Adam Parks (00:00)
Hello everybody, Adam Parks here with another episode of Receivables Podcast. Today I'm here with a industry legend, Rebekah Henderson, who is working on the litigation management side at Velocity Investments. How you doing today, Rebekah?
Rebekah Henderson (00:16)
Hey, good, how are you doing?
Adam Parks (00:18)
I'm doing fantastic. really do appreciate you coming on and having a chat with me leading into the RMAI conference. I know a lot of groups are there, especially the law firms, to meet people just like yourself, to find those opportunities to service accounts that have been purchased. And for anyone who has not been lucky enough to get to know you a little bit through the years, can you tell everyone a little bit about yourself and how you got to the seat that you're in today?
Rebekah Henderson (00:41)
Yeah, absolutely. I stumbled my way into this industry like most people do, answering an ad in the paper in Atlanta, Georgia for a law firm believing that maybe one day I would be a lawyer. And just doing basic support, litigation support of contested litigation against a small regional bank in the southeast United States. Quickly realized I did not want to be an attorney.
But absolutely kind of fell in love with the folks that I was meeting. In fact, one of our clients, a new client, a client that we probably didn't engage with as much as we should have, I got to know them very well. They were a debt buyer. And after about a year of being angry at us, because of course, a lot of times when law firms service debt buyers and banks, one gets more attention than another, and they came to fire us and offered me a job and I accepted.
I've been doing internal legal outsourcing for a debt buyer for 25 years now. So it's been a while.
Adam Parks (01:44)
That's fantastic. mean, look, it's it is a very niche operation, of the three debt disciplines, When a creditors got charged off account, they can sell it, sue it or collect it. And being able to manage that litigation channel, both from a consumer perspective and a performance perspective is not an easy task. But now you find yourself with Velocity Investments. Can you tell everyone a little bit about Velocity and what it is that you do there?
Rebekah Henderson (02:09)
Yeah, so Velocity has been buying debt, gosh, mean probably for over 20 years. In fact, they believe strongly in the legal model and they've had a small legal forwarding network probably for, I think our reports go back to 2006. So a nice long time, I've got a lot of data over here. So in the past couple years, we've specialized in purchasing Fintech paper and that's really made our business explode.
So starting just after COVID, we saw our volume increase a tremendous amount. And so I came over to kind of help the network meet the growth that we had.
Adam Parks (02:44)
So now that you've been with Velocity for a few years and we're looking at the current economic cycle that we're dealing with from a consumer standpoint, we're looking at this increase in the volume of accounts and predictably a decrease in the collectability accounts if we look at the other economic cycles like 2008. How are you seeing law firms start to prepare to manage this change in volume?
Rebekah Henderson (03:06)
We've had some absolutely great law firms get out in front of what they saw as the upcoming trend. We've had other law firms really struggle to keep up. The firms that have bank clients were very aware that the charge-off volume was increasing. They got lots of predicted numbers from the banks. So they knew they needed to have better online presence, better...
payment portal, the ability to negotiate with a website at 11 p.m. while someone's scrolling in bed versus calling somebody during their business hours as well because also, like the United States has one of the best employment rates ever. So everyone is working. So we've had other law firms that are still tossing around the idea thinking, you know, I'll send emails myself or I'll do the text messages.
or maybe my payment portal will still work, finding that it's not working. We've had one firm actually all of a sudden overnight, their numbers month over month just skyrocketed. And after about two solid months, we asked, know, what has changed? And they said, we got an online portal. And that was it. It was just we gave the consumers the ability to make a payment and they did. And so lots of adjustments towards being able to
Engage with the consumer virtually. That's the winning ticket.
Adam Parks (04:30)
I think those communication points are a really great opportunity for those law firms to actually actively engage with the consumer even potentially before litigation costs are laid out. So you're right if the first time that the consumer is realizing that they're being sued is when they get the on the door during dinner. That's not a great consumer experience. I think most consumers would like to get a text message or email or some communication.
Rebekah Henderson (04:40)
Ideally.
