Adam Parks (00:01)
Hello everybody, Adam Parks here with another Receivables Info LinkedIn Live webinar. Today I'm here with a really great panel to talk about building and maintaining your legal network in the current environment of debt collection. But with me here today, I have Mr. Gary Tier from Forwarders List, Michael Cassidy from Velocity and Rebekah Henderson, also from Velocity. And I've talked with all of you in the past on this subject, whether it be in the hallway at a conference or on a podcast. So I'm excited to hear a little more about what you guys are doing and how you're helping to prepare these law firms for what is to come. So before we kick it off, just to run through the quick intros, Gary, starting with you, can you tell us about yourself and how you get to the seat that you're in today?

Gary Tier (00:55)
Thanks everybody. Really an honor, very humble to be here with Michael and Rebekah. Great company. So this is the only thing I've ever done. I got out law school, I wanted to go to ⁓ college, thought I wanted to go to law school, took a job as a temp with the Fuller's List of Attorneys, ended up buying the business seven years later. ⁓ Now we're 18 years later and here we are. If you don't know, we're a Directory of law firms that specialize in collection work, ⁓ commercial, consumer, really anything under the umbrella of creditors' rights or collections. And we're a free resource on the bank and debt buyers.

Adam Parks (01:38)
Awesome. And a great organization. Michael, could you tell everyone a little about yourself and velocity?

Michael Cassidy (01:45)
Sure. ⁓ Mike Cassidy, Chief Operating Officer of Velocity. I've been here ⁓ just approaching two years, although I've cleared 20 or 21 years in the industry. The majority of my career was on the other side of the fence, so I was really on the issuer, ⁓ specifically on the collection and recovery side of it. ⁓

Gary Tier (01:45)
You No

Michael Cassidy (02:11)
On the issuer side, for significant majority before joining here, Velocity, we are a national debt purchaser. So we do primarily purchase ⁓ unsecured consumer products, ⁓ heavy personal loans. We operate to a significant degree in the fintech space, which ultimately attracted ⁓ me to this. Just that was part of my prior experience as a fintech lender. But yeah, I'm happy to be here and ⁓ joining the conversation.

Adam Parks (02:43)
Well, glad to have you here. And Rebekah, could you tell everyone a little bit about yourself and your role at Velocity?

Rebekah Henderson (02:49)
Yeah, I am the director of Velocity's legal network. I've been in the industry for about 25 years. I've had about three different experiences working at the servicer, so at the law firms, which has been a fantastic contribution to what I've spent the majority of my career doing, which is managing legal networks for mostly debt buyers, one bank. So that's it.

Adam Parks (03:16)
Okay, well, it sounds like we've got a pretty well organized group here and a lot of expertise around this particular topic. So let's try and set the stage, And I'm gonna kind of float this out to the whole group, but what are you seeing in the marketplace and what has you preparing for this increased volume and accounts to go through litigation?

Michael Cassidy (03:40)
I'll go first. for our part of the world, and again, I mentioned, we have a heavy emphasis on personal loans. We do buy other products. And I know, Adam, you and I were at a conference last week and I think this topic came up quite a bit. The personal loan, FinTech in particular side of it, has seen pretty material origination growth the past year, I think. Yeah, I don't even correct me. think it was like 50 % year over year. Now it came off of a low year. ⁓

Adam Parks (04:12)
The highest origination ever is our, was a measurement that I remember walking out of there with was that we are currently at the highest unsecured consumer loan origination in the history of tracking it.

Michael Cassidy (04:25)
Yeah, mean, it's pretty incredible. With that comes natural, with that would come natural volume in our side of the world, right? Defaults happen, it takes time, but it's going to happen. But that origination is coming where we know there's other macro challenges or hurdles that are coming up. So I think naturally folks should be expecting, whether it's personal loan card, auto, we're not in that space, but I would expect it you would naturally see and expect volume to come. And if you're fortunate enough to be on that side, but I think it is a matter of right, how do you prepare for it? ⁓ So I think this is just where we are in a macro level, the right topic.

Adam Parks (05:09)
Do you think that something like the shortening of the statute of limitations across the country and that push by the states is having a direct impact on the need to increase volume to the legal networks?

Gary Tier (05:12)
Thank

Michael Cassidy (05:23)
I think it will. I don't think it has yet materially, but yes. ⁓ I think you'll see that.

Adam Parks (05:31)
I mean, are you litigating more in New York than you did before the statute of limitations went to three years?

Michael Cassidy (05:34)
Well, yeah, I was going to say that I think New York is a good example. think state by state, you're going to look at that. So New York is a great example. New York is a great example for other reasons that you may be pushed to litigate anyway. There was a big one that almost came to fruition that would have made the urgency to go the legal route a little heavier. But ⁓ yeah, think New York is a good example. You're going to see it. And a lot of those are just chipping away at, you you have volume.

Adam Parks (05:41)
Sure.

Michael Cassidy (06:04)
and then you've got these other state level challenges.

Adam Parks (06:07)
So Gary, their experience is coming from the accounts that they're purchasing, but you're working with groups really across the board, right? A variety of creditors and debt buyers that are working all different kinds of products. Are you seeing those same kind of trends at that macro level?

Gary Tier (06:17)
Yeah. Oh, absolutely. And to back up, mean, this is kind of how this came to be, right? You and I were talking about doing some kind of session and you kind of asked me what was out there. And I said, well, you the sort of thing that I've been pushing for 18 months was this volumes here, right? And Velocity is a great example. We knew their volumes were doubling or even tripling in this time span. And then when you add other banks and other debt buyers exploding at once, you got to look at your vendors and say, OK, I know you could handle if one client increases.

Gary Tier (06:51)
But what if six, seven, or eight of them increase over that same time period? Can you handle a bandwidth? And no vendor wants to tell their client no, right? So it's not the easiest discussion, but we were sort of counseling that, make sure the firms really can handle it. ⁓ And to sort of directly answer your question, yeah, it's across the board. mean, there's no, we haven't really seen, ⁓ some areas are growing more than others, but I think basically every asset class that we're aware of is.

Gary Tier (07:20)
maybe at worst flat, but mostly going.

