All language subtitles for ep 32

'cause, you know, we all own money, your
mortgage, your car, your whatever, your

credit card, let's say your student loans.

So we all own money.

You're not going to jail.

And there, there are ways
to manage it and pay it off.

We've spoken about this before in
previous episodes on collection.

The fact is we can learn an incredible
amount from the mistakes we make,

but too often in lending businesses,
we don't build the feedback loops

that are needed to bring lessons back
from collections to originations.

Welcome to how to lend money to strangers.

I'm your host, Brendan look range.

And I have been working in consumer
lending for the last 20 years.

Delivering projects in Africa, Asia.

And now as the chief solution
architect at confirm you a FinTech

that's game of finding access to
credit among the end bank, check out

our story in episode 24 of the show.

But if we can learn from collections,
then it stands to reason we can learn

even more from the companies that
specialize in helping consumers, when

loans go wrong, like the New York.

Debt MD's whose founder and CEO.

James Lambrettas is here with me today.

James.

Lambrettas welcome to the show.

You have a undergraduate degree in finance
from Penn state and an MBA from NYU stern.

So all the typical qualifications
of a banker and yet the last decade

or so of your career has been spent
some might say on the other side

of the fence, Helping consumers
to push back against the bankers.

That's probably a little bit of an
aggressive description, but certainly

helping travel datas to extract
themselves from bad credit situations

and take control of their own debt.

So let's start with that
interesting contrast.

Could you expand a little bit on your
background and what got you to move

into this world of debt solutions?

For sure.

So before launching that MD Brandon,
I worked a, as you said, in the debt

relief industry for five years, my job
was to advise people as to what their

best option was to pay off their debt,
predominantly credit cards, and then

some medical bills and student loans.

So everyday for five
years, I would speak with.

Both in-person and on the phone,
assess their financial situation

and then recommend a solution based
off their unique circumstances.

What I've found from doing that every
day, because, you know, as you can

imagine, when you speak to the same
type of person or same type of customer

every day for five years, you begin
to glean insights on them, right?

So people in debt they're
stressed out, they're under time

constraints to find a solution.

Many of them are misinformed as to what
their best option is to become debt free.

So.

That got me thinking, you know,
how can I improve this situation?

Make it easier for them
to find a solution.

And that's ultimately when I
thought of the idea for dead MD.

So I wrote a business plan,
raised some capital, and then we

built and launched the platform.

Well, one of the things you have
is certainly quite an in-depth

blog section on your website
with quite a few good articles.

And one of them that I've seen
uptake quite recently was a stat

that 74 million Americans have
more credit card debt than savings.

So this really is a huge, I don't
want to say problem, but a huge

section of the market that need to
be thinking strategically about it.

One question I did have was, do you work
primarily or exclusively with consumers?

Who've got problems with
their data that I know of.

So consumers that are
already in delinquency or.

Struggling to make payments, or
do you also work with consumers

who are just acknowledging that?

Look, I'm paying all my debts,
but I've got a lot of them and I'm

sure there's a better solution.

I just don't quite know how to solve it.

That's a great question.

So to answer it, honestly, both
because you do have that first

group of people that you mentioned
where, you know, they're really

struggling, they have average to poor.

They, they can barely keep up with all
their debt payments and for people like

that, there's solutions, whether it's
a credit counseling or debt relief,

but then you have people who, yeah.

They may have a little
bit of a, of on security.

But they're there.

Credit's good, but they're just
looking to lower their interest rate

and lower their monthly payment.

And if they have good credit,
they're able to do so, because if

the average interest rate on a credit
card today, I believe is like 19%.

So why pay 19% interest?

If you could consolidate your debt
with a loan, lock yourself at say 7%.

So you could save hundreds, if not
thousands of dollars on that debt

and pay it off in a reasonable time.

Instead of kind of spinning your wheels,
paying on the individual credit cards.

So in the end, whether you're you have
bad credit or great credit, it comes

down to making a wise financial decision.

So you can ultimately become debt
free in a short period of time.

So that's what it comes down to.

And before we deep dive a bit of
how Tet MD is helping, let's take a

consumer's point of view here quickly.

What are some of the common routes
into trouble that you see from

your bird's eye view of the market?

Are there certain specific events or
choices or even mistakes that people

are making to lead them to need
the assistance of someone like you?

For sure.

And we've actually done some
research on this, the top

reasons why people fall into.

Number one is a job loss.