100%. Well, I mean,
so I also say, I mean, this is anecdotal, but I feel like I've observed that the consumers aren't receiving that law firm letterhead letter anymore. They're receiving a very standard model validation notice. They have received that exact letter now multiple times, typically by the time the account goes legal.
the brand of the firm, the logo, I mean there's not even a logo, right? The name of the firm is in the upper right hand corner, it's hardly noticeable. And I just think people are throwing that away. I have anecdotal evidence that that is the majority of what's happening. Meaning that all the additional time to send out demands that Reg F has kind of brought into our world, plus the soup prep and the media review and the meaningful review of all the media we send.
and then the court delays that have persisted since COVID because the courts haven't really restaffed. So all of that means that the consumer really hasn't received a communication since the last time a prior agency might have sent something that they might have opened. We buy a lot of fintech. The fintech consumers are very used to ignoring an email. So by the time it gets to us, they've been emailed, they've been text messaged. And so if we've sent it to
to the legal group, the process server, the sheriff on the door is the first communication that, you're going to have to deal with this. And that's not ideal. The ideal scenario is having an escalated intentional communication after the model validation notice period expires, making sure that the consumer knows the track that this account is on.
And giving them even once, we have a very successful firm sending out a letter, several actually, but one is doing it, think, particularly good job. As soon as they get service, a letter goes out that is just introducing the consumer to, you have a lot of other options that aren't, hey, you have to miss work to go to court that day. It doesn't have to be scary. We have this portal. And giving the consumer those options at that kind of scary time in their life is really ideal.
to creating a liquidation event, which is ultimately what we're after.
Adam Parks (07:03)
So I did an interview recently where we were talking about groups have started to use, let's say voice artificial intelligence for whether it be inbound or outbound communications. And part of the value or part of the behavioral ideas of the consumer is that they've started moving more towards that type of technology because with the electronic voice, they don't feel the shame. I wonder if through that same, you know, ideas, like you're able to kind of reduce that.
Rebekah Henderson (07:25)
That's interesting.
Adam Parks (07:29)
I don't want to call it a shame tactic because that's not the intent, but even them feeling that shame may actually prompt them to become more engaged on that account.
Rebekah Henderson (07:41)
Absolutely. mean, look, I hear over and over again from firms that some of their most successful letters are the ones that aren't asking the customer for a payment. They're not giving them a payment plan or an offer of a reduced balance. It just says, hey, we understand. Times are tough. Did you know that you can just engage with our website? There was one verbiage that said, we know it's awkward to talk about your personal finances with a stranger. Did you know you don't have to?
And that's a really successful letter. And it doesn't create overshadowing in the legal process. And it engages with the consumer in a different way, because typically in an agency cycle, it's sort of a shorter time period. So it's a lot of communication with the consumer about specific payment plan options, whereas the legal talk-off process is long. You've got a solid at least two years with that consumer.
communicate harshly with the process server, I would consider that harshly, but then gently a thousand other times directly with the firm and the consumer, and I think it's a winning ticket.
Adam Parks (08:46)
I think it's a pretty good option and it seems to be something that the firms are starting to move towards in the TransUnion 2024 debt collection industry report. We talked about how upwards of 40 % of payments are now coming through these digital channels and if you're going to send a text message or an email, you better have a portal to send them to or you're going to have a lot of friction in the relationship because you can't take the payment yet through the SMS technology, right? Maybe MMS will open up new windows and
Rebekah Henderson (09:13)
I hear it.
Adam Parks (09:15)
opportunities. But as of right now, that's kind of a limitation. You also can't make a payment through an email. That's not something any any of us are ever going to touch anytime soon. So we do have to push them through some sort of a payment portal and enable them to engage with that. I thought it was strange early on, I've built a lot of websites for a lot of law firms in the debt collection space. And it wasn't until maybe five or six years ago that I started hearing more about the opportunity to engage with the consumers. We went from
flat payment forms to authentication tools where they can go in, see documents and engage with it more, that feels like it has had a pretty significant boost on the ability to perform. At the same time, I would expect that it has some sort of positive benefit from a compliance standpoint as well. How do you look at that balance between performance and compliance in this new digital world of law firms?