Adam Parks (07:24)
It's interesting now Rebekah, from your perspective, somebody who's actually managing and responsible for the management of the law firms and that flow of information, you know, how are you defining success in a changing environment?

Rebekah Henderson (07:40)
We honestly, we originally defined it as liquidation. That's important just because it's placement specific. So we have legal targets. Everything is a percentage based on total placed accounts. So expectations don't really shift. Understanding, especially we're gonna, I know we've got kind of on the docket to discuss media challenges.

Rebekah Henderson (08:07)
So, right, a media challenge might adjust my expectation. An affidavit challenge might adjust my expectation. But in general, and this is where the relationship is key, I'm not adjusting. Expectations are what they are, and so you do have to have those conversations where you know six clients are having the same conversation with the same vendor. We all want the same thing, and you have a relationship and figure that out. Fair enough. Now, from your perspective, Michael, as you're modeling out the purchase of an account or the purchase of a portfolio, are you starting to take into account how liquidation may change based on these downstream factors?

Michael Cassidy (08:49)
to be way too smart.

Adam Parks (08:51)
Not to be sitting in a board meeting with y'all, but I feel like that's the question I'm asking.

Michael Cassidy (08:54)
Yeah, mean, I think that the yes and no, I mean, I think a lot of that goes to this conversation, right? A lot of your model is going to come, majority of your model is going to come from history, ⁓ External scoring, history, where do you expect legal curve to, where do you expect legal, the entry point to start, what do you expect to occur from that point? So you are just the nature of underwriter, you have to leverage history.

Michael Cassidy (09:23)
That's how you're to prove to a lender, how you're going to prove to everyone, hey, this is sound. ⁓ But ⁓ you do have to start to factor in other challenges. ⁓ I think to me, on the front end of it, ⁓ I think it becomes you're constantly iterating the strategy, which I know we have done here.

Michael Cassidy (09:49)
if there are changes at a state level. Well, you can't solve for all of them. I can't solve for stuff I already booked. But do you want to tweak the type of account you're willing to send in a certain state because of whatever challenge? Because it's easier to do that and change the forward-looking than I can on something I already purchased makes it hard. And then, again, go back to what Gary mentioned.

Michael Cassidy (10:17)
The reality is you can't change the facts. After the fact, I can't change anything. You underwrote an account based on what you thought was true at the time. The world changes and now you have to make sure, all right, there's more volume to stay on curve, oversimplified, to stay on curve. I have to make sure the network can still perform. Do we have enough? Because I can't fall off to Rebekah's point or made it before.

Michael Cassidy (10:47)
Everyone decides we're going to throw volume into the network at one point. We all know why it'll slow down performance. It doesn't mean we can accept that. So now do I have to get more law firms? I have to look at? So yes and no. Can I change it for purchases tomorrow? Sure. Can't change them for the stuff I already bought.

Adam Parks (11:01)
Okay.

Rebekah Henderson (11:05)
Well, along, so along those lines though, because I think what comes up later in the conversation is around the necessity for reporting and like true infrastructure if you're going to have a legal network. And a lot of that is to manage and see what's happening before it becomes a problem, before it's negatively impacting your like 12 month, 13 month liquidation expectation.

Rebekah Henderson (11:31)
You saw all of it coming and were addressing adding firms, removing inventory, moving stuff long before it has like an actual negative impact to the curve. So.

Adam Parks (11:42)
That's interesting. Now, when we start thinking about this, as you mentioned, Michael, like if everybody starts dropping volume into the network simultaneously, we find ourselves in a situation where are you going to expand your existing network? Are you going to leverage a third party service provider and back to the like the chicken or the egg question? Do you buy it or do you build it?

I don't know that there's an easy answer there and I'll float that to everybody here. But I'm curious because I feel like that's the when we have to do something quickly. So often we try to outsource it because we don't feel like we can develop expertise or grow our organization at the necessary pace. So as you start envisioning this increase, you saw the same numbers that I saw last week in terms of what's coming down the pipe in terms of delinquencies and charge offs across the board from a product perspective.

Michael Cassidy (12:06)
Thank

Adam Parks (12:36)
What do I do next? I buy it do I build it? And does it change if I'm a new organization, if I'm new to litigation versus someone who has already got an established network?

Michael Cassidy (12:45)
The last part, and then I'll pass it to the two folks who have been on this side of the business longer than I have. my general, ⁓ the buyer build, think, because you run it, I actually used this scenario with Rebekah maybe yesterday, I think in preparation for this. But that buyer build, I think that dialogue comes up regardless of whether we're talking about legal network and building this out, or if we're talking about a fintech lender just starting and saying, do I want to be my own servicer or get a master servicer. Like those commerce, you're making the same, you're having to think through the same item. So my view of it is, buy versus building, there's no wrong answer generally. There probably is a wrong answer depending on where you are in life cycle. If you're new to a product and you want to build out, I started purchasing auto, which we don't purchase, right? With metal attached. Like to build that,

Michael Cassidy (13:41)
will take time and you're gonna trip over yourself many times. You may need to go to a legal network that can actually properly work that, has relationships and firms that understand the asset versus me trying to source them on my own or go to a group like forwarders and say, hey, I don't have firms in my network. Maybe I do, I'm just obviously hypothetical. I don't have firms that can do this.

Michael Cassidy (14:07)
I think it does depend on where you are, whether that's I'm a new buyer who's scaling and entering legal or I have infrastructure but I'm new to an asset. If it's just pure volume, I think there's similar answers, but there's more than one thing. You have to look at, can I add more to my network? Yes or no? And should I? Do I have the bench to do it?

I think you can also make internal decisions, which I know we have done to say, all right, if I get to forward all these accounts out, am I even forwarding the right ones? Maybe I was forwarding everything because it was convenient, ⁓ or could I create capacity by looking at resetting my eligibility? What is truly eligible for legal or should be, and is it creating a bottleneck? Which I know Rebekah and I have done, which is, is there stuff that actually you dig in deeper and you find out?

I'm actually not getting a wonderful return on that. can keep that out of legal to let the other stuff go through. So I think you have to look at all parts of, are you a part of the problem? Are you forwarding the right thing? And can that help with volume? And then do you have to know?

