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Financial information management software firm Convoke Systems announced late Sunday that it has raised a $5.5 million round of financing to help creditors keep track of all the necessary data required to collect on consumer debts. It closed the round Thursday, the day after the U.S. financial reform bill was signed into law.

A large number of consumers are defaulting on their debts due to the recession. Credit card companies sell the debt to collection agencies, which then try to collect on the debt. Lost or incomplete paperwork often times makes it difficult to verify debts, making collection difficult or impossible. Convoke Systems solves this problem with a Web-based platform that verifies ownership, tracks a debt’s title, and manages supporting documentation. With the passage of the financial reform bill and the creation of the Consumer Financial Protection Agency, the company can help creditors comply with a far stricter regulatory environment.

The funding comes from Flybridge Capital and QED Investors.

“These people are mailing physical documents and it makes no sense,” said Flybridge Capital partner Matthew Witheiler. “This particular sector of the market — charged-off credit-card debt — is worth $100 billion dollars domestically and the courts are now mandating you have proof as a debt collector.”

Witheiler and fellow Flybridge Capital partner Jeff Bussgang will be joining the company’s board of directors, along with QED Investors partner and former Capital One executive Frank Rotman.

The company intends to use the funding round to expand beyond credit-card debt to other financial and nonfinancial consumer debt. Convoke Systems CEO Gary Portney told VentureBeat the company was looking at tracking mortgage, cell phone service, and health care debts as well.

He specifically noted the difficulty many creditors were finding with mortgage debts. “The more trades, the more it gets lost,” Portney said. “[Consumers] don’t know who owns their debt. The government wants more transparency and better reporting. Banks can benefit from it, and consumers can benefit from it.”

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