Well, you know, thankfully my job is just to push liquidation. I think I've had a wonderful background working with the majority of banks that forward to legal in this industry. So I am very cognizant of when they should be called a customer and when they should be called a guest. You know, everyone's preference. And so for sure, our focus is
is first with the consumer's experience. That's been drilled into my head now enough times I've got it memorized. But that is for sure not my wheelhouse. We are absolutely focused on engaging with the consumer enough times and enough positive ways to get that liquidation event, hopefully before we're having to garnish wages, before they have a lien against their house, before they have a judgment. Because one message I think
It's difficult to put in writing and one, the message that really a collector can hopefully deliver gently over the phone is if you start a payment plan before judgment, there's no interest. You have this small window where your post-charge off, where there was interest, charge off had stopped and you have a short timeline now because when there's judgment, there's usually going to be post-judgment interest. And so,
How do we engage with you to get that payment prior to the interest in the cost really becoming collectible and some of those other add-ons that become just additions to an already high balance?
Adam Parks (11:32)
So I know the more sophisticated law firms have had a focus on data security and privacy for a long time, especially those that are working directly for let's call it the major issuers, right? So those bigger multi-state firms. How are you seeing that same play out with smaller firms, right? Are you seeing that same kind of focus on that data security and privacy or are they just kind of keeping themselves offline?
Rebekah Henderson (11:53)
Yeah.
No, it's a huge focus. mean, the truth is there was the big data breach, I think that woke up the majority of the firms with a third party that they all engaged with, a data connection group in 2022, I think. I think that woke everyone up to the reality that we're the target, we weren't a target, but we're definitely becoming one and we're a soft target. So.
Adam Parks (12:24)
We are the target, I can assure you, managing 130 websites across the space. have engaged in multiple counter-attack opportunities and I mean, I've spent a significant amount of time. Like we are definitely a target. And I would think that the law firms would have been the low-hanging fruit and that data breach.
Rebekah Henderson (12:26)
Yeah.
Adam Parks (12:42)
definitely woke them up. I think there's been a couple of data breaches in the collection agency space as well over the last 24 months that have kind of woken that up. And that's what we found in the industry report this year was that data security is actually the number one concern. In 2023, it was cost concerns, but in 2024, it has grown to be data privacy and security is the number one factor that organizations are really digging into. And so are there any tips or tricks?
Rebekah Henderson (12:59)
Absolutely the number one concern. Yes.
Adam Parks (13:10)
you know, that law firms could be employing to be a better partner and to better demonstrate their commitment to these topics.
Rebekah Henderson (13:19)
Yeah, so in order to be a law firm in our network, we're going to ask for policies and procedures around all of your network security, your employee access to certain data, your third party access to certain data. And we're going to make you prove it. So it's not just a policy. It's also, OK, now it's a policy. Now show me how you're doing that. And then
we do when we go in and audit, we're going to do account level testing and test any of the controls that you say that you have. So it's not just about, I have a policy and I tell my employees not to do X. It's like there has to be a policy and then there has to be proof of execution of, OK, well, where did you track that? And where did you track when they failed? And where did you track that you succeeded? So if you're doing.
certain security checks every night, every quarter, every month, whatever that looks like. Okay, where's that log? So I think we went from a world of trust and thinking, hey, they have a policy, we trust that their IT group knows what they're doing to, I wouldn't say a lack of trust, because I would never say that, but we would like to verify that you're actually following all those steps. Because it is true that every time we hear about
Adam Parks (14:27)
Trust but verify.
Rebekah Henderson (14:37)
like the last couple breaches I've heard about. It's like, it's that one computer and that's the one and we just don't include it in the XYZ and it is always going to be that exception because the hackers are better than you think they are.
Adam Parks (14:54)
There's no exceptions. There's just there's no exceptions.
Rebekah Henderson (14:56)
I would not claim to understand
it, but I will tell you they will find the soft spot and they will, if you have one, they'll find it. So.
Adam Parks (15:04)
Believe it or not, I actually caught an organization that had been hacked yesterday just by reviewing the emails that was being sent. It was a very large organization. I'm sure it'll become public in the not too distant future, but just happened to receive an email that looked pretty legitimate. you know, if anytime I see a .ru extension on anything, I know what's happening next. So kind of quick. But as you're going through this growth pattern, right? We're going through this volume of accounts is going up.
Rebekah Henderson (15:12)
no.
Ugh.
Yeah.