Gary Tier (15:03)
you

Rebekah Henderson (15:14)
Well, and I love that too, because ⁓ I'll say two things. Creating a bottleneck for sure. ⁓ A lot of the firms specialize. So they are not going to tell you that, and you're going to see it in the numbers. And sometimes there's a bottleneck on just the easy stuff, because it's not what their solid processes are built for. So aligning a placement ⁓ structure for that, I think, also helps with the volume shifts. But the truth is,

Adam Parks (15:21)
I'm.

Rebekah Henderson (15:44)
This industry has a growing number of very highly experienced networks that are available to large debt buyers, small debt buyers, champion challenges. And I think it would be silly if you're new not to go look at some of those as options or at least start those conversations.

Adam Parks (15:55)
challenges and think it would be silly if you're new. That's interesting. It's interesting. Gary, how about from your perspective?

Gary Tier (16:07)
Yeah, I mean, just to echo what both Michael Rebekah said, mean, it's, you know, and I don't want to get, I'm not exactly sure where we are in our outline here, but you can get really into differences between builder or buyer, right? And the networks are plug and play, right? They have the infrastructure, they have the relationships, everything is set up. I mean, there's definitely a list to get going, but it's, they make it easy, right? Because they built it out for other clients. When you start from scratch, It's just that, it's from scratch and it takes a lot of work and a lot of resources. And we'll get all the calls with creditors or debt buyers who haven't done legal and we have that conversation with them because we work both with clients that go direct and also the legal networks in the space. One is not necessarily, one might be good for me but not good for you. It's just a question of what route you wanna go. Both methods are effective. And they have advantages and disadvantages, which I think we're going to get more into a little bit later.

Adam Parks (17:08)
So I'm kind of working my way through some of the strategic decisions that have to be made as we're going through the process of kind of evaluating what are we gonna do here? Because when we talk and some of the things that you guys have brought up here, I think is spot on in terms of, if you're managing it directly, what does that mean? How does that cost change? And then I think it's also important that we talk about the cost of kind of managing these two different worlds because in you know, you've got different levels of control between if am I going to buy it or am I going to build it or lease it? And what does that look like? But there's also some you know, when we think about variable versus fixed costs, and you know, how does that start to impact the decisions that we're going to make as an organization about buying and building if we're going to build it, we're going to have to build more fixed cost into it. And if we're not going to be able to run enough train cars over those tracks, is it really worth it? Whereas if I'm going to have volume fluctuations, I would start looking more towards that outsourcing capacity because I won't have that same fixed cost when the volume drops. Does that make sense?

Michael Cassidy (18:27)
I think we've talked a lot about it. know on our side, when you look at, it's one thing to talk about, have, scaling problems are good problems to have. It's one thing to talk about the asset. I have these accounts, I need to forward it, but a lot, it takes a lot of work and there's a lot of infrastructure to forward and manage accounts because you don't just forward and it's gone. Law Firm A just did it and everyone shakes hands later.

Michael Cassidy (18:54)
There's stuff to do, whether you use a network or not. ⁓ So the buy vs build, at least in our world, whether I don't think it matters whether you're using a network or you're building your own network of law firms, you still need to have infrastructure to support it. So a lot of our buy vs build has been around the infrastructure, which is all right, now I have all of these assets. I have a system of record, whichever one you're using or multiple in some cases. ⁓ You have a system of record, that's one the asset lives.

I've got to send media, I've got to store the media, I've got to send the media. I have this backend supporting of affidavits and other stuff. And every one of those, I think you're making that decision wherever you are in life, it's like a buy versus build. And again, there's no wrong answer. There's no general wrong answer. You have to look at where you are in your stage and look ahead. You can't predict it, but like I should be. Making that decision with some knowledge of what I expect to be in the future doesn't mean I can prepare for it all, but if I'm going to get a system of record that suits my needs now, will it suit your needs when you have, you know, three X the volume, four X, five X, whatever it is. If you're sending media through a very manual process, is that going to still work when you have four or five, six times the. So then you start to look at, can I build it? Do I have the resource? Do I have the stomach for all what goes wrong after and maintaining it? Or is there a product I can, you're gonna pay more for the product in almost all cases, but only if you don't factor in your own resource cost. Like there is a cost to manage it, but.

Adam Parks (20:37)
You're internal. Yeah.

Gary Tier (20:40)
Yeah.

Rebekah Henderson (20:40)
Well, and especially like if you're running out of California too, and you're thinking, I want everything here in California where I'm located, ⁓ your cost just to get suits out the door, do it yourself, it's also not, it would be a lot more difficult to scale ⁓ versus outsourcing.

Adam Parks (21:00)
So when you

Gary Tier (21:00)
Yeah, and Michael was talking about kind of the more like the technical side of what you need. And one of the discussions Rebekah and I have had is the people, right? A lot of times, folks just think they can hand it to somebody who's already got a full time job and say, guess what, Gary, we're going to build a legal network. Can you go to NCBA or call forwarders list or whatever and figure it out? It doesn't work that way. And yes, maybe there you could kind of start it.

Rebekah Henderson (21:24)
figured out.

Gary Tier (21:29)
If you're successful, which that's the goal, you're going to need good people, at least one good person, right? At a minimum. And that's with the network model. ⁓ So, you know, I don't know exactly all the audience here, but you're going to have to invest not just in the, you know, IT and all that kind of stuff that Michael was kind of touching on, but very much think about the people involved because it will grow and it'll become a monster if you do it right. And you're going to need the right people in place to manage it are not just smart but also good with relationships, right Rebekah?

Rebekah Henderson (22:02)
Yeah, I mean, in that regard, you're going to get what you give. If you've got somebody who just forwards reports and doesn't follow up and doesn't give clear direction to the firm, ⁓ you certainly shouldn't expect the firm opened your report, knew what you wanted them to do and then executed. You and I know clients believe that. So like, but you're going to get what you give. And so if you give them clear data, clear expectations and deadlines with the right tone and the right personality kind of or like ⁓ expertise sharing that then. I think that's more of a winner. And so again, like choosing ⁓ a network that's already put together, they have those professionals. If you don't have that, you got to go find that person and look, they're not everywhere. So. No, that's interesting. You and as we talk about that infrastructure, you know, there's that you're going to need the people we've talked a little bit about about the technology. But let's try and put this in into scale for people and help people understand just how much information data documentation we're actually talking about being able to move because we're not talking about sending an email with an attachment here.

