AI in debt collection - the pros and cons

Businesses turning to AI for debt collection may not get the results they hope for, new research from Yale School of Management has reported.

The findings have highlighted concerns about its effectiveness and impact on customer trust.

Led by Professor James Choi, the 2025 study analysed data from over 300 debt collection firms over two years. The findings: human agents consistently outperform AI in recovery rates, customer engagement, and satisfaction.

Key findings included:

• 23% higher recovery rates with human agents compared to AI systems.
• 34% more debtor responses to human outreach.
• Higher complaint rates for AI, often due to impersonal or poorly timed messages.
• Lower satisfaction and retention among customers contacted by AI tools.

“AI can optimize timing and language,” said Choi, “but it can’t replicate empathy or build trust. Debt collection is about communication, not just automation.”

Despite lower operating costs, AI systems come with hidden downsides. One European fintech firm was fined €2.5 million in 2024 after its AI collector violated consumer protection laws. Other issues include AI sending payment demands after debts were cleared, damaging reputations and customer relationships. Backing up the argument that there really is no substitute for human interaction and a personal professional approach to debt recovery.

Legal risks also loom large. Debt collection is heavily regulated, and AI systems can unintentionally breach laws and regulations, leading to fines and legal scrutiny.

Some companies use AI for initial contact and humans for follow-up, but the study warns this can backfire if the first AI interaction is negative or confusing. Human collectors can be trained, monitored, and held accountable, but if an AI acts up, liability is harder to assign, and the reputational risk is huge.

Yale researchers recommend a human-led, tech-supported model. Use AI to assist - not replace agents, improve analytics, and enhance customer insights. Most importantly, prioritise ethical, empathetic communication.

At Controlaccount, we recognise that whilst AI debt collection may promise efficiency, it still can’t match the effectiveness or emotional intelligence of a human collector. Our expert team and highly trained to negotiate payment terms with debtors, build relationships and identify vulnerable people when required and handle each case ethically, effectively and compliantly.

 As a member of the Credit Services Association, we follow the CSA Code of Practice for handling customers in vulnerable circumstances and financial stress, and we incorporate this into all of our working practices. 

A good debt recovery agency should be able to find a balance between processing volume and building automation as well as offering multiple communications channels for customers, and whilst AI has a role to play in this alongside analysing data and forecasting results – we do not underestimate the importance of human interactions, as processes and therefore outcomes cannot be adhered to or achieved to the same level with AI led debt collection.

Interested to speak to one of our team? Get in touch today.