Adam Parks (15:33)
you're taking on more law firms, how are you managing that? Like, are you growing your team now? How are you keeping up with that growth methodology?
Rebekah Henderson (15:39)
Yes.
Well, we let's see and the beginning. Last year was 2024. Goodness. OK, at the end of 2023, I can't. So funny we're in a new year at the beginning. At the end of 2023, we basically hired an entirely new group to manage all of our firms. So it's me and a group of three folks. And we have a new job position posting actually right now that's out for one more person. And we have found
in our what we feel like is our wheelhouse is finding somebody who has had experience at a large law firm because the amount of perspective that someone brings to an organization like us who's growing, who's absolutely trying to become a better partner for our firms. We love our network. We're pressing our network to increase suit rates, increase judgment rates, increase liquidation and
Along the way, we're trying to change our processes to become more efficient so that it makes it easier for the firms to do those tasks. Well, a lot of that is brought to our attention because our group came from law firms. you know, bless it, they didn't have debt buyer experience, which I love. They had debt buyer clients. And so, they can tell me how every debt buyer does it. And I...
have had experience, I've probably seen every scorecard in this industry. And so we want people who bring that perspective, the sympathy for the firm, the understanding how a firm spends a dollar and makes a dollar, and then also how we can be a better group to support them making a dollar and us making a dollar.
Adam Parks (17:23)
So you bring up a good point there. What actions can a debt buyer take to be a better partner for their law firms?
Rebekah Henderson (17:31)
Well, high on my list was doing your own redaction. Every law firm, one of the first things they've got to do is outsource their redaction. It is a huge expense and it became, it's become just this like extremely common thing. Like everyone has their redacting vendor. And then of course if you litigate in different states, well the redaction is different in one state than another.
And if no client has two statements that are the same, so then it's particular to the client. And then if it's the type of debt, it's particular to the type of debt. And it becomes extremely complicated. And because we can hire people from firms to manage our firms, we know our type of debt. We know the law in those states. And we know how the document should be redacted. So why wouldn't we just do the redacting on behalf of our firms?
I'm not saying that there's not more redacting that the firms would ever do, but we can do the stuff that is the minimum that they should be doing.
Adam Parks (18:32)
taking over some of the administrative processes where you may have a larger economy of scale. As an example, I know a lot of groups have started doing the manual redaction or they're doing digital redaction or let's call it process driven automated redaction on some level, but that also leaves exceptions that need to be manually managed. And I've looked at that project in the past with my partners and the OCR optical character recognition technology that's required to actually break these things down. Yeah, no thank you.
Rebekah Henderson (18:37)
Yeah. yeah.
Yeah.
Adam Parks (18:59)
I've walked away from a few different opportunities to purchase organizations because I realized just how crazily complex the redaction process was going to be. So, but I really liked that advice for a debt buyer to be able to take on some of these administrative tasks where they may have a competitive advantage based on their size, the economy of scale, or even the economy of scope of their capabilities of executing on those types of things.
I would think would make a debt buyer an even more attractive client to a law firm as you're trying to get the best and brightest to be working your products.
Rebekah Henderson (19:27)
Yeah. We've also found a lot of steam with putting our documents for self-service by the firms. mean, just like a consumer wants to self-service pay their debt, we send all the media at placement. But sometimes some mapping happens, whatever. And we make it available for paralegals or attorneys at the firms to log in and pull down whatever
individual piece of media that they believe that they're missing. And that's been, a tool. Now, it's relatively recent, but so far it's working where they've got access to go in and kind of answer their own questions.
Adam Parks (20:19)
I love that. mean, we've come a long way since truckloads of documents showing up at your office and having to comb through them or get Iron Mountain out there so that you can go through scan these digitize them and make them actually usable. I'll never forget the first time I got one of those deliveries and they filled like our office with boxes of what now who's gonna what am gonna supposed to do with this? Like this is a lot of information but that ability to self service must be
Rebekah Henderson (20:28)
Yeah.
Adam Parks (20:46)
a very attractive opportunity for a law firm that is servicing your accounts.
Rebekah Henderson (20:53)
It is definitely a process we're trying to perfect constantly because at the end of the day, buy debt from more than 12 sellers, but we're forwarding debt. We're suing on about 12 sellers. And so there's always a nuance, a difference that we're trying to standardize and put through in these systems so that things are convenient.