Right? Like we have to set up the right train tracks to be able to transmit the data and we're train loads of data, not, you know, email attachments worth of data. Talk to us a little about what that challenge looks like as you scale.

Michael Cassidy (23:34)
I'll start and then Rebekah, you'll probably have more ⁓ detail, but I'll give ourselves as an example. There are buyers materially larger than us for sure, ⁓ but we've seen the pain of growth, the happy side of it, but there are challenges. Let's just use file size and everything else, but if your process is designed to support whatever number it is, 1,000, 2,000, 5,000 accounts per month you're sending into legal, you could probably muscle your way through it pretty well in most cases. But when you get up to something that's now in the 20,000 to 30,000, you have a ⁓ spike month and there's 45 or even 60,000 that go in a month, again, it's one part can your firms handle it, which is not a small part. You need to make sure they can. But you have to make sure you can handle it, right? In the file, I mean, that becomes the type of assets we're buying. You're looking at seven to nine pieces of media that goes with every one. And that's for personal loan where you have transaction history versus statements. ⁓ Because again, we're predominantly buying personal loans. So you're seven to nine pieces, not overlooking it's. I think we looked at our average size of 394 kilobytes. You're looking at like 60 gigabytes to a hundred gigabytes of just media data that you're sending in each placement. You're storing that, you're sending it, sending it a secure way. The receiver's got to be able to take it, parse it, go through, do their meaningful... Yeah. manual process starts to break at that point. Organize it. Yeah.

Michael Cassidy (25:23)
you know, how are you managing it? ⁓ And I think Rebekah makes a really good point as far as, you know, give what you get. You have to use leverage your firms right away. We've had to do a lot of, you know, soul searching in that too of, you know, ⁓ it's one thing to just say, hey, here it is, enjoy it, figure it out. But, you know, that hurts everyone at that point. It's do I have the right infrastructure? Maybe I think I do, but it's actually creating headaches here. I think when you get to a certain point, little issues become really big issues potentially, and you've got to start planning ahead for it. ⁓ I do think, again, even if you have experts, like we are fortunate, we have Rebekah, ⁓ Lord knows what would happen if it was just me, but you might be really good, but you're probably not as good as your entire network. Like asking them, what are others doing? How could this be? better? How could I do it differently? You have to start soliciting that feedback early because building it and correcting it when you're now forwarding 20, 30,000 is way different than getting ⁓ things corrected when you're smaller.

Rebekah Henderson (26:37)
think when we were talking about it yesterday, we kind of came to the conclusion, better when you're small to overdo, then and back away from some of your processes. So if you are too careful or too providing too much, rather start there and back away as you grow, then to be at a certain size and realize I have now forwarded over the last several years, this many accounts and I've got to go remediate an issue that you discovered later. ⁓ That one is a tough one.

And I will add to the data is like, there's only so many months of 10,000, 20,000 accounts a month that have to go on before you're receiving back daily. And I'm a big believer in the firm sending you their daily notes. ⁓ I think any debt buyer who doesn't have access to those notes is probably living, I don't know, with more stress than I like to live with. The minute a consumer calls and has a complaint, I like to read those notes.

That's a million records a day, easy. So has to be imported into your system. There need to be codes associated, like has to be able to be ⁓ matrixed and processed. So any ounce of this as it scales, because the firms are keeping those accounts for, I mean, I'd like to say two to three years in active litigation, but the truth is they're keeping them for 10 years in some states. So you're just talking about an insane amount of data being exchanged

Rebekah Henderson (28:06)
all the time.

Adam Parks (28:08)
It is a lot of data and I you know, I think we understand the cybersecurity implications of that kind of data being moved around. But you talked about the infrastructure that's necessary in order to build or even buy network capacity, for example, what compliance considerations do you need to have? Or do you need to consider as you're going through this process? mean, beyond audits and RFIs and onboarding, I mean, it feels like an endless flow of things that need to be done.

Michael Cassidy (28:45)
Yeah, not that I will pretend and I couldn't even, I couldn't pretend to wear the data, ⁓ you know, your information security ⁓ officer hat. could, you would find out pretty quick. don't know anything, but ⁓ I think the reality is build off what Rebekah just said, you know, it's one part I'm sending you firm, whatever, thousands of records and pieces of media and

Michael Cassidy (29:13)
Some have to be redacted some are like, so, but I'm, I'm sending you all of this data. I'm sending it through likely an SFTP. I'm getting back all of this stuff that exchange. could feel moderately comfortable to say, all right, I've got to have certain protocols to protect it in exchange. I could take your, your documents and our compliance group out, like we do and make sure you, believe you, you have the controls, but the reality like in the world we're living in now it's I don't know the answer to that. It's more risk tolerance. It's very hard to protect the answer to all of it, you're seeing breaches. ⁓ You would think the breach would happen at our firm or agency or wherever else I'm forwarding or even here, but then it's happening at their letter vendor, at their whatever.

There's a reason it's the most talked about, one of the most talked about, maybe AI is more topical, but I think one of the more critical and still most talked about is cybersecurity because we are exchanging so much every day back and forth. And to Rebekah's point, that consumer is going to live there in a third party platform from me for 10 years, for whatever it is. And I'm already downstream. Now I've got the seller who still owns that, owns to a degree you know, that consumer and what I did. So there's probably, again, it's your risk acceptance is, it's still a hard decision when you're small, but I think you can kind of get your head around it as you get larger and larger, your tolerance to it, what type of insurance, I mean, these are all the things we're talking about all the time. What insurance do I have? What do I require my firms to have? We know that adds a burden on them, but how do we all, you know,

Michael Cassidy (31:02)
protect this thing and continue to iterate. And it's probably the biggest investments we've made here haven't been to the, well, they have indirectly, but they're not visible to our networks or anyone else. It's all on the cybersecurity side of how can we detect, how can we stop? I can put that wall up as well as I think I can in here, but I can't set up yours law firm. can't set up the, so now we've got to go out. We've got to ask them.

