Are lenders being too cautious when it comes to using texting / SMS for debt collection? Several third-party agencies with deep SMS experience say yes.

Texting with consumers who are dealing with delinquent or charged off accounts can result in a major lift in engagement and overall performance. Nevertheless, the collections & recovery industry has been slow to add texting to their digital debt collection strategy because of some serious concerns about compliance – despite the arrival of new Regulation F guidance covering texting.

Some of those concerns, however, are based on compliance myths about texting with consumers. And those myths may be holding lender back from using SMS as much as they could. Let’s debunk three of those myths.

Myth #1: Texting Consumers Increases Consumer Complaints

Frankly, this is just not true.

Third-party agencies using texting to contact consumers report that they receive more complaints about calls than texts by an order of magnitude, and consumers largely see texts as much less invasive than calls. One of those experts attributed this to texts giving the consumer the ability to opt out without having to speak to a person. As long as you have a solid process by which to process opt outs (for example, allowing the consumer to text “stop” to opt out), texting is a less-invasive, high-reward way to reach consumers about their delinquent or charged off accounts.

Pro-tip: avoid requiring the consumer to click a link to opt out. Most consumers view links as potential scams and may be reluctant to click.

Myth #2: Under Regulation F, Consent is Absolutely Required

This one is a bit more complicated.

Creditors and lenders get consent to communicate via text up front when the account originates, but it’s up for debate whether that consent passes to third party agencies. Whether consent passes to third parties is a question for collections & recovery attorneys to consider, but there is an argument that allows us to mostly disregard that concern.

Operational experts from the third-party agencies who are on the cutting edge of innovation in the space have the opinion that Regulation F doesn’t expressly require an opt-in or consent from the consumer to send text messages. Regulation F does, however, explicitly require an opt out.

Discussing this option with your agency partners is key to getting a robust texting program in place, and while risk appetite may vary, it’s clear that consumers prefer texting to phone calls, so it’s certainly a worthy discussion.

Myth #3: There’s a Safe Harbor in Reg F, and You Must Abide by it

Regulation F presents a safe harbor for email and text communication which involves verifying the consumer’s information in one of the ways laid out in the rule prior to engaging in outbound texting.

But that safe harbor is not the law, and it doesn’t protect the creditor, only the agency.

Third party disclosure is a real risk when engaging in text communication with consumers, but creditors should be focused on understanding how their agency partners prevent third party disclosure without managing to the safe harbor, but instead managing to the FDCPA and Regulation F.

Pro-tip for creditors: Understanding your risk from the beginning is key. Work with your agency partners to create a robust digital collection strategy by getting all of the necessary teams involved from the beginning of the process, especially your legal and complaint departments and your TCPA experts.


Every Thursday, Collections & Recovery sends out an exclusive email packed with analysis on the newest trends in collections strategy, the shift to digital collections, best practices for vendor management, and deep-dives into regulatory and compliance issues that matter to you. The only way to get it is to subcribe.