And look, I think it's always gonna be a work in process. I think that's why I like this team who again comes at it with a law firm perspective. How do we, I mean, look, we understand like, okay, here's an example. There are states where there's a bunch of hearings where an attorney has to show up. So I'm uniquely sensitive to the cost that the firm has to take on of an appearance counsel on debt where maybe
A different firm I know has an attorney, has more attorneys in the state. So I may know that there's a certain type of my net that looks better for, is more collectible to one firm than another firm just because of the number of attorneys that they have because of the appearance council requirements. Little things like that. I mean, all these things, these little tiny, like little tiny nuances pick away at everyone's profitability.
And so having people in-house who can kind of keep that in mind and are sensitive to it is really helpful.
Adam Parks (22:17)
I think people fail to realize that this is a game of inches, not miles.
Rebekah Henderson (22:21)
absolutely. That's a good one.
Adam Parks (22:22)
Right. This is not a place where we're to give a football analogy, this is a place where we're very focused on fundamentals and moving the ball incrementally down the field in small pieces, not necessarily throwing the ball way down the field. And so I think this small incremental movement of this game of inches, because the margins are not what they are when they're sensationalized in the media. Right. It's
Rebekah Henderson (22:25)
Yep.
Absolutely.
Adam Parks (22:44)
And I actually went through an explanation today of trying to explain to a reporter that debt buyers are ultimately just financial institutions. thought that, you know, they'd be able to purchase debt and do these things.
It takes a lot. There's big barriers to entry to becoming a debt buyer these days, especially a legitimate debt buyer. You've got the RMAI certification is kind of like the baseline standard. And then everything starts to build on top of that. Have you found the certification programs like RMAI to be helpful in setting a baseline for your compliance expectations for the firms?
Rebekah Henderson (22:59)
yeah.
Absolutely.
Well, it's wonderful and it creates a baseline for that conversation where I don't have to feel like the bad guy or the over needy client where I can just be aware. I need you to do this and it's not just me. This is basic. It's in the certification. It's nice to point the finger at somebody else if I'm being honest.
Adam Parks (23:35)
Fair enough. is the table stakes to be here in Playcards with us. Like compliance from, let's call it 2015 to 2020 was a differentiator. Look how compliant I am, but in this post 2020 world, that's not really the case anymore. Now it's look how well I can treat your consumer while also performing and liquidating the accounts that I need to liquidate. But I feel like the...
focal point has shifted pretty dramatically in the last five years.
Rebekah Henderson (24:10)
A lot. There's no question.
Adam Parks (24:14)
Absolutely. So Rebekah, I really do appreciate you coming on today sharing with me your insights and all of the great things that you're working on over there at Velocity. I hope that people watching will help identify the right fit for your team, someone coming from a law firm to come and participate with Velocity. I've been working with Velocity for a couple of months now on the website and other projects I have really just enjoyed.
Rebekah Henderson (24:32)
awesome.
Adam Parks (24:42)
everybody that I have interacted with. It's been a great experience for me from the outside. I can only imagine how much fun you guys are having inside the organization.
Rebekah Henderson (24:51)
It is the nicest group of people I've ever worked with and the truth is I've said that. I said that at the last place I worked and the place before that and so that's not something I'm saying casually. These are the nicest people I've ever worked with and really kind and they share their knowledge. That is so unique. I am very lucky and so...
And so everyone on my team feels the same way. We all really enjoy it.
Adam Parks (25:22)
Well, I hope that somebody watching becomes your next team member, because we know that they will be well educated on the industry itself. But for those of you that are watching, if you have additional questions you'd like to ask Rebekah 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 might just be lucky enough to get Rebekah to come back at least one more time to help me continue to create great content for a great industry. But until next time, Rebekah, thank
Rebekah Henderson (25:25)
That would be great.
Adam Parks (25:50)
Thank you so much for your insights today. I really do appreciate you coming on and sharing with us.
Rebekah Henderson (25:56)
Thanks, Adam. I appreciate the invitation.
Adam Parks (25:58)
Absolutely. And for everybody watching, thank you so much for your time and attention. We'll see you all again soon. Bye everybody.