Gary Tier (31:31)
Thank

Michael Cassidy (31:32)
It's like a frightening, it's a frightening spot.

Adam Parks (31:36)
Well, it's that game of telephone, right? You're not just worried about yourself, you're worried about third party, fourth party, fifth party, sixth party, and it's kind of this never ending rule set.

Gary Tier (31:37)
Thank

Michael Cassidy (31:45)
I do think that

Gary Tier (31:47)
Thank

Michael Cassidy (31:47)
it's interesting. We have this conversation a lot of like, and I get it, we all get something imposed on us by someone, sellers impose on us standards we have to have for insurance and everything else. Yeah, correct. ⁓ But I get the challenge, everyone in like contract negotiations, everyone focuses on well, your insurance hurdle or whatever it might be, cybersecurity to run that topic.

Adam Parks (32:00)
You telling me we all gotta serve somebody?

Michael Cassidy (32:15)
It would cost me X to meet that hurdle. And you get so focused on the like, well, what am I going to make? You used to see those clauses of, I'm going to cap it out on my prior 12 month spent. You get all these weird things, which to me have to all be thrown out because it's not, this isn't about like the contract spent if a breach happened. Like we're all caught in this horrific scenario that has a material cost well beyond what we contemplated.

Michael Cassidy (32:44)
and if it was fault of someone. My whole point in that is these conversations around contracts and how do you protect, one thing to protect against it with security and investments there, but there is gonna be, as you get larger and larger, your demand for higher standards on insurance and things like that isn't to be brow-beating, it's because that risk is compounded. I it just becomes so much greater, but. No one wants to hear that, I mean, that's just the reality. Those thresholds grow and grow.

Adam Parks (33:16)
larger the volume, the larger the risk. The more records at play.

Rebekah Henderson (33:19)
You know. Even if you use a third party ⁓ outsourcing your network, you're still gonna have also like an obligation to do some level of audit on your firm. Maybe you pass that off to your network, but even then you've got court cost review, court cost kind of audit, and then account level. Like what's really happening, where are the disputes coming from, what's the impact of the consumer? ⁓ Even if you've outsourced and you've done the best to somebody who, let's say they do all the onboarding for their firms and they do all that auditing, I don't think you're going to live in a world where you don't have some sort of internal review and grade for that servicer and their compliance level.

Michael Cassidy (34:03)
We've used this like outsource and I think a lot of times we're talking about to use a legal network or build your own network. It's all outsourcing unless you're suing internally. It's all outsource. Yeah, correct. So unless you're doing it in-house, it's all outsourcing, whether it's legal network, recovery, our agency network here for debt buy or if I'm the lender and I have a first party or third party, it's all outsourcing. And if you're not, to Rebekah's point,

Adam Parks (34:13)
Unless you hired lawyers, yeah.

Michael Cassidy (34:33)
If you do not, if you're not overseeing it, if you don't have the data in house that you can, you you can actually manipulate touch, find out what someone is doing, how they're doing it. If you don't have ⁓ a firm grasp on what they're doing and how they're doing it, small or large, you've relinquished control that you shouldn't relinquish, right? You need to have a firm grasp, which means you need people that understand it. You need a system that can take the data and do something with it, convert it into something that's usable. But I just outsource, we all carry the minute it goes out your door, it's outsourcing.

Gary Tier (35:14)
Yeah. And the whole thing around compliance and cybersecurity in particular, ⁓ it's overwhelming, right? I mean, I know all four of us on this call know it and probably a lot of people watching and it's a shameless plug, right? But this is where groups like RMAI, NCBA are invaluable, right? Get out there and talk to people and don't just talk to prospective clients or vendors downstream. Talk to your peers. If you're a debt buyer, talk to another debt buyer.

Adam Parks (35:14)
Fair statement. Go ahead, Gary.

Gary Tier (35:43)
or a creditor or somebody else who maybe has a legal program because believe it or not, people are willing to share information and look out for each other. ⁓ It's especially if you're new and building a legal network, right? Get out there, press the flesh, talk to people, train information. The more you get to know people and the more relationships you build, it'll help with all this.

Adam Parks (36:04)
So Gary, what's that first step look like in a journey of a thousand miles building your legal network when you don't have a Rebekah Henderson on your team?

Gary Tier (36:14)
So, well, the first part is kind of what we started with, right? Build it or buy it. So if we're on a phone call, and I mean, I just had one, ⁓ I think on Monday, you know, that was the conversation. Like, do you have people in place? That's the first part, right? Like, who's gonna own this? Is there somebody? And what's that look like? And if the simple answer is, and we get this a lot, especially Michael in the FinTech space, it's we're not building out a staff to manage legal.

So we're gonna sell or we're gonna third party, right? That's just the nature of product or asset class right now. However, if you're in a different scenario, you might say, you know what? Yeah, we have the time and resources to kind of build this thing. So that starts the path. We also get a blend. So not to go like too off track, but sometimes we'll talk with a creditor or a debt buyer who says, you know what? 80 % of my portfolio is on the Eastern Seaboard. Then I would say, you know what? Maybe you want to build a direct network in those states and then outsource the rest to a network. You kind of bundle those up, make that the plug and play, and then you are more direct where you have more inventory. So once you get that established, then it's to your point. I don't want to plug us, but we would make those introductions to law firms. Is it FinTech? Is it credit card? Is it auto? is it this is it that we play matchmaker. I would also encourage people to go again to the RMAs is an NCBA is and meet people directly but you start those relationships and the vendors and other people can help you figure out the court costs the best IT companies what cyber security you should have all those things right tap all these resources and then you're up and running. Typically there's also a build out with court costs and the and the revenue forecast right so.

Gary Tier (38:02)
There's a big bank that came back to market some time ago and we were working with them. They only started litigating in like 10 states, right? And you'd say, oh, why not just dump? Cause they knew the core costs outlay in those 10 states was going to be astronomical. And they're not going to make that money back for a time. And then they dump more in, more states. So there's a whole kind of science to building it out. The step one is who are the people internally? Are you going to invest infrastructure or are you just going to outsource the whole thing, which is also a good option.

