Six years into managing the back office of a collection agency, I have a unique view of the industry’s technological transformation. I see it from the finance seat. And what has happened is impressive.

AI, first perfected in contact centers and now rapidly transforming collections, is changing the economics of the business. The speed of change in reaching consumers, meeting them where, when and how they prefer, continues to accelerate. Virtual assistants don’t call in sick. Self-service portals don’t go home at 5:00. Strategy and assignment engines can track preferences and outcomes across millions of interactions in ways no supervisor managing rows of agents ever could.

Hundreds of agents in an office became hundreds offshore. Then remote. Now, increasingly, some of those interactions require no agent at all. The leverage, consistency and scalability are extraordinary. I am an optimist about where this is going. But I am also a systems guy. And systems have a funny habit.

Solve one bottleneck and you discover the next one.

The Contact Was Only Half the Job

The contact center use case and the collections use case look remarkably similar right up until the consumer says: I’d like to pay. Then something different happens. A financial transaction begins.

The payment has to be authorized, processed and posted. Consumer balances change. Client funds have to be identified and safeguarded. Agency revenue has to be calculated under thousands of contractual rules. Trust accounts have to reconcile. Clients have to be remitted. Financial statements have to be issued.

The shiny new front end eventually reaches the decidedly less glamorous back office. And there we encounter another generation of systems. Many of the foundational collection platforms supporting the industry were designed for a very different operating model. Now we are asking them to support growing client bases and transaction volumes generated by front ends their original designers could hardly have imagined.

That isn’t an argument against AI. Quite the opposite. It is an argument for completing the transformation. If we modernize the consumer interaction without modernizing the financial and operational architecture underneath it, eventually the bottleneck simply moves downstream.

So I have been thinking a lot about that next investment. Modern CRMs. Better payment architecture. Automated reconciliations. Integrated client accounting. Better data architecture. End-to-end systems capable of supporting what the new front ends can generate. Lots of work. Lots of opportunity. And then Nevada sent me a form.

Wait. You Want What?

Our collection agency is licensed across the country. The original founders named in many of those licenses had retired, so we were doing what sounded like administrative housekeeping: updating licenses and replacing the former principals with current management.

A couple of states wanted more. Nevada wanted a personal financial statement. Mine. Not the company’s financial statement. Mine. Cash. Bank accounts. Real estate. Mortgages. Retirement accounts. Other assets. Accounts payable. Loans. Creditors. Collateral. Balances. Everything.

I stared at the form. No way. There must be some mistake. I’m the CFO of a corporation. I’m not an owner. I’m not a director. I don’t run collections or compliance. I have no economic interest in the company beyond being an employee.

I’ve spent more time thinking about Nevada since receiving that form than I had over my whole career. As best I can remember, my lifetime physical connection to the state consists of an airport layover. Yet Nevada apparently wants my personal balance sheet.

Our licensing specialists said it was required. I pushed back. Our attorneys looked at it. The answer was more unusual than I expected. I wasn’t an officer under our corporate records. But for licensing purposes, NMLS looks to function, not simply legal title. I perform the CFO function. Nevada uses NMLS. So Nevada wants the form. The company needs the license.

Somewhere in the back of my head I heard The Godfather: “Make him an offer he can’t refuse.” Sign the personal financial statement or don’t remain the CFO of a company that needs the Nevada license.

Really? I thought Big Tony had stopped making collection calls years ago. Now I wondered whether he had simply changed sides of the desk.

What Risk Are We Trying to Control?

Sarcasm aside, there is a serious question here. Collection agencies handle other people’s money. That demands regulation. It demands strong controls. It demands scrutiny. I manage the people responsible for bank reconciliations, including accounts holding funds that ultimately belong to our clients. Those controls matter enormously. Test them. Audit them. Challenge our segregation of duties. Review who can initiate transactions and who can approve them. Inspect the reconciliations. Test system access. Trace the money. Make sure one person cannot initiate, approve, record and conceal a transaction.

