By Joyce Carroll
Special to Delaware Business Times
Consumer debt is at a staggering $3.4 trillion in the United States. While lenders want repayment, the means to the end isn’t always a clear path.
Charged-off debt, that which has been removed from the books – but not forgiven – is often passed to collections agencies or sold to debt buyers. And, like that ugly wedding gift re-gifted twice over, one’s debt may have many holders during its lifetime. As a result, creditors and consumers can’t readily keep track.
Site launched locally
Global Debt Registry in Wilmington hopes to increase transparency through an online platform that stores, analyzes and shares information among original creditors, collectors, and consumers. Their innovative approach has even caught the attention of the White House.
“There is a gigantic gap in this industry,” said Mark Parsells, GDR’s CEO. With the exception of in-house tracking by payday lenders, he’s unaware of anybody providing such a comprehensive service.
Like Carfax, a consumer site giving a used-car purchaser a vehicle’s history, GDR has created a database for consumers wishing to track their debt history. Debtlookup.com launched last year.
“Consumers have had no way of validating authenticity,” said Parsells, referring to the legitimacy of a collections caller or the particulars of the presumed debt.
Mike Gibb, CEO of Canvas Media, knows the industry well. His media group owns AccountsRecovery.net, an industry social media site with 4,500 members, and RepoPulse.com, a news-oriented site for those in the auto-repossession business.
“Any type of standardizing verification within the debt buying industry is something that the industry could benefit from,” he said, adding, “The industry has had a negative stigma. … Because it’s been largely unregulated, it has attracted a number of individuals whose motivations are more selfish or who are more interested in taking advantage of the situation vs. doing things best for the industry.”
One need only note the trio of unrelated settlements last month to realize the value behind what Parsells is attempting to do: In July, the Federal Trade Commission reported the return of several million dollars to nearly 95,000 consumers duped by Asset Capital and Management Group, a collections firm accused of extorting monies by making false threats, and an agreement with a collections firm that had solicited Spanish-speaking consumers for repayment of phony debts.
Even some big-league players are finding themselves in hot water. Chase Bank, U.S.A., N.A. and Chase BankCard Services Inc., headquartered in Newark, was ordered to overhaul its debt sales and stop its collection practices on a half-million consumer accounts. Attorneys general in 47 states, Washington D.C., and the Consumer Financial Protection Bureau took action following the financial institution’s practice of illegally robo-signing court documents and selling bad credit card debt. The financial institution has since stopped the practices, but according to the ruling it must pay at least $50 million in consumer refunds, $136 million in penalties and payments to the CFPB and states, and a $30 million penalty to the Office of the Comptroller of the Currency.
In response to the settlement, Chase issued the following statement: “We are pleased to resolve these legacy issues and are working to complete our remediation of affected credit card customers.”
Given the scope of the debt resale market, even original lenders have difficulty following the paper trail. To rectify the situation, GDR is working with some of the country’s largest financial institutions, debt buyers, and collections agencies. At 55 clients registered and counting, Parsells said the company is not yet at critical mass level. Still, its list of clients and partnerships is impressive. In April, one of the nation’s major credit reporting agencies – TransUnion – joined forces.
“We are excited about the potential of TransUnion’s relationship with Global Debt Registry,” said Peter Ghiselli, vice president of emerging markets at TransUnion. He added, “GDR fits in with TransUnion’s mission of using information for good [purposes], providing our customers and consumers transparent information so better decisions can be made.” The service will enable TransUnion’s collection customers to solve the chain of title issue by giving registrants a means of tracking the location of debt that may have been re-traded to another creditor.
“We see our role as having a major B-to B (business-to business) focus. We want to ensure that banks are compliant with federal and state law as it relates to tracking and storing information [related] to consumer debt,” Parsells said, adding, “We’re really developing an independent system that’s meeting the needs of everyone in the eco-system …We are looking at every non-mortgage consumer asset class.”
The company is making a large ripple in the fintech industry and beyond. Global Debt Registry received the bronze award in the banking category at this year’s American Business Stevie Awards. The international media and the White House are also paying attention. A White House invitation earlier this summer netted positive feedback regarding GDR’s consumer services, and culminated with plans for follow-up meetings.
Originally founded in 2006 by the son of a debt collector, GDR was a concept introduced before the market was ready, Parsells said. The company folded and was eventually sold. Parsells joined as its full-time CEO in 2013, bringing a rich background – he’s run multibillion-dollar divisions for Citigroup, American Express, and Bank One in addition to his own business ventures. With regard to GDR, Parsells retained the company name but overhauled its product. He, along with his leadership team, spent the next two years building out the technology required to support the online platform.
What’s next on GDR’s horizon? Parsells hopes to expand into the growing arena of medical debt, and emerging peer-to-peer lending platforms. “We have ambitions to move globally,” he said, adding “[We’re looking at a] way to host on Amazon Web services. I think in five years time no longer will anyone [ask] how can there not be a tracking system.”