Adam Parks (38:15)
You Fair. Now, Rebekah, from your perspective as someone who evaluates and selects law firms, for these to join a litigation network, how are you looking at their bandwidth? Like, how are you like, what kind of questions are you asking? And what are you looking at to understand? Like, what's the real capacity of this organization? Because I find that sometimes their eyes are bigger than their stomach.

Rebekah Henderson (38:51)
Yeah, I think a lot of our questions in the past two years have really focused on digital communications and where are they in that? A, that's the future and B, that's going to tell me how easily you can communicate with the consumer during the gaps of time, especially during COVID, where you had courts extremely slow. So in the typical, hey, we don't make outbound phone calls, but we do sue collector like model at the law firm. The consumers weren't necessarily hearing from the firms for

Rebekah Henderson (39:23)
a year. Well, that's not really, I was going to say it's not effective, but it's very bad for a curve. And that's essentially what we're managing. Like I do manage firms, but mostly I manage a curve. And so you're just managing what contact with the consumer creates the right life cycle in terms of a curve on that account. I'm asking, and you can very clearly see it.

Rebekah Henderson (39:51)
but it is very clear from all data that when a lawyer sends an email and it's after an escalated agency cycle, that the consumers are responding quickly and like ⁓ very decisively ⁓ versus when I'm looking at it, if I'm not seeing that early liquidation, like pre-suit, which is what I want to see, right? I want to see as many payers without the necessity of a lawsuit as possible. So I would immediately view you as not very well scaled. Because just because you can push those suits out the door, all we are is like one little disaster away. You're a hurricane away from all the courts shutting down. You're a, you know, COVID, whatever it is, those happen all the time. ⁓ They're like every other year scenarios. so, I mean, some of it, part of managing a network is very real, like California wildfires, ice in Houston, like

Rebekah Henderson (40:47)
Hurricane in Florida. I mean these are things that shut down huge legal markets and if you've got a firm not communicating with the consumer well then guess what happened to my money? ⁓ Payments didn't get processed whatever that looks like if that's not automated ⁓ All of those are problems and really would tell me immediately whether or not the firm is prepared for volume

Adam Parks (41:09)
Okay, and, and go ahead, please.

Gary Tier (41:10)
Hey, just to add to that real quick, because that's important. So bandwidth is a tough thing to gauge, Excuse me. But a couple of the big CFPB actions were meaningful attorney involvement. And one of the things we learned in an RFP process after that was there's a proliferation of multi-state firms. And one of the things we learned was, OK, you handle these seven states, but

Gary Tier (41:38)
how many attorneys are licensed in each state? And it seems so basic, but we weren't asking that question some years ago. was like, ⁓ they can handle Georgia, great. And little did we know there was one attorney licensed there filing 7,000 lawsuits every hour, right? So it seems so basic, but one of the easy things is, how many attorneys are licensed in that state? If nothing else, just for meaningful attorney involvement. And there's no hard matrix around it, like there's an equation. I that.

Gary Tier (42:08)
But it's common sense, right? If you only have one attorney in that state, how many lawsuits can you reasonably, you know, pump out? And what does that look like? And you got to ask them. It sounds like there's two questions there, right? There's the how many attorneys you have and how many suits you filing in that state and maybe there's something in looking at that ratio.

Gary Tier (42:27)
And each state, yeah, correct.

Michael Cassidy (42:29)
I think that it's, that goes back to another point too of leveraging a group, Gary, your group doing that on others' behalf is awesome. I do think it's, if you're looking, again, you could even be a seller looking to stand up your own legal. know Gary and I have talked about that. You're seeing that now. Anyone that's looking at, ⁓ you truly have to understand, it's just such a great example of what questions to ask. And it's not even just asking upfront. Like that example Gary gave, I think is perfect of like, right. You know, hopefully you know what your volume is, what you expect to place out there. They may meet that standard today and you go down the path. Great. But then you buy a new portfolio, you just naturally grow and you have to keep asking that question. And that's having, again, I always go back to like, if you're outsourcing, you still need someone internal to like keep an eye on things. All right, well. Georgia's is growing, I bought a portfolio ⁓ that's, Rebekah, well, I bought one that I found it was all Pennsylvania or Texas. And it's like, well, we should probably look at that because can I handle it? When is it gonna hit legal? Do I have the right amount of folks there? ⁓ Because not all, Rebekah, to your comment about like the scale, I agree. We've talked a lot about, I think, firms.

Michael Cassidy (43:54)
create capacity with things like digital, you can create capacity. That's not going to solve Gary's point of the meaningful attorney involvement, but you can help, all right, I can help solve some problems, get some liquidation upfront. But not everyone's going to have capacity and that doesn't always mean it's a bad firm, even if you're growing. And I know Rebekah has done this a lot where you get an incredible firm that is going to do really, really well for you, but you need to know their limits.

They may be a great firm that you should maintain for a long time, but can manage a hundred or a hundred and whatever the number is, I'm just making it up. And that's perfect. Yeah. But you should never like, you have to be careful not to break people. that is the last week we were in a session for a different conversation, but it was like, you can't force a firm or an agency or whoever it is. You can't force anyone to be something they're not.

Rebekah Henderson (44:30)
And they're killing it on a hundred. Yeah.

Michael Cassidy (44:47)
And if they're not that today, it doesn't mean they're bad. You might just have to plan around it, work with it. Maybe I know I want to max out this firm because I know what they can handle, which means I have to have a conversation. But I'm going to hit my 150. And then I need to have another firm that can handle it. There's ways to optimize it because not everyone will have digital. Not everyone will have five attorneys in a state that can handle this. Then you need to make those decisions. ⁓

Adam Parks (45:03)
coverage.

Michael Cassidy (45:15)
But you need to know what the capacity is. I agree.

Adam Parks (45:19)
So this kind of leads me to an interesting question as we go through this scaling. This question is kind of related to the scaling, but just in general, who's more responsible for the enrichment of data, the finding of assets in that entire process? Does that fall to the asset owner in your mind or is that something that the law firms really need to be improving in their procedures?

