Consumer debt levels have fallen since the end of the recession. However, they still remain elevated. This has created a slew of problems for consumers. Artificial intelligence is shaping their plight in interesting ways.
According to American Banker, artificial intelligence is increasingly being used for debt collection. It also raises the risk that poorly written algorithms could cause consumers to get blamed for debt that doesn’t belong to them. American Banker points out that 39% of complaints about debt collection processes is that the debt didn’t belong to them. This has led many people to believe that artificial intelligence is increasingly being used to make consumer lives more difficult.
However, there are also a number of benefits of using AI to help customers get out of debt or relinquish the responsibilities. Here is an overview of the role AI plays in the future of consumer debt management.
Artificial intelligence is making it easier for debt collectors to pursue unpaid debts
Customers that are delinquent on their debts can take a number of steps to escape paying them. These tactics can include:
- Moving to a new address or even a different state
- Changing financial institutions, so any debt collectors may feel it is helpless to try to pursue an asset forfeiture order
- Lying about whether or not they have taken on any debts
- Lying about their income to appear judgment proof
- In extreme situations, they may try changing their name to make it harder for deck collectors to find them
Artificial intelligence makes it easier for debt collectors to find customers that are avoiding them and dispute any untruthful statements they have made. This may not seem like a serious concern if customers act with extreme indifference to the debts they have taken on. However, some people’s situations are much more sympathetic and many customers are chased by debt collectors for debts taken on by identity thieves. This can cripple their lives.
Debt collectors can use AI to monitor activities, such as new reports on delinquent purchases to dispute statements that customers are not responsible for the debts or lack the finances to pay existing liabilities.
Most of the changes AI brings to the debt collection profession are more positive
While artificial intelligence can make debt collectors feel more emboldened, there are a number of changes that are more beneficial for consumers. As American Banker points out, artificial intelligence is helping shift the focus from using debt collectors back towards the original lenders. A growing number of financial institutions are handling their deck collection process in-house again.
Ranjan Dharmaraja, CEO of Quantrax, states that AI can also help debt collectors personalize their approaches to each situation.
AI can be used to decide on what techniques work for each situation, and to automate and create the perfect balance between human and machine thinking, Dharmaraja told ACA International.
This means that the debt collection process can be handled in a more collaborative and holistic manner. Customers feel more encouraged about repaying debts to lenders that treat them respectfully, rather than debt collectors that use much more coercive tactics. Preliminary data suggests that artificial intelligence is improving the repayment rate of many delinquent loans.
AI is mitigating the risks of consumers going into debt in the first place
There are a number of artificial intelligence-based applications that help consumers manage their money better and even track their debts. These tools can be especially invaluable for people that are trying to get themselves out of data. Here are some of the core benefits:
- Many tools help customers monitor their own spending habits. They might identify vices that cost them more money, which they can change to make it easier to pay off debts.
- These algorithms can help them identify whether or not they are victims of identity theft. Tools like LifeLock have helped hundreds of thousands of customers escape debt that identity thieves took out in their name.
- Many artificial intelligence-based applications hope customers discover new deck consolidation and forgiveness opportunities.
While many of these tools are not designed specifically for the purpose of debt management, customers can benefit from them indirectly.