We've also seen, you know, a lot
of people that get divorced end

up in debt because you go from two
incomes to one and then you might

have to pay child support alimony.

So that's another big one.

And then the third one is
like a medical emergency.

You know, stuff happens
in life, as we all know.

And you know, if you have to get
rushed to the emergency room, Now in

your, in the UK, but here in the U
S a lot of people don't have health

insurance, or aren't completely covered.

So when you have that medical emergency,
a lot of times, unfortunately, you're

stuck with massive medical bills and a lot
of people end up either taking out loans

or charging the medical bills on credit.

Those are the three major life events
that we've seen that caused people to

go in debt, which is quite interesting
because, you know, there's still, I would

say a stigma around getting yourself
into this sort of financial trouble.

And the assumption would be that, oh,
these are people who've, overborrowed.

Spent excessively on trivial items.

And of course they are people who struggle
with spending on their credit cards.

But it's also clear that these are
just a lot of the factors that all

of us face, as you say, we're all
liable to hit by a medical emergency.

Things like divorce, obviously
sort of wanting to couples will go

through, but you know, a lot of the
headlines now buy now pay later.

And whether it's going to encourage
young people to overspend where it sounds

like we also need to be thinking a lot
more about the other changes, unforeseen

events, bigger events, where it's less
of a, a bad habit to more of where you

need some help to get back on your feet.

Yeah, for sure.

And there is this negative
stigma for people in depth.

There are a lot of people who
they overextend themselves.

They spend more than they bring in.

You know, unfortunately those people
end up in that as well, but there's

one point I want to get across.

Sometimes it's people are unlucky.

They, they have these emergencies
and getting into debt as a result of.

And I think that if we go looking for
silver linings in something like COVID

one of those silver linings might be
that it's normalized collections to

some extent, and certainly normalized
going to your lender and asking for

some assistance in repaying, your.

We've had people that
are losing their jobs.

We've had people who've had the hours cut.

On the other hand, we've had people who've
benefited from government programs, or

simply because they couldn't spend, you
know, saved money during the crisis,

but you've got a better view of that
than I to what have you seen through

COVID through all the way that this
has maybe changed the tit environment?

Yeah.

And believe it or not actually
during COVID we in the U S I can only

speak for the us, but we actually
saw one of the biggest pay downs of

credit card debt, unsecured debt.

In a long time, I want to say 10 or
20 years with the lockdowns people

couldn't really go out and spend money.

With the federal unemployment benefits.

Some people were actually getting more
income than they were at their job.

So what a lot of people did was
pay down their debt and then the

government did implement these grays
periods, especially with student

loans, president Biden actually just
extended that, uh, up until may.

Not to mention there was a freeze on for
sure rent, and I believe you, you could

get approved to not pay your mortgage.

So that gave people the
opportunity with no expenses.

Really everything's closed.

Everything's locked down.

Why not pay down some debt.

So that's kind of surprising.

You think all, everything is so bleak
with COVID, which let's be real.

It kind of was, but you know, the
one positive is that a lot of people

were able to pay down some debt.

Yeah.

And I think that pattern is repeated in
many markets, certainly in the UK as well,

where payment, holidays, or mortgages,
where the most publicized first step.

And for most people who have a mortgage,
that's your biggest monthly expense.

So it only took one or two months
of not paying your mortgage

to pay down your other debts.

Now, some people took it because they
lost their jobs and they need the

extra money, but others simply took
the payment holiday, use the spare

capital to pay down their credit cards.

And I know Peter position, it will
be interesting to see was this just

a pay down that everyone benefits and
they start to build back up again,

or will this change behaviors, but
yeah, an interesting time, certainly

to be in this side of the market.

Clearly, there's a number of reasons
that consumers have caught into

the situation where they asking
for some help with managing the.

Let's talk about how debt
MD provides that help.

What services do you do?

What does it look like
to work with Tet MD?

We're the platform that connects
people with the professional help

they need to become debt-free.

We help people with credit cards,
medical bills, and student loans.

So the user they'll go onto our platform.

We have what's called
our smart debt analyst.

It asks the user questions about their
types of debt, total debt, what their

main goals are, whether it's, you know,
lower their monthly payment, lower their

interest rate, who's their credit score.

And then based off the answers to
those questions, we connect them with

the relevant company or companies
that can best assist them with their.

There is no one size fits all
solution for anyone in debt.

Everyone's got a different credit score.

Everyone's got a different income,
everyone's got different financial goals.

So we want to lay out their
options in front of them.

