Is It Legal to Use AI in Debt Collection? What You Need to Know

Jul 31, 2025

Last week during the ACA International Convention, the HealPay Team became familiar with the latest AI resources available to the industry. AI (artificial intelligence) is reshaping the debt collection industry—automating tasks, increasing outreach efficiency, and improving the consumer experience. But with innovation comes responsibility. If your agency is using or considering AI tools, understanding the legal implications isn’t optional—it’s essential.

In this post, we break down the legal issues of using AI in debt collection, the regulations that still apply, and best practices to stay compliant while modernizing your collections process.


1. AI in Debt Collection Must Follow Existing Laws

Using artificial intelligence in debt collection doesn’t mean you get to bypass legal frameworks. If anything, AI compliance requires closer scrutiny. The following federal regulations apply whether you’re using a human agent or an AI-powered assistant:

  • Fair Debt Collection Practices Act (FDCPA): Your AI can’t mislead, harass, or impersonate a human agent. It must act in ways consistent with consumer protection standards.

  • Regulation E & E-SIGN Act: If your AI system facilitates payments, it must capture valid consent and provide electronic disclosures legally.

  • Telephone Consumer Protection Act (TCPA): Automated voice messages, including those from AI IVRs, require prior express consent from consumers.

  • Gramm-Leach-Bliley Act (GLBA): If your system processes consumer financial data, you must safeguard it with robust data protection practices.


2. Consent and Disclosure Are Critical

Consumers need to know when they’re speaking to AI—and consent to it. Full transparency builds trust and keeps your organization compliant. Make sure you clearly disclose:

  • That the system is AI-powered

  • What data is being collected

  • How the data will be used and stored

If you’re using AI for behavior tracking, automated decision-making, or payment processing, consumers must be able to opt in (and sometimes opt out).


3. Watch for Algorithmic Bias in AI Decision-Making

The Consumer Financial Protection Bureau (CFPB) is closely monitoring how AI is used in credit and collections. If your AI system segments consumers, prioritizes accounts, or determines repayment plans, it must:

  • Be explainable and auditable

  • Avoid discriminatory outcomes (especially under ECOA)

  • Be tested and reviewed regularly for fairness

Unmonitored AI decisions can lead to regulatory investigations or lawsuits—especially if they result in biased outcomes based on race, gender, or location. Always have the ability to defer to a human operator when problems are encountered.


4. Keep Strong Audit Trails

Whether it’s an AI chatbot, voice assistant, or payment system, you’ll need records. Create a compliance-friendly AI infrastructure with:

  • Time-stamped logs of conversations

  • Consent records and payment authorizations

  • A clear record of account decisions made by AI

This isn’t just good practice—it’s vital in the event of disputes or legal audits.


5. Don’t Forget State-Level AI and Privacy Laws

Several states are creating or enforcing laws specific to AI and data privacy. For example:

  • California’s CCPA/CPRA

  • Colorado Privacy Act (CPA)

  • Virginia Consumer Data Protection Act (VCDPA)

These laws may require you to inform consumers if their data is used in automated decision-making—and give them a way to opt out.


6. Best Practices for Using AI Legally in Collections

To keep your AI legally compliant in the collections industry:

  • Choose vendors that build with compliance in mind

  • Conduct routine audits of your AI systems and outputs

  • Train your staff on AI compliance and responsible usage

  • Stay current on federal and state AI and privacy regulations


Compliance Is Your Competitive Advantage

Using AI in debt collection can transform your operations—but it has to be done right. With regulatory scrutiny increasing and consumer expectations rising, AI compliance isn’t just about avoiding risk—it’s about building trust and modernizing ethically.

At HealPay, our AI tools—including HealPay Assist—are built from the ground up with FDCPA, TCPA, and Regulation E compliance in mind. We help agencies collect smarter—without cutting corners.


Want to see how HealPay AI tools can automate your collections workflow while keeping you compliant?
Request a Demo Today »

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