Understanding Debt Buyer Insurance: RMAI Certification Insights with John Bedard | Ep 205

Adam Parks (00:01.682)

Hello everybody, Adam Parks here with another episode of Receivables Podcast. Today I'm here with my good friend and industry legend, Mr. John Bedard. How you doing today, John?

John Bedard (00:12.77)

Very good, Adam, thanks for having me.

Adam Parks (00:14.766)

Absolutely, I really do appreciate you coming on again to continue to share your wisdom, knowledge and insights with our audience. And today, I we're going to go a little bit down the insurance path and talk about some opportunities for debt buyers to acquire insurance through a new program. A lot of things to talk about there. But before we jump into that, for anybody who's maybe new to the industry and has not had the opportunity to meet you yet, could you tell everyone a little bit about yourself and how you got to the seat that you're in today?

John Bedard (00:42.754)

Sure, sure. Well, my name is John Bedard. I'm an attorney here in Atlanta, Georgia. My firm is Bedard Law Group. And my firm represents debt collectors, debt buyers, creditors, and lawyers all over the country. We help them stay in compliance with a myriad of laws that regulate their businesses around the country. We also help them with their defense litigation.

when they get sued by consumers or when they get sued or investigated by the government. Adam, is 2025 now. This is going to be my 27th year representing the industry. So I've been around for a little while. I've seen a lot of things. And I like some of the new things I'm seeing, which is why I think you reached out to me to talk to you about some exciting new things that are being offered in the industry today.

Adam Parks (01:38.96)

Well, I think it's interesting. Insurance is one of those areas that I think has always been a challenge for the space and really a challenge for everybody. Let's take the debt collection industry out of it for a minute and talk about insurance. What am I covered for? What am I not covered for? Is the coverage right? Am I paying the right amount? It's this intangible world where if you are not digging into these policies, and even if you are digging into them, trying to understand them is a

problem and I know that I spend an insane amount of money on insurance on an annual basis. I know that debt buyers have some very strong and high requirements because they're a misunderstood or not understood segment of the marketplace. It's a very unique animal. There's nobody else out there that's quite like a debt buyer. Somebody who's purchasing a charged off receivable I think creates these unique challenges. And this is a

you know, as we've talked through the program and when you came on and told me about what the collection agencies were doing from an insurance standpoint and having the lawyers work together to mitigate the premium costs associated with the policies, it was really interesting. And when I heard that the same thing was gonna be happening from a debt buyer perspective,

I thought there's no better time than right now for us to start talking about how organizations can better position themselves in 2025 to improve the coverage that they have now that data security is the number one concern across the entire industry, according to the TransUnion 2024 debt collection industry report. So we know that it's a challenge, we know that it's been identified, but how are we going to start addressing these insurance needs for the debt collection?

industry job.

John Bedard (03:24.364)

Yeah. And I think the answer to that question was the impetus for a renew relationship between ACA International and QBE North America. You know, they have been partnered for a while now, and they have really brought to market a unique insurance product focused on debt collectors. And they have got a lot of expertise around that product.

Adam Parks (03:49.723)

Yeah.

John Bedard (03:54.264)

They've got a lot of risk mitigation associated with that product, including their expert defense panel, including their collection notice review program. All of those things put tremendous downward pressure on premium and on risk. And that's been wildly successful for them. And so what they have done is they have gotten together to create a similar program.

that is uniquely designed for passive debt buyers. They have brought to bear the very same expert resources. They have brought to bear the very unique certification program that RMAI provides to the industry. And now QBE has this insurance product designed specifically for passive debt buyers.

Adam Parks (04:28.348)

they have brought to bear the very same.

John Bedard (04:52.664)

which really leverages the expertise and risk reduction tools that RMAI offers the industry, and also that expertise and risk reduction tools that ACA bring to the industry to really meet the unique needs of passive debt buyers in the marketplace. And that's really what they have done. And I understand this is a pretty new product, but it is really

Adam Parks (04:53.266)

really leverages the expertise and risk-deduction tools.