You know, the pros and cons
of each, whether it's credit

counseling, that settlement alone.

We want to be that educational partner
and form them on, on all these options.

Cause once again, a lot of people,
aren't sure the difference between

those three and then ultimately they
can decide for themselves what's best.

Yeah.

And I think it's interesting that we've
seen a lot of apps on the front end to

helping you to better understand which
credit card will give you the best air

miles return, but you're filling that
same sort of role at the back end saying,

look, you've taken on these various parts.

A lot of them have terms and conditions.

You probably haven't written yet.

None of us do then you're not coming
in from a data is bad approach.

Or, you know, there's an
industry here in the UK.

I'm sure it's in there around the
world as well, where people will

come in and say, okay, well we
can get your data as an office.

And it will cause quite a lot of knock-on
impacts people don't fully understand.

Whereas you've taken this neutral approach
and sometimes that at approaches, yeah.

He has a debt consolidation loan, which
has, you know, this is still taking

on credit and sometimes it's okay.

We need to make a payment plan,
but it's not a, uh, out the door.

We want to get all this data to north
and we want to make the lender suffer.

One of the things that I saw again
on, on your blog when I was scrolling

through it the other day, though,
was a warning about scams to look

out for in d'etre payment service.

What are the things to
people need to be aware of.

Yep.

Unfortunately like the debt
settlement industry is widely

known for having a lot of scams.

If you're looking into like that
settlement, that relief, if there's

companies that they say they do not charge
you any fees, I would run away as fast

as I can because in the end, whether
it's a lender or a credit counseling

agency, any company on the planet,
they're in the business of making sure.

If they're telling you that they're not
charging any fees, that that's a red flag

and I would not do business with them.

And then you have some companies
that offer like some form

of money back guarantees.

Usually this is with
debt settlement as well.

You're not buying like vacuum cleaner.

If it doesn't work, they're going
to give you your money back.

This is your financial
future at stake here.

So once again, that's,
that's another major red.

And then I guess I'll leave it at.

And, uh, I know you're, you know,
you're in the lending industry, but

some people can't get a traditional
loan from a traditional lender.

So they end up going
the payday loan route.

And, you know, I don't know
how it's still legal, but a lot

of people do get payday loans.

You're talking like
hundreds of percentage.

And you literally keep paying
and paying and paying and, and

the principle never goes away.

Yeah.

You get to pay off credit cards,
but you, you put yourself in

a worse financial situation.

So those are the three main red
flags I would watch out for yeah.

On the payday lending industry.

As you said that it's a quick one until
suddenly it just builds up and pulls up.

One, one thing I'm interested in
is if I've, if I've got this right,

somebody will come engage you in.

He has my date situation and you'll
help them solve their problem today.

And sometimes that's enough because as we
say, sometimes it's just through divorce,

a medical emergency or student debt.

That's got them where they are.

But for other people where it might
be more of bad spending habits are

the other tools that you provide to
help them in the longer run I've seen.

As I mentioned already a few times,
you've got that great blog and you put

out a lot of good content that how else
can you perhaps build these strong.

So that they don't fall into
the same situation down the.

I feel like most people keep some type
of spreadsheet or budget to see what's

coming in, what's going out, but we've
actually built out basically this debt

analysis, personal finance spreadsheet.

As long as you input your debt correctly,
with your monthly payments, you can see

exactly what you're paying out each month.

You know, if you keep paying X
dollars, this is how long it's

going to take you to pay off.

And we send it to anyone who subscribes
to our email list, you know, because

when you have four or five credit
cards, the bills are coming and

then that one comes 10 days later.

You never really have a good snapshot.

You know, you just keep paying and
you don't really think about it.

Right.

And a lot of people have automatic
payments set up, so it doesn't

occur to them with this personal
finance, uh, analysis spreadsheet.

They can see exactly what
they're paying when you have

like 20,000 or 30,000 in debt.

You'd be surprised people are
paying a thousand, $1,500 a

month and just minimum pay.

When you put it in front of somebody's
face and they see how much they're paying.

That's when they know they
really need to do something.

Get a loan to pay it off or do
it on their own, minimize your

expenses, take on another job.

But the point being is doing
nothing is like probably one

of the worst things you can do.

Yeah.

And it's a message has come
up in a few interviews.

I've done with people in
collections where we'd all have

this fear of being yelled at.

It meant that you'd scrambled
and try and make solutions.

