Why are collection agencies slow to adopt new technology?

What the trade press says holds agencies back

Compliance and legal risk. An AccountsRecovery.net recap of a 2017 webinar, given by Ontario Systems’ chief compliance officer and a BillingTree executive (BillingTree sponsored it), called concerns about whether new technology complies with state and federal rules, and worries about CFPB investigations, one of the main obstacles for agencies. It added that many were slow to put money into the infrastructure. A 2021 AccountsRecovery.net article described the same instinct: companies holding to the status quo for fear of lawsuits and lost money, doubting that technology makes much difference to contact rates, and preferring not to fix what is not broken.

Client audits and security demands. Clients carry the risk of what their agencies do. In an insideARM series on how healthcare providers audit their collection agencies (Berta Alicia Bustamante, 2017), the point is that a provider cannot hand off its duties by outsourcing, both parties can be held accountable, and so providers should audit their agencies routinely. Every new tool an agency adds is one more thing to explain at the next audit. At a 2010 industry panel reported by insideARM, one panellist, then chief operating officer of a large agency, said the cost of entering the business had changed because clients each set their own, often conflicting, security requirements.

Thin margins. The same insideARM article (Stephanie Eidelman, 2010) noted that contingency fees once sat around a third of what was collected and had been pushed down toward the high teens, while some costs rose, and that better technology had only partly made up the difference. In AccountsRecovery.net’s January 2025 summary of a TransUnion industry report, labour and technology costs were rising, cost control was critical, and nearly half of companies named data security as their top concern.

Stretched IT and integration. Robert Fite, writing in insideARM in 2012 for Telrock, a collections technology vendor, argued that new tools pay off only when they connect to the collection system an agency already runs, and that messages sent outside it are risky and systems that do not talk to each other can corrupt data. In our view each integration lands on the same small IT team.

Vendor promises. insideARM’s Research Assistant newsletter (August 2025) said some advanced AI vendors were only beginning to understand collections compliance, and that some agencies found deficiencies or missing capabilities after buying. Its advice: avoid long contracts for now, test with your own collectors in real scenarios, and be wary of a polished demo.

Why the caution is rational

In our view the caution makes sense. An agency’s downside is lopsided: a gain from a new tool is a few points on a client scorecard, while a compliance failure can cost the client relationship, a lawsuit or a licence. Margins leave little room for a project that fails, and clients’ audit questions turn every tool into paperwork. An agency that waits for proof is doing its job.

The cost of waiting is real too. The 2021 AccountsRecovery.net article described the status quo as a drag on competitiveness, and the 2025 TransUnion summary found larger firms more likely to be using AI and machine learning. The answer, in our view, is a first step built to be safe.

What makes a safe first step

1. Nothing changes for consumers. The first step should not touch what collectors say, what consumers are offered, or contact rules. Your compliance team can then review it as a data or vendor question.
2. Small scope. One client or campaign, with a clear owner. Starting with one campaign covers how to choose it.
3. A control group. A random split, the same weeks, and a measure agreed in advance, so the result answers the question rather than the sales pitch. How to prove a routing change worked.
4. Your own collectors and data, not a demo, as the insideARM newsletter advised.
5. A light IT load. Exports you already run, and nothing to install where possible. The IT effort for agent matching is one example of what to ask.
6. Approval before data moves, from compliance and from any client whose agreement requires it. Getting through a compliance review.
7. An easy exit. Short commitments, and what happens to your data at the end, in writing.

Sources

• AccountsRecovery.net, webinar recording on upgrading payment processing 2017 recap of a BillingTree-sponsored webinar with Ontario Systems’ chief compliance officer; both are collections technology vendors.
• AccountsRecovery.net, The best tech you haven’t heard about yet 2021, on the industry’s attachment to the status quo.
• insideARM, Focus on 3 key areas to audit collection agencies: compliance plan Berta Alicia Bustamante, 2017, on why healthcare providers audit the agencies that collect for them.
• insideARM, Collection fees should be based on work requirements Stephanie Eidelman, 2010, on falling contingency fees and rising costs.
• AccountsRecovery.net, Collection industry faces challenges amid growth and innovation January 2025 summary of a TransUnion industry report.
• insideARM, New technology must be integrated with traditional collection tools Robert Fite, 2012, writing for Telrock, a collections technology vendor.
• insideARM, Research Assistant weekly: AI vendors, be vigilant August 2025 peer group newsletter; it carries sponsor placements from collections technology vendors.