John Bedard (05:20.526)

It is really designed to meet the needs of passive debt buyers in ways that a lot of other programs that I have seen in the industry don't quite make it. And so that's what's happening right

Adam Parks (05:34.684)

Well, it sounds like there's there's really two areas that this program is leveraging to reduce the the cost of premiums. I'll say one is kind of replicating some of the things that ACA has already been doing, right? Like you're talking about the the the letter review programs. And I want to dig into a little bit of detail there for anyone who has not seen the last episode where John and I talked about some of the insurance. I'll link that below as well where we go into a little bit more detail.

from a collection agency standpoint, but for this purpose, for the debt buyers, John, talk me through from the ACA side, like some of the things that you've done to be successful with those ACA programs that now you're bringing over to the debt buyer side.

John Bedard (06:16.172)

Yeah, and so for example, ACA has created this thing called the Collection Notice Review Program, which is uniquely designed for collection agencies. And the purpose of it is to review in advance the form and the template communications that debt collectors have with consumers. The Collection Notice Review Program. And it is available to all ACA members.

and it is a really nice tool and checklist that a debt collector can go through to reduce the risk associated with their written communications with consumers. So it's an entire program dedicated to that. Well, this new debt buyer program that is out there now actually leverages the RMAI certification standards because this new policy has been designed to meet the requirements

Adam Parks (06:58.13)

Well.

John Bedard (07:14.286)

of standard two under RMAI certification program. And particularly, it provides coverages where many other policies provide exclusions. And so for example, this new policy covers purchase paper. mean, if you're working purchase paper, you may very well be excluded from your current policy. And this policy is specifically designed to cover that.

Adam Parks (07:15.026)

you

Adam Parks (07:27.658)

Interesting.

John Bedard (07:44.02)

It is also specifically designed to cover your activity and your collection activity on paper that the debt buyer itself owns. There are many policies out there which exclude activities that are associated with working your own paper. And it only covers your activities so long as you are working for another for a fee.

Adam Parks (07:48.722)

and your collection activity on paper that the debt buyer itself owns. are many policies out here.

John Bedard (08:13.546)

And so this particular policy is designed to cover those things, which is really important because a lot of passive debt buyers and a lot of debt buyers that are not just passive need those kind of coverages and might not realize that they don't have those coverages. The newest version of RMAI certification program requires those coverages or to say it a different way, prohibits the exclusion of those.

Adam Parks (08:37.874)

I would say it

John Bedard (08:42.222)

coverages, is important. And it's what makes that program such a flagship program for RMAI, their certification program. And they've got certification program not just for debt buyers, but also for debt collectors and for lawyers. And so the whole idea here is risk reduction, risk mitigation, and all of that has a downward impact on premium.

Adam Parks (08:44.818)

So it makes that program such a flagship program for army officers.

John Bedard (09:11.438)

Some of the other things that are unique to this new policy are our coverages, particularly vicarious liability coverage. know, Adam, what we see often on the litigation side is the plaintiff suing not only the servicer, but also suing the owner of the the debt buyer as well on a vicarious liability theory. Well, your servicer violated the law, therefore you violated the law.

Adam Parks (09:34.342)

Sure.

John Bedard (09:41.518)

And this new program through QBE and ACA provides coverage for that kind of allegation. It also uniquely provides coverage for regulatory liability. And so when you get a demand from a federal, state or local government, including a request to waive statute of limitations rights,

Adam Parks (09:45.938)

interesting

Adam Parks (09:56.754)

get a demand from a federal, state, or local government, including a request to waive

John Bedard (10:08.066)

that kind of regulatory liability is covered under the policy. What is many times excluded from policies are government investigations. But again, ACA and RMAI and QBE realize that this particular segment of the market has needs for this kind of coverage. so,

Adam Parks (10:20.434)

But again, ACA and RMA are...

Adam Parks (10:32.785)

Sure.

John Bedard (10:33.838)

QBE's policy also includes coverage for investigations, subpoenas, civil investigative demands from federal, state, and local governments. Those are the kind of things that this policy covers, understanding that there are unique needs that passive debt buyers have. And I think this program was designed to meet those unique needs.