Those aren’t regulatory nuisances. They’re essential controls. And collections has plenty of other regulation. FDCPA. TCPA. Licensing requirements. Consumer-protection laws. Audits. Examinations. An alphabet soup that keeps lawyers, compliance professionals and consultants very busy.

Much of that scrutiny has helped change the industry. In fact, I would argue that the best agencies have moved beyond asking simply: How do we comply? The more interesting question has become: How do we treat consumers better?

Reasonable payment plans. Better communication. More convenient channels. Respectful treatment. Self-service. Meeting people where they are. Turns out advocating for consumers can also be good business. That’s progress.

Which is why the personal financial statement bothers the systems thinker in me. What exactly are we trying to measure? Suppose my mortgage balance exceeds the cash in my bank account. What has Nevada learned? Does that make me a greater risk to client funds? Suppose I have no mortgage and millions sitting in liquid investments. What has Nevada learned then? Am I now trustworthy?

Maybe personal financial condition tells a regulator something. But how much? And how does that compare with what we can learn by examining the actual control environment surrounding the money?

We Built Systems So We Wouldn’t Have to Trust People

This may be the accountant in me talking. For generations we have been designing internal controls specifically to reduce dependence on the honesty of any single individual. Segregation of duties. Dual authorization. Independent reconciliations. System permissions. Audit trails. Exception reporting. Management review. Internal audit. External audit.

We don’t protect money by finding people rich enough that we assume they won’t steal it. We build systems designed so they can’t steal it, or at minimum cannot do so without collusion and a trail that substantially increases the likelihood of detection. That’s what controls are for. So perhaps the more useful regulatory question isn’t: How much money does the CFO have? Maybe it is: What could the CFO actually do with ours?

That’s a systems question. And systems questions are increasingly important because the industry itself is changing.

The Next Human Problem

There is another unintended consequence worth considering. The collection agency of the future may employ fewer traditional collection agents. But it is going to need some very talented people. AI specialists. Data scientists. Cybersecurity experts. Financial-control professionals. Systems architects. Compliance specialists. Operators who understand how all of it fits together.

The industry needs people capable of designing the next generation of systems precisely because the old operating model is disappearing.

Imagine recruiting the visionary CTO/CIO/CFO. “We’d like you to help build the future of collections.” Great. “One small thing. A state you’ve never worked in may consider you an officer for licensing purposes even if you are not one legally and hold no ownership interest. You will have to provide a detailed accounting of your personal assets and liabilities.” 

A creditor can own billions of dollars of receivables without requiring its CFO to provide a state collection regulator with a personal balance sheet. Outsource the collection of those same receivables, however, and suddenly the personal wealth of an executive at the collection agency may become part of the regulatory inquiry.

Excuse me? Maybe that person signs it. Maybe that person says no. Maybe companies start thinking much more carefully about how executive financial responsibility itself is structured. And perhaps regulation intended to increase accountability inadvertently creates incentives to obscure actual responsibility. That would be an interesting outcome.

Another Bottleneck

I’ve spent a lot of time writing about the technological transformation of collections. I remain enormously optimistic. AI is changing the consumer experience. Automation is changing the economic model.

Smaller agencies relying on traditional calling strategies will find it increasingly difficult to compete with organizations capable of making these investments. Consolidation seems inevitable. But the transformation doesn’t end with the consumer-facing technology. The front end has to connect to the back end. The back end has to connect to modern financial controls. The controls have to operate inside a regulatory architecture. And all of it still depends upon attracting talented humans capable of designing, operating and governing the whole thing.

Every time we remove one constraint, another appears.

I thought the next big challenge in collections was modernizing the foundational systems underneath all that impressive AI. Then Nevada handed me a six-page personal financial questionnaire. Turns out the back office may not be the last legacy system.

So what does a CFO with no ownership interest and no director role do when his employer’s license depends on providing a state with his personal financial information?