saw you on stage a lot, but it was always great to have an opportunity to engage with you. everybody watching today, thank you so much for your time and attention. We'll see you all again soon. Bye.

John McNamara (39:14)
Take care.