Adam Parks (11:00.38)

Well, they're trying to to manage the unique threats that are faced by these types of organizations. I'm a huge proponent of the RMA certification program. think, you know, having third parties come in to conduct the audits is a major function that provides teeth there. We've started to see it be mentioned across.

even within, know, rulings and states, right? As they're writing rules and they're putting their notes together, you're finding more of that type of language included, which I think is a huge positive. So finding ways as we've continued to improve the program, but to also enable the membership of RMAI to actually comply with the stricter requirements as the certification program, I believe goes into its 11th or 12th.

know, version, right? So as it continues to evolve over time, you know, under the direction of the board of directors and David Reed, who's done a phenomenal job with that program, the requirements are becoming more strict and solutions are needed to resolve those situations. And now if you're saying that in the newest program, there's gonna be restrictions on what can be excluded from the insurance programs, I feel like that's being

John Bedard (11:50.36)

Yeah.

Adam Parks (12:18.044)

done to the best interest of an entire industry, right? Because if we're not properly educated on our insurance programs, and we're being taken advantage of by these, whoever it is that is selling that insurance or is putting together that package or program, this is a great way for the industry to come together, find a unique solution to a unique set of problems, because there's not a lot of people out there that have our problems.

and then actually be able to roll that out. So you guys are doing the letter portion. Everything is being tied back to the certification program and meeting those. But I know that with ACA, you were doing some other things that were risk mitigation exercises with organizations and empowerment from that perspective. Are there other aspects of this that we should expect to see from a debt buyer perspective?

John Bedard (13:11.298)

Other than the implementation of the new certification program, you know, well as anybody, the RMAI's certification program is the premier certification program for debt buyers in the marketplace. And I think that what ACA and QBE have done is created a nice compliment to that program to give the marketplace

John Bedard (13:37.164)

particularly they're only giving it to RMAI members and ACA members to give those members a tool that one helps them satisfy the requirements of the certification program, but also provides tremendous risk mitigation tools to their businesses. And that's really what they need. And so I kind of think, Adam, that it's a win, win, win all the way around because it really

John Bedard (14:07.104)

it makes debt buyers better in their operations it brings debt buyers into the the universe of experts that all three of those organizations really bring together and and it really you know that you know the rising tide rises all boats is that is that the same and and as as all that buyers in the marketplace

Adam Parks (14:28.25)

Yeah, something like that.

John Bedard (14:33.594)

really adopt andy become members and adopt the certification program all all boats are going to rise in the marketplace and that really that really benefits everybody including consumers

Adam Parks (14:48.262)

Well, I think insurance is one of those things that we've we've all struggled with for a significant time. And I think the number one challenge that we have in either obtaining or maintaining, you know, fair coverage for fair premiums is the education process to the underwriters were an unknown quantity, right. And so to an underwriter, when they're looking at a debt buyer, they looked at a liquor store. Now they're looking at a debt buyer, right? Like they don't understand the uniqueness of it.

And it sounds like QBE has taken the time to really dig in and understand what the risk levels are. Where are the real risks here? By bringing together experts, including yourself, right? To have those discussions, identify where the real threat levels are, and then build the programs around it that allow people to get the coverage that they need. But I think that the risk level is not necessarily higher for a debt buyer than it is for a liquor store. Just random example.

but I think it's more about just understanding how it works, right? Like, you know how a retail store works, your inventory is your problem, it turns and burns and that's fine, but for debt buyers, it's such a different animal that it requires a deep level of knowledge to truly understand where the real risks are. Because if you just go by the headlines, right, we're the worst people that ever existed and we're always being sued, but that's not the real reality of it, but it takes an insurance company's...

desire to dig deep, to get educated on that process and to trust all the experts that they bring together so they can form program like this.

