PAIR Finance lawyer Mathias Kadler: “As a fintech, we have advantages in dealing with the new collection law”

Berlin-based fintech PAIR Finance has been disrupting the debt collection sector since 2016. Using AI, behavioral psychology and data science, it is creating a digital, self-determined customer experience for people with open bills for the first time. Mathias Kadler (40) is general counsel of PAIR Finance. The experienced litigator has been on board since 2018 and is part of the management team. In this interview, he explains how he is succeeding in shaping the future of the collection industry.

Mathias, you are our General Counsel and thus the guardian of the law. What does your work look like?

As General Counsel, I manage the legal department with a team of currently two colleagues and am also responsible for the professional performance of our services.

Working at PAIR Finance is particularly exciting because in a debt collection company, the tasks of the legal department include not only internal legal matters of the company, but also the specialized areas of our legal services. We therefore essentially take care of two areas:

On the one hand, we naturally act as a classic legal department and advise the business units on all legal matters with customers and partners and take care of the corporate law issues of the PAIR Finance Group.

In addition, however, we also ensure compliance with the areas of law that are significant in collection activities, in particular civil law, civil procedure law, including enforcement and insolvency law, and cost law. As a “Qualified Person” of PAIR Finance – a position required for registration as a debt collection company – I am in this respect responsible for the professional correctness of the legal service. Of course, also for the protection of the consumers we contact.

PAIR Finance has ambitious goals and wants to change the debt collection industry in Europe with AI, data science and behavioral research. What does this mean for your department?

We are a company that processes a large amount of data points. It goes without saying that the highest priority must be given to safeguarding the rights of consumers. That is why data protection is of particular importance to the entire company and a focal point of the legal department’s activities. For this reason, one person in my department deals exclusively with data protection and we also work with an external data protection officer. 

Since we also use what is known as artificial intelligence in our processes, we have to use special technical measures when processing data in order to protect the rights of the data subjects. For this reason, our models work exclusively with aggregated data that do not allow any conclusions to be drawn about which person is behind an individual collection case. For example, we use a feature that takes into account whether an email address contains a person’s first and last name, but does not take into account the actual information itself but only the derived information “email with first and last name”. This allows us to analytically evaluate the authenticity of an address without having to process personal data. Working out such solutions together with PAIR Finance’s Tech & Data Science team is a great challenge for a lawyer.

Debt collection has long been considered non-customer-centric. PAIR Finance is taking a completely new approach and putting the consumer at the center. How do you support this goal?

Our goal is to protect the valuable relationship our clients have with their customers. To do this, we rely firstly on the combination of personalized user experience with simple payment solutions: The consumer decides when and with which device he visits our platform and we deliver the individually suitable payment option, whether installment, credit card or Apple Pay. In order to enable this service, the legal department must first be able to advise and provide technical support to the specialist departments in a wide range of contract negotiations.

In addition, however, PAIR Finance also wants to take into account the position of consumers in the collection process as far as possible. Therefore, it is not only part of our tasks to mediate and monitor proper collection activities within the company. Rather, in our opinion, it is necessary not to exhaust the scope of legally recoverable costs, especially for small claims that are often paid quickly, but to take consumers seriously as (contractual) partners of our clients and to offer our solutions at reduced costs. We naturally provide very intensive advice on these questions of cost law.

“New lowered collection fee reflects customer focus.”

How does PAIR Finance deal with the legally possible fee framework so far?

Collection costs are often perceived as too high. In two-thirds of the consumer complaints investigated by the consumer advice centers, the costs are criticized as not being in proportion to the service provided. Although the costs will regularly be legitimate, this high level of consumer rejection of the costs is already capable of preventing any dialog between companies and customers. And that’s where we come in with our consumer-friendly approach. Since its inception, PAIR Finance has always set the costs of its service at around 30% below the legally permitted fees. This approach has now also been followed by the legislator and, with a law to improve consumer protection in debt collection law, has made binding precisely the reduction of costs that PAIR Finance has been putting into practice for years.

You mention it, a new law is supposed to bring more consumer orientation to debt collection: What changes are coming and what does the new law mean for people?

The German Bundestag and Bundesrat have passed amendments relating precisely to reimbursable collection costs, which will come into force on October 1, 2021. Essentially, the law says the following: In the future, only significantly reduced collection costs will be reimbursable for processing small claims, for claims paid in response to the first collection reminder, and for claims against which the consumer has not raised any objections. The costs can only increase further as the expense of the collection service grows. The law is thus exactly in line with the vision already lived by PAIR Finance and reflects our customer orientation. For consumers, the law clearly offers the advantage that all debt collection companies must now reduce costs for small claims that are not objected to.

For us, too, the new rules (more at: naturally mean a need for adjustment. However, as a fintech, we believe we have structural advantages in dealing with new laws. As already mentioned, we have always had a lean and flexible cost structure, so we don’t have to make any major adjustments at this point. In addition, as a technology company, we are also in a position to react quickly to new requirements at any time and to adapt our self-developed software to all collection regulation requirements without delay.

Every area at PAIR Finance is constantly evolving, what are your projects this year?

As a technology leader, we are constantly looking at new processes to make them more efficient – for example, in the judicial process. This happens very rarely for us, as our strength lies in finding individual solutions with consumers. Nevertheless, we will be able to support our clients for whom we were unable to reach an out-of-court solution with their customers even better in the future with further smart solutions in the area of judicial enforcement.

We will also continue to digitize our internal processes. In particular, this year we will integrate a legal tech solution that will enable all departments to centrally create and negotiate contracts and make them available to our partners for digital signature via smartphone. The legal department will also benefit from intelligent management of all contracts, which will enable us to provide key figures for contractual agreements quickly and for a large number of contracts.

Thank you, Mathias, for your time and the exciting insights!