You take out this payday loan, or you
would go down to minimum payment and

then maybe you take another credit card,
have minimum payment, all know hope

you could solve this without having
to be yelled at nobody ever spoke to

the lender until it was far too late,
but as collections as modernized, and

certainly COVID has helped here again.

Making it online, making ways
to communicate without the

embarrassment of a face-to-face
or a phone call trying to make it.

So consumers do have that conversation
early on, because as you said, the

worst thing you can do is nothing.

And I think that's one thing I want to
pick up on here now, because he, as you

mentioned, I've always worked in lending
and I think one big systematic problem we

have there is that we turned have a very
good feedback loop at an individual level.

So we would bold a model
for a lending product.

And we would look at the risk profile
and we'd say on this portfolio.

So let's say if we issue a 10,000 loans,
as long as less than 2% of them go to.

We're making profit and then we'd roll
out the product and we'd measure the risk.

As long as it's less than 2% is going bad.

We never really think about it, but
every one of those people that do go

to LinkedIn for them individually as
usually some sort of personal trauma,

not every time, but I'd say, and maybe
you do have some numbers, but the

vast majority of people something's
gone wrong, they're upset about it.

It's really stressful.

It's trauma.

And they don't want to
go through collections.

No, never, but we kind of forget
about them because while it's

within, within our target, for sure.

But these consumers, no doubt, one lenders
to think about it and actually say, how

can you build a better product so that
people don't go through that and you will

have had a unique experience of this.

You know, we were supposed
to learn from our mistakes.

You can see the lending
industry's mistakes.

Have you got any thoughts about how
lenders should be designing their

products or doing their marketing
or managing their customers in a

way that can be better for everyone?

Yeah.

And I'm sure as, you know, every loan
company markets, the quote unquote

debt consolidation on that's like
one of their big offerings, it's

a buzz term and maybe they market
it, you know, and everyone sees it.

Now the purpose of the debt
consolidation loan is pay off their debt.

Right.

Let's just say they paid
off their credit cards.

And I'd love you to chime in
here, Ken, the lender who who's

offering that consolidation.

Ask or somehow make the bar.

Closed down their credit cards that
they just paid off or refrain from

using them because I've seen this
firsthand where a person gets the loan,

pays off their credit card and then
proceeds to charge them back up again.

And that's a situation where
they're most likely going to default

if they have to now pay their
credit cards and this new loan.

So you mentioned, how can
they make everyone better off?

Is there a way to.

Oh, you have to close the cards
though, or you can't charge on

them because once again, I think,
you know, everyone benefits from.

One other thing, and I'm sure you
definitely know more about this than I do.

We're working on, it's almost dumb, a
machine learning application where we

can actually predict what the optimal
debt relief option is for a user dive

deeper into their financial profile.

Yes, I'll speak to your first one.

When in the very early days, we, and
this was partly because logistically

you couldn't easily do this, but
we would manually take on the job

of closing the consumer's account.

So we would say, bring your
data across to us and we will

close your other cards for you.

And we could get away with that.

But what happened then is
from a competition point of

view, smooth the process.

People would start giving up on that.

So now we have this situation
where exactly as you described.

I will give you a debt consolidation,
loan, but your credit limits.

So sitting there and it's
in the back of your mind.

And next thing you know, you've now
just caught the debt consolidation

loan, and your credit limit used up
that said, you know, can we stop?

It wouldn't be something
that needs new technology.

It's only doesn't even need new networks.

If we look at something like
the gaming industry, you know,

you can blacklist yourself.

You can say, I don't want
to, I don't want to Campbell.

There is in the credit bureau world, you
can freeze your credit profile, which is

usually a defense against identity fraud.

I'm sure that same
process could be worked.

And we just need to tweak it a little
bit that when somebody volunteers.

This is what I want, my
weaknesses runaway Spain.

And I would like to be helped.

Would there be ways around it?

Yes, of course.

So, yeah, it's not perfect,
but I think you're right.

That it shouldn't be that
hard for a consumer who is.

This is the problem.

Yeah.

And you know, one last thought on that,
where you tell people, or you make people

close out all their credit cards that
is going to impact their credit score.

So that's why a lot of people are
going to balk at that because.

Credit score is important, but
all these banks, they convey it.

Like it's like your firstborn child.

Like God forbid it goes down three points.

And once again, I'm not, I don't want
to downplay it, but I don't think

it's the end all be all when it comes
to having good financial health.

I think that's more so how much cash do
you have in your, in your bank account?

How much savings investments?

Zero debt.