John Bedard (16:18.594)

Yeah, yeah. And know, ACA and QBE really have a track record of quantifying that risk reduction. The best example of that is their collection notice review program, because when that program was initiated, the purpose of it was to reduce risk associated with communication content with consumers, because at the time,

John Bedard (16:47.82)

the industry was seeing a tremendous volume of litigation and complaints against debt collectors because of the content of the letters they were sending to consumers. When the collection notice review program was rolled out, we saw a dramatic decrease in claims against debt collectors as a direct result of debt collectors that were members of ACA taking advantage of the collection notice review program.

and getting their letters and communications reviewed by experts prior to putting those things into production. And that just had a tremendous impact on claims, which had a corresponding impact on premium because as risk went down, you know, so did premium. And so I think it's based on that track record that they were really able to get together.

and figure out how to do a similar thing with debt buyers as well. And that's where the flagship RMAI certification program comes into play because that program has certain requirements for debt buyers. QBE and ACA really understand that market and really understand why those requirements are in place. And the expectation is that

John Bedard (18:11.49)

that that program now is going to have similar tremendous downward pressure on risk and again corresponding you know downward pressure on premiums.

Adam Parks (18:23.612)

Well, when that program first came out, right, like the standard was everyone's got their, you know, general liability insurance, and then it you know, then you add arrows and omissions on on top of that. And that tends to be a pretty expensive policy. Now you got to have cyber policies now you got to have right like now there's all these additional requirements that have come up over time. And I think a lot of people have

bought a policy real quick from whoever they were comfortable with because they needed to fill a gap to get a deal closed, whether that's to bring on a new client to acquire a portfolio from a particular financial institution, or whatever the individual situation was, I feel like that's kind of how a lot of us ended up with the insurance that we have had for years. And then it becomes like, can I keep the insurance? And I think that's been the mind frame after 2008 to 2015 timeframe when there were a lot more, let's call it

lawsuits in the marketplace. Things have kind of changed since then. And it does require a modernization of these programs in order to get us caught up because I feel like this has been a deadweight expense that organizations have been dragging along for a long time. And now being able to take a fresh look at that with some new level of expertise and fresh eyes and quite frankly, new programs because a broker can't sell something that doesn't exist, right? And there's

not aware of other programs that are debt buyer specific, especially passive debt buyer specific, because that's an even more unique animal.

John Bedard (19:48.908)

Yeah. Yeah.

Adam Parks (19:50.854)

Right? That's not a debt buyer that's also got a collection agency on the side. That's somebody who's going through that outsourcing process. Like it's a very different animal. I'm curious to see, you know, just how much downward pressure can be put on those premiums as more powerful and more established debt buying organizations explore the program.

John Bedard (20:11.276)

Yeah, yeah. don't have the answer to that. But if... Yeah.

Adam Parks (20:14.202)

I don't expect you to I'm excited to see what happens next because now I know that this is coming into the marketplace. And I would expect to see a downward push on those premiums, especially as you get those more established debt buying groups to participate in a program like this, because I think that will help to educate QB to continue to bring down those risk premiums.

John Bedard (20:33.634)

Yeah, yeah. You the other thing, you know this as well as anybody, Adam, know, premium matters. But what also matters is whether or not you have a partner in your insurance company. I have been part of the defense panel for ACA's chosen partner, what, for 20 years? For quite some time now.

John Bedard (21:02.56)

And I can't remember a time in which the insurance company that ACA is partnered with has made effort to deny somebody's claim. Right. And I know there are a lot of collection agencies out there who have insurance, who have policies. But the moment they make a claim, they

John Bedard (21:25.07)

you know they tell me that they feel like their insurance company is doing everything they can to deny a claim and to not provide coverage and i can tell you i i cannot think of a single time in which that has happened in any case that i've been involved with you know with qb or any of a c a's chosen partners and and and that means a lot in my view because i have seen our own clients and and collection agencies who have

John Bedard (21:54.958)

paid premiums have paid for policies and been told, we're not covering this for whatever the reasons are. And when it comes to evaluating the value of the lower premium that you may have paid for that policy, ends up being not useful at all if you can't get coverage, right? Yeah.

Adam Parks (21:56.434)

and then told, sorry, we're not covering this or whatever.

