Why Debt Consolidation No Longer Has to Run on Assumptions

If case studies tell you the what, conversations reveal the why.

Figure's Rod Albuyeh recently joined Method COO Mit Shah on the Tearsheet podcast to talk about debt consolidation loans. In an in-depth discussion they explored some long-standing assumptions. Which is fitting because assumptions are what these loans have always been built on. A lender assumes it knows what a borrower owes, assumes the money will go where it's meant to, and assumes the picture it underwrote still holds by the time the loan funds.

So what happens when those assumptions turn into evidence?

Two black boxes

Early in the discussion, Mit described debt consolidation lending as having two "black boxes."

The first is information. What does the borrower actually owe today? Not what they owed when a credit report was generated or a statement was downloaded, but at the moment the lending decision is being made.

The second is execution. Once the loan funds, the borrower is trying to do the right thing: pay off what they owe and get their finances in order. The system makes that harder than it should be. They have to find each account, confirm the balances, send each payoff by hand. Every step is another opportunity for the intended payoff to stall or not happen at all.

These are longstanding issues but they aren’t permanent characteristics. Both the visibility problem and the friction problem can be solved. Accuracy can be built in, execution made effortless. Fix both and incentives align: the borrower gets where they were trying to go, and the lender's book is better for it.

Approve more, move faster

The results Figure shared since introducing Method’s Direct Pay are the kind that invite a skeptical second look. Sixty-day delinquency down by half. Funded conversion doubled. An average FICO lift of 21 points within thirty days of funding.

Numbers like that usually have a catch. The obvious one: Figure isn't lending better, it's just attracting better borrowers. That’s what host Zack Miller pressed on — was this selection bias or was something else happening?

Rod's answer wasn't about borrower quality at all. "We're recalculating DTI on the fly… we're approving people that we couldn't otherwise approve."

When liability data reflects a borrower's financial position in real time, underwriting changes too. Borrowers who looked marginal on stale data can qualify once balances are refreshed and intended debts are verified as paid at funding. Figure isn't skimming the top of the pool, it's seeing the pool accurately.

The assumption wasn't that better data helps, it was that lenders have to choose between approving more borrowers and taking on more risk. And that borrowers have to accept a slower, more complicated process to access the capital they need.

Better infrastructure challenges both. Lenders make sharper decisions without taking on more risk. Financially healthy borrowers get a faster path from approval to action, allowing lenders to deliver on the promise of a HELOC that funds in minutes, not months. The loan book improves, and so does the borrower's experience.

Premium feature or the future?

That was Zack's closing question. Is verified consolidation an edge for sophisticated lenders, or where the category is going? Mit was clear. He sees it "becoming more commoditized and being part of the industry in general."

Verified payoff was only ever a premium feature because lenders had to build it themselves, an expensive and complex undertaking only the biggest could afford. Turn it into infrastructure a lender plugs into, and it reaches the institutions that never could: regional players, credit unions serving members one loan at a time. And every institution it reaches brings its borrowers with it — the people the build-it-yourself model was never going to serve.

If verified payoff becomes standard rather than a custom capability, debt consolidation lending starts to change. More institutions can offer it, more borrowers qualify based on an accurate picture of their finances, and assumptions are replaced with verification.