Rebekah Henderson (45:46)
It depends on what you want to answer when you're ⁓ answering to a regulatory body.

Adam Parks (45:53)
All right. Direct.

Rebekah Henderson (45:54)
So if you control the asset, mean, forwarding an account to a firm and then letting them decide what's collectible, I mean, that is certainly an answer. ⁓ They would then have to defend, well, they would have to defend disparate impact. They would have to defend, like, ⁓ what is it, FCRA? I mean, like, it's a lot easier of an answer when you're making the decision.

Adam Parks (46:09)
It's not your answer.

Rebekah Henderson (46:24)
and selecting the accounts and just managing, hey, sue these.

Adam Parks (46:31)
Fair enough. I'm just, yeah, it's fair enough. But it's all it's also, I don't disagree with that statement. As I've talked with the law firms, you're more likely to hire data scientists to be able to look at large data sets and make decisions. The law firms are looking at a much more localized population and may not have that same visibility that you necessarily have from a data and data management perspective.

Rebekah Henderson (46:32)
Is that fair? ⁓ I felt very clearly about that one. And they may be managing their margin in a way that you don't really have any insight to.

Michael Cassidy (46:59)
Thanks. Yeah. So, and maybe I'm answering a different question, but just to make sure, ⁓ you know, I think we're all kind of, you know, there's another benefit of outsourcing of like, I do get an arm distance to some degree of risk, ⁓ you know, but if we're talking specifically about data and like data enrichment and adding other attributes, I do think there's a balance, right? I don't think we should be in the business to tell someone they can act, should act or do something.

Adam Parks (47:09)
That's okay.

Michael Cassidy (47:33)
when it's, you know, they're the attorney, they're the firm doing the actual work. It's on them. At some point, it is on them. That doesn't mean I can't give data and I shouldn't give things that can be leveraged. We should understand how they use it. Be careful what you give. But I know things like we have done of like, everyone does manage to ⁓ margin. ⁓ And Rebekah, if I speak out of turn, you could correct me or not, because no one else will know. But I do think ⁓ doing asset searches, things like that, where at a certain point, if we can bear the burden of the cost, I do get the benefit. get a larger percent of the benefit. If I can bear the burden of that, I think it could make sense if you're doing it logically, if everyone has someone to answer to. there could be a really good benefit to you, the forwarder.

Michael Cassidy (48:30)
to pay for certain things. had a conversation last week with someone who's buying email addresses, they're scoring and buying new email addresses. I think it can work. You always have to be careful how you forward it to them. You can't say it's got consent if it doesn't. All that stuff aside, I do think there is some burden the forwarder can and should take on to make things move faster and easier. That will help the scaling. That will help. Think of core costs and how much a firm has to outlay, depending on your structure, how much they're outlaying in cash just to get to suit and waiting for... There's a big cash outlay you can do little things to make your lives easier. It might help you.

Adam Parks (49:18)
So Gary, as we go into our last 10 minutes here, I have a question I wanted to direct towards you as someone who's an intermediary between the forwarders and the law firms with relationships on both sides. What can the debt buyers and creditors be doing to be a better partner for the law firms as they're going through this scaling? Right, I mean, it's kind of a fixed question, but.

Gary Tier (49:41)
Yeah, so as we're going through like the volume increase specifically

Adam Parks (49:45)
Yeah, mean, really just how can they be a good partner in general, especially during this process of increasing volumes?

Gary Tier (49:52)
besides raising rates.

Michael Cassidy (49:54)
you

Rebekah Henderson (49:55)
that

Adam Parks (49:56)
I kind of knew that one was coming, but...

Gary Tier (49:58)
Yeah, was too obvious not to touch. I don't know. I mean, it's a good question. And I honestly hadn't really thought about it for the presentation. it's all the normal stuff, like any given time. mean, communication, all those things, transparency. Maybe in terms of the volume, maybe it's Rebekah going to a firm and saying, hey, look, be honest with me. If you can't handle the volume, we're not cutting you out.

Like you're not going to lose in that scenario. Like put the onus, know, relieve that fear of the vendor that if they say no, they're in the, you know, they go in the corner and they're on probation or something. Maybe it's like, Hey, look, we know what's going on in the marketplace. Just tell me, right? If you can only handle a 20 % increase or whatever it is, we're good. I just need a backup. And I, and I know you're afraid that the backup might step on your toes or gain market share, you know, maybe bring it to them in that fashion.

Gary Tier (50:56)
to let them know that they're safe, but it is what it is and you have to protect the house, which is in this case, velocity. Just be honest with me. Beyond that, in terms of the volume, don't know, probably the larger buyers and creditors have more scale internally. So maybe it's like, is there anything more we could do on our end during this time of higher volume to ease the burden?

Gary Tier (51:25)
wouldn't know the nuts and bolts of that as well as my ⁓ co-panelists here, but maybe there's some function or functionality or something in the process that you guys could take back and take off of their plate, I don't know.

Adam Parks (51:39)
self-service in some way, shape, form.

Gary Tier (51:41)
Something, yeah.

Rebekah Henderson (51:42)
Yeah, would say probably right up there with fee, the firms probably want to say ⁓ redact your own documents ⁓ would be pretty high. Yeah.

Adam Parks (51:51)
Okay, administrative procedures. But let me ask you this, how do you feel about the law firms using offshore to do those types of administrative tasks versus however you're going to manage it internally?

Michael Cassidy (52:05)
I'm actually, this will be consistent with what I've told a couple of firms. ⁓ I don't have any problem with it. think we want to have an awareness. Generally speaking, I don't have a problem with it. We need, then speaking, this would be different for everyone, but as the forwarding entity, I need to know where you're doing the work, where the data is, all this stuff. ⁓

Adam Parks (52:06)
I don't

Rebekah Henderson (52:08)
Yeah, you can go.