Adam Parks (22:17.604)

Well, are you coverage for the event that might happen, right? Like we said, 40 % of organizations in the space, like the top concern across our entire industry right now for collection agencies and debt buyers is the entire idea of data security. And so beyond just data security, there comes what am I actually covered for?

John Bedard (22:32.33)

yes.

John Bedard (22:38.902)

Yes.

Adam Parks (22:39.154)

And when's the last time that was evaluated? Because I feel like this program is going to have a better understanding of the systems, the needs, right? And kind of how those things are going to start to come together. But we know that that is such a high level of concern. And even when something happens and we saw it happen in 2024, we saw multiple security incidences that happened across the collections industry in 2024. But are you prepared? Some of those organizations aren't here anymore. And it's sad.

John Bedard (23:05.838)

That's right.

Yeah.

Adam Parks (23:08.598)

Those are great companies that have had some sort of an incident that are just not here anymore. So is your organization prepared to withstand what can happen? And I don't think it's a function of if you're gonna get hacked, it's a function of when you're going to get hacked if a group or a smart enough individual turns their attention and dedicates on you.

And so in the debt collection industry, we tend to have that happen and we get more rogue consumers than we would like to admit. And I think being able to understand what's my real risk here and am I gonna be covered if an incident happens? What's that next step? Am I gonna be covered? What's that discussion gonna look like? And I feel like that is a discussion that we're gonna have to take to a live session this year, John. So when I submit my speaker proposals for the year, I'm going to include you to participate.

John Bedard (23:55.629)

Yes.

John Bedard (24:00.206)

Yeah.

Adam Parks (24:00.37)

in that particular discussion because I think it's an important one.

John Bedard (24:04.216)

Yeah, yeah. Well, look, I've been, I have a whole deck on that. I just got done speaking on a very issue at the last RMAI meeting. And it's, I guess we would be remiss, Adam, not to talk today about another thing that ACA and QBE were working on, which is a cyber policy. And, you know, that is designed to meet the needs of the collection industry. We really...

John Bedard (24:32.18)

every one of us is just one cyber incident away from being out of business. we all have some kind of, well, not all, many of us now have some kind of cyber policy. But what are we covered for? Because if you have a $2, $3, $4, $5 million cyber policy, but you have what's called a sub limit on, say, something that's really important, like notice to consumers that many states require,

John Bedard (25:02.04)

you effectively don't have a policy at all. And so what I tried to tell folks, and especially our own clients, is look, you need to understand what kind of coverage you have and what you have these things called sublimits for. If you have a sublimit for something that you really need coverage for, then you need to have another discussion with your agent because you might not have the coverage you think you have. And you don't want to find that out after you get the big red blinking screen on your server that says,

pay the ransom or not get your data back. That's not the time you want to find out what you're covered.

Adam Parks (25:38.542)

Agreed. I think getting out in front of this and having these conversations is the best way to get organizations to actually go back, take a look at their policy, take a look at their coverage, and or to bring it to the forefront and have that conversation with one of the ACA, you know, chosen partners and talk through. Here's the coverage I have today. What's different? Why is it different? Why Why is this a better program?

And I think it's at the very least worth exploring for a lot of organizations, both small and large, because those smaller organizations feel that premium impact even more so than a larger organization that is better built to dissolve that cost.

John Bedard (26:17.858)

Yeah. Yep.

Adam Parks (26:20.976)

Wow, John, it sounds like you're up to a lot here and I'm sure people are gonna be stopping you in the halls at RMAI to say hi and maybe ask some insurance questions. I unfortunately will not be there this year, but I'll be back on the road at CRS and very excited to start seeing everybody again. But 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 just put those in the comments.

below as well. And hopefully I can get John to come back at least one more time to help me continue to create great content for a great industry. until next time, John, thank you so much. I really do appreciate all of your knowledge and insights and your willingness to come share them with us.

John Bedard (27:07.138)

My pleasure, Adam. Thanks for having me.

Adam Parks (27:09.074)

Absolutely, for those of you that are watching, we'll see you all again soon. Bye everybody.