Hide `n Seek
Will skip tracing get easier with the flood of free information on the Internet, or more difficult with the rash of privacy legislation? Either way, traditional tracing vendors face a formidable combo of challenges. How are they coping?
By Elayne Robertson Demby
The Internet has dramatically changed the face of the skip-tracing industry. "Many firms are doing skip tracing themselves on free Internet sites that were not accessible five years ago," says Kenneth H. McMaster, president of Excel Investigations Inc., a skip-tracing firm in Alsip, Ill.
Today, he says, all a company needs to do a basic search is a name and an idea of where the person lives. By contrast, five years ago, a lot of information - such as date of birth, Social Security number, or driver's license number - was required to get a search underway. "And five years ago I was getting information off of microfiche at courts and libraries," McMaster says. "I needed access to voters' lists to get birth dates to start a search. Now that way of doing research is antiquated."
All a company needs these days is access to the Internet and a name to get started, McMaster says. The result: When a collections agency knocks on the door of a skip-tracing firm, a cursory search already has been made. To find still-missing debtors, skip tracers need to be more resourceful.
To remain competitive, skip tracers have to have resources not available to the general public, particularly since searches farmed out to skip-tracing firms will be for people and assets much more difficult to locate. "Five years down the road," worries McMaster, "I don't see a whole lot of money to be made in skip tracing because more information on the Internet will allow more companies to do it in-house."
In fact, some companies now are making a business of helping collections operations bring the chore of finding debtors or missing assets in-house. One of these is ChoicePoint Inc., a spin-off from Big 3 consumer credit repository Equifax Inc. Last October, ChoicePoint introduced a new product called Debtor Discovery, which makes use of the 10.5 billion records in the company's database, arguably the largest commercially available repository of public records in the U.S. "There is a constant mind shift between in-house and outsourcing," says Kimberly S. Bean, ChoicePoint's national sales director for the banking and financial services group in Boca Raton, Fla. "The only way [credit card] issuers will move work in-house is if it's efficient, automated, and works with their current systems."
Companies can access Debtor Discovery online, off-line, system-to-system, or via batch processing. In initial test runs of the product by one of the country's top 10 credit card issuers, which already had used other online products and two outside agencies, Debtor Discovery was able to furnish additional information to locate a debtor 55% of the time, Bean says. Debtor is able to link people with their assets, relatives, or another individual, such as a roommate, with whom they previously had an association. It can link individuals with businesses, as well.
First Data Solutions is another company marketing directly to agencies and companies wanting to handle skip tracing in-house. First Data markets an integrated suite of products under the trade name FastData. One of the most useful components for the collections industry, says Timothy F. Maurer, vice president of marketing at First Data Solutions in Omaha, Neb., is a product called Customer Contact. It allows collectors to conduct hard skip activities by integrating the most current data for locating people into the agency's existing system. The information can be delivered either online or batched on the Web, he says, so clients can get the information they need, delivered in a manner that is most efficient for them. One of the main features of Customer Contact, says Linda E. Vidas, project analyst at First Data Solutions, is that it lets collections managers set the search sequence that they want to maintain when conducting a skip trace. First Data counts among its clients many of the top credit card issuers, including banks, retailers, and consumer finance operations, plus many of the top auto finance companies.
The drive to improve the efficiency of operations is another trend affecting the industry, Maurer says. Companies are always working to keep costs down so collectors need to reach the right person and arrange payment, if possible, quickly. Automation of the skip-tracing process is key in today's labor climate, Maurer points out. "Automation enables collectors to produce more quickly and cost efficiently in a tight labor market," he says. That creates demand.
And prices have come down. Access to the data has become less expensive as access has become easier over the Internet, says Michael S. Dores, president of Merlin Information Services, based in Kalispell, Mont. His firm sells public record information, such as property, motor vehicle, and court records over the Internet and on CD-Rom to clients interested in locating people and assets.
To remain competitive, Dores says, skip-tracing companies have to distinguish themselves. For example, he says, Merlin Information Services specializes in national databases and California databases and making it easier to locate information in them.
But collections agencies themselves should not be impacted directly by the new regulations. Under the Fair Credit Reporting Act, companies that do collections are entitled to use credit reporting data in collections, says Margaret P. Eisenhauer, an attorney with the law firm of Hunton & Williams in Atlanta. But while collections agencies may not be directly impacted, they will nonetheless feel the fallout.
The issue, Eisenhauer says, is the source of the information. A loophole in the FCRA has allowed credit-reporting agencies to sell an individual's name, address, and Social Security number, she says. That's the information collectors need, not the entire credit report, so they typically buy it from a data vendor. "Why pay $3 for a credit report when you can pay 30 cents and get it from a reference data company?" she asks. But the new regulations now say that the name and address from a credit report cannot be distributed to anyone who does not have a permissible purpose to get a credit report. Data vendors don't qualify. "True collections agencies," says Eisenhauer, "can still get the information, but they may have to change how they get it." And a likely contraction among vendors selling the data could boost prices. "So collections agencies will be impacted by the new regulations," she says, "because getting information will cost more, and there will be fewer sources to get it from."
Skip-tracing firms will no longer be able to access credit header data. "True skip tracers are going to have to find new ways of getting the information from public records, and not from credit reporting sources," Eisenhauer says.
The situation has turned things upside down for credit data providers. "Everybody is still looking at the products they provide, and nobody has a definitive answer yet as to how these new rules will impact them," says Norman G. Magnuson, vice president of public affairs at the Associated Credit Bureaus in Washington, D.C.
'Finding New Sources'
Still, some providers are optimistic that they will be able to provide debtor-location information despite the new rules. For example, ChoicePoint's Fagan believes Debtor Discovery will still have the ability to find people if credit headers go away: "We believe with information we have at hand we can still comply with the law, yet provide the needed information."
A number of the providers of credit header information, including Trans Union and the Individual Reference Services Group, filed a lawsuit in federal court challenging the new regulations. Whether that will change the outcome remains to be seen. Meantime, skip-tracing vendors must regroup and find new sources of information so hidden assets and missing debtors can still be found.