Technology adoption and potential regulatory changes will be top of mind for collections agencies for 2025. Technology will help increase agency efficiency and increase collections. And potential regulatory changes could result in substantial changes to the collections landscape.

Here is a brief look at what’s in store for the collections industry in 2025.

The impact of AI

AI is poised to be the next “big thing” in the collections industry. Debt collections agencies are starting to adopt this technology to improve operations and increase collections. AI can do this in a multitude of ways, including:

• Efficiency: AI can automate routine tasks, such as sending reminders, processing payments, and updating records. This reduces the workload on human agents while minimizing errors.
• Predictive analytics: AI can analyze extensive amounts of data to predict consumer behavior, such as the likelihood of payment or default. This allows companies to prioritize their efforts on accounts with the highest recovery potential.
• Personalized communication: AI can tailor communication strategies based on individual profiles, including best time to contact and by the consumer’s preferred channel. This personalization helps improve engagement and response rates.
• Compliance and risk management: AI can help ensure compliance with industry, state, and federal regulations by monitoring interactions and flagging potential issues. It can also assess the risk associated with different accounts, helping companies make informed decisions.
• Enhanced customer experience: By providing more personalized and timely interactions, AI can improve the overall customer experience, making the debt collection process less stressful and more efficient for consumers.

The use of AI by collections agencies is gaining traction. According to a TransUnion report, approximately 11% of third-party debt collection companies were already using AI and machine learning (ML) technologies. And around 60% of third-party debt collectors were in the process of deploying AI/ML-based technology.

The report also revealed that:

• 58% of these companies use AI to predict payment outcomes, such as a person’s ability or willingness to pay a debt.
• 56% apply AI to segment customers and profile them for various workflows.
• 47% utilize AI to recommend communication strategies.
• 46% leverage AI to anticipate consumer behavior.

While still in the early stages of adoption, AI has already been proven to enhance the efficiency, accuracy, and effectiveness of debt collection. Collection agencies using AI will benefit throughout 2025 as adoption of this technology increases.

Regulatory changes

The change in political leadership in the U.S. could have a significant impact on the collections industry, especially with the Consumer Financial Protection Bureau (CFPB).

While it hasn’t been confirmed, it is likely that the CFPB’s current director, Rohit Chopra, will be replaced. If that happens, the potential candidates to replace him will likely have different regulatory philosophies, which could shift the agency’s focus.

In addition, it is being suggested that the incoming administration may freeze new regulations from executive departments and independent agencies, including the CFPB. This could halt or delay the implementation of rules that were finalized under the previous administration. The new administration might also reverse or reconsider several rules and policies established by the previous CFPB leadership. This includes potential changes to rules related to small business credit, consumer data portability, and credit card late fees.

The results?

The approach to enforcement and supervision is also likely to change, potentially becoming less aggressive compared to the previous administration. This could impact how the CFPB manages consumer complaints and regulatory compliance.

If existing CFPB rules are modified, debt collections agencies could see less-stringent regulations, potentially easing some compliance burdens. And, depending on the administration’s regulatory philosophy, it could mean fewer aggressive actions against debt collectors.

In addition, a freeze on new regulations could delay the implementation of any new rules that were already in the pipeline. This might provide debt collection agencies with more time to adapt to existing regulations without worrying about immediate changes.

What’s more, any ongoing litigation related to CFPB rules, such as those involving small business credit and credit card late fees, might see changes in how they are defended or enforced.

States’ response?

The potential for a freeze in regulations or a relaxation of regulations at the federal level could result in states responding by increasing their regulations. These could include, but not be limited to:

• Debt collection
• Debt buying
• Collection litigation
• Data privacy
• AI
• E-sign
• State data breach laws and regulations.

While nothing has been determined regarding these regulatory changes, it is logical to foresee a period of regulatory relaxation for debt collections agencies. This could include potentially fewer enforcement actions followed by a probable increase in regulation at the state level.

Time to prepare

Is there a way for collections agencies to take advantage of the growth of AI while, at the same time, preparing for the potential regulatory changes?

Well, yes, with an innovative and flexible collections platform built on a Software as a Service (SaaS) foundation. Such platforms include features, such as:

• A workflow that uses data feeds to configure queues, campaigns and more
• AI-driven segmentation that groups accounts to determine propensity to pay and best time to call to see more successful outcomes
• Real-time compliance with guardrails built into the workflow

This combination of flexible design with built-in intelligence gives collections agencies the ability to adapt as technology and the regulatory landscape continues to change.

No one can predict everything that will happen in 2025. But collection agencies can prepare for potental changes by taking advantage of these innovative features.