Michael Cassidy (52:33)
Because there may be, although I generally, if it's something you have well structured, you've guardrails around it, I'm okay with it. But there may be portfolios, I have a different answer for legal reasons or otherwise. So I think one, if it's transparent and you know what they're doing, that I don't see why a forwarder should be uncomfortable with it. And I'm a little biased in that because prior to this, I've mostly done outsourcing and offshoring. So I'm okay with it if it's the right thing outsourced. If you have the right process, it's the right thing. Not everything can or should be offshored, if we're talking offshore in particular. But I do think we do have to help the firms in this case ⁓ gain efficiencies. There's not a lot of places they can gain it. Digital is one, some offshore is another. Automation of

Adam Parks (53:27)
So speaking of those efficiencies, I just had a question come through that I wanted to pose to the group here. How do you see leveraging artificial intelligence in the preparation of suits and managing the higher volumes that law firms may be facing?

Michael Cassidy (53:42)
We're not in sick.

Adam Parks (53:42)
I gotta be honest, I feel like your answer about outsourcing was almost the perfect answer to this question as well because it depends on what are you doing and how are you doing it. Gary, I can see you got something cooking.

Gary Tier (53:51)
Well, yeah, so I mean, this could be a whole nother session, frankly, from because I've had a lot of discussions. So Michael, your answer is really interesting. I will say, one of the top five banks called me about six or eight months ago and asked me, you know, what are other banks doing because firms are asking us. And I sort of talked it through with him and Michael, to your point, like, you know, this helps them. And he said, yeah, but when our compliance people look at it, they're like, why would we ever let

Adam Parks (53:54)
I agree, I agree.

Gary Tier (54:20)
another party. Now we have to go audit them, do all this stuff and we benefit nothing from it. And he said, I know it sounds harsh, but what's in it for us? I said, well, they get more efficient. They said the risk isn't worth it. for them, now as an issuer, there's a different brand protection element. ⁓ Circling back to the AI, that's an interesting one because it's not exactly a fourth party vendor. Right. So I don't know how that fits in. I'm aware that I've seen some contracts.

Michael Cassidy (54:36)
Yeah.

Gary Tier (54:50)
where the creditors saying you can't use AI in the process of collecting on our portfolios. I don't know how somebody takes it out for certain steps.

Michael Cassidy (55:01)
AI is going to be, so sorry to your comment about the offshore, I know we're short of time, be quick. ⁓ On the offshore, mean, not that this is going to solve, mean, certain groups, larger banks in particular, certain groups are just going to have hard rules, whether it makes sense or not. There's going to be hard lines you can't cross, but every vendor has outs, everyone outsources, everyone is a fourth party and they're talking about fourth party risk. So everyone is a fourth party. You're not your own letter vendor. You're not your own...

Gary Tier (55:18)
Yeah.

Michael Cassidy (55:30)
whatever it is, everyone is a fourth party. ⁓ That's not gonna change everyone's risk appetite. On the AI, I do think part of this we on this panel can't answer because I think the attorneys in this space would have a different, it depends again, how and where you're using AI and are you doing it in the actual legal preparation? Like there's a line that I believe ⁓ if you brought a bunch of attorneys on here, they could go deep into that side of the risks in that if you're using it for pure back office. Again, I think there is definitely a greater tolerance if this is about gaining efficiency in back office. Remove any legal doc preparation, anything with that, will not comfortably speak to. Yes, correct. But I think everyone should be looking at back office, gaining efficiency via AI in their back office if you're not.

Adam Parks (56:14)
anything that a lawyer should be doing.

Michael Cassidy (56:27)
I mean, again, make sure your seller or your client or whoever it is allows it. But ⁓ I would venture to say everyone is looking at how they can use it in the back office side because it's not consumer facing and it's not a legal document, you should be looking at it.

Adam Parks (56:42)
think those administrative efficiencies are wildly important. There's a lot of different use cases for the application of artificial intelligence to these processes, whether it's the appending of data, the man, I mean, there's so many different ways in which we can use it to improve the businesses. But as we come down to our last couple, our last few minutes of our presentation today, any final items that you'd like to cover for our audience as it relates to helping these law firms to prepare for this upcoming volume?

Michael Cassidy (57:14)
I wouldn't say this isn't specific. No, no, no. This one isn't as much for the law firms, although I think I know ours have been pretty comfortable bringing this to our attention. So I'll just say it anyway. do think having open dialogue or transparent dialogue around like the gaining of efficiency is critical because more often than not, you may be able to support the actual suit side of it or the collection side of it. But the administrative stuff, like we just mentioned,

Gary Tier (57:16)
The law firm.

Adam Parks (57:18)
Really? Good.

Rebekah Henderson (57:36)
Yeah.

Michael Cassidy (57:44)
That probably creates the bottleneck first. And I know in our case it did, it does. So I do think navigating that is having kind of open dialogue of what specifically is the issue, and setting realistic expectation, like what can we solve in a reasonable amount of time? So to me, as you scale it, it's having dialogue, which means you have to have someone that can speak to the pain points, that can have the conversation, but you have to have the conversation or it just doesn't work.

Gary Tier (58:15)
Will you guys, if you see a firm doing something really efficiently, will you take it to your other firms? Like, hey, Mike's doing this with this, your orbit, yeah, okay.

Rebekah Henderson (58:26)
100%. I think not everything translates across states. a lot of attorneys will tell you something's automated. And I don't know that they all understand what that means. I'll be like, show me that automated thing. And then like 13 clicks later, we've got it. And I'm like, well.

Gary Tier (58:48)
Thank

Rebekah Henderson (58:50)
You know, that's not automated, but along those lines, getting on site, physically seeing what's working, having conversations with the data vendors. Like, so what we've started to do is have direct conversations with the data vendors that are selling to all of our firms. And I think that's more of a helpful conversation is, you know, have you talked to this guy that they solve your problem? I don't know how much your problem is costing you, but you can ask them how much it costs to solve it ⁓ and decide if it's profitable. So. Yes to all of the above. There's a lot of opportunity.

Adam Parks (59:28)
It sure sounds like it. And as we hit the top of the hour here, I want to thank you all for coming and participating today. I really do appreciate you coming on and sharing your insights.

Rebekah Henderson (59:40)
Thanks so much, guys.

Michael Cassidy (59:40)
Thank you.

Adam Parks (59:41)
Absolutely, and thank you everybody for watching us today. We really do appreciate your time and attention and we'll see you all again soon. Bye