Most importantly, the last 10 years
of my career were in quite a few.

And I'm the biggest proponent
of look your credit score.

If you've missed a payment,
you'll have a bad credit score.

If you've never missed a payment,
if you keep hitting your limits,

you're kind of in the middle.

But beyond that, it's largely irrelevant.

The marketplace is such that
if you qualify for a mortgage,

there'll be competition.

You'll get a good rate.

If you want a credit card,
you can get a credit.

Does your oldest account on record help?

That helps a little, but it's,
it's not changing anything.

The level of detail in the credit score
is fantastic, but few lenders use or can

even use a strategy that deep and we've
wanted people to value the credit score.

We want them to understand
it's there, but.

One of the problems with the way we've
talked about credit scores and we've

made them too personal mathematically,
would we do the credit score?

Right.

We calculate it without
knowing who you are.

We strip away all those details.

So it's not a judgment on ups.

What we're saying is from the data we
have in front of us, looking back people

with this pattern on average, that does.

And I think if we can get people to stop
seeing it as that, what have I done wrong?

I can be the most confident about
you when I've got the most data.

So if you have lots of credit cards,
you've paid, I can see that I can be

a little bit more confident, but if
I don't have that, it's not negative.

It's just saying I'm a little bit less.

Sure.

And I think there is now a time.

Where we almost need to step back and
say, okay, we've maybe gone a bit too far.

You can ease up a bit
on your credit score.

They fluctuate.

They change on some things
that are entirely irrelevant.

Your credit bureau score is important.

But there's other ways
to measure your risk.

There's other ways to measure
your favorite Realty and

let's say, you're right.

What is your savings?

What is your net wealth?

What is, how much do you owe people?

How flexible are you to
ride through a crisis?

All of that is going to be
more important to a lender.

Then five points here with a, on a fire.

And then, yeah.

And in terms of machine learning,
I think one interesting thing with

machine learning is that it's actually
not used all that much in the credit

bureau world, because we use using very
structured data that doesn't necessarily

need machine learning, but it's been
tried out in a lot more of these other

scenarios, more like what you're saying.

And I really think that's where
it comes into its own because each

month while it probably each week,
each day, maybe different products

are being offered by the model.

Different situations are
presenting themselves.

And that's really where something
a lot more flexible comes in to

have a system who can do that.

You don't have to go
through feeling the state.

Feeling the embarrassment, feeling the
stress, throw it all at the machine.

Come give me three solutions.

Yeah, I can pick the
one I went from there.

It's a clean process.

And I think where we can take that
trauma art move away from that school

model where, you know, you've been
naughty and are you must endure are

shouting at you until you pass back.

I'm still in the lending industry.

So I probably shouldn't be too
aggressive on this note, but.

We can push back a little bit.

NCN if no fraud was committed, this
was a business decision that was taken.

It's a profitable business
decision overall for the lender.

And don't take it too personally.

Yep.

And, uh, a quote I heard a while
back, it's not a crime to own money.

If it was we'd all be in jail.

'cause, you know, we all own money, your
mortgage, your car, your whatever, your

credit card, let's say your student loan.

So we all own money.

You're not going to jail.

And there, there are ways
to manage it and pay it off.

Uh, well, it can, my first episode,
we did a history lesson at it in the

past, they were jails for this sort
of thing, but yeah, I think that's a

message that does need to be heard over
and over, or don't go wild just because.

Uh, contract that was
entered into in good faith.

Turns out you couldn't afford the
debt, or you got out of control.

You know, that was a risk that
was taken knowingly by the bank.

So at some point we do need
to just get rid of that.

Um, but James, thank you very much.

If consumers or anybody really wants to
learn more about how to work with debt MD,

what's the best place for them to contact
you or to learn more about your business?

Our website it's www dot
debt, M D D E B T M d.com.

We have a great blog with a lot
of free resources, calculators.

And if you are somebody who isn't
sure what to do with their debt,

you know, feel free to take a look.

And, uh, Brandon, thank you for having me.

I thought this was a great discussion.

Yeah.

And hopefully we can do it again.

Yeah, definitely.

And thank you all for listening.

If you haven't done so already, like
share and subscribe to the show,

how to lend money to strangers is
written, hosted, and edited by myself.

Brendan lick range, the theme
tune and show music is by.

And you can find show notes, written
transcripts, more in depth articles and

details on how to book me for speaking
engagements@wwwdotourtolendmoneytostrangers.show.

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Next Thursday.

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