Modern debt collection best practices
In the past, debt collectors had a reputation for using harassment and intimidation techniques to persuade debtors to pay back their outstanding balances. Luckily, thanks to new regulations and digital collection software, collection teams have changed their ways for the better.
Modern best practices allow collection agents to do their job more efficiently with a more empathetic approach. Best of all, implementing a robust consumer-oriented debt-collection plan is not as hard as it may seem. Read on to learn five proven best practices to up any organization’s debt-collection game.
1) Digital-first contact strategy
The future of debt collection is primarily digital. Now more than ever, consumers prefer a contactless approach to handling almost every aspect of their lives, and resolving their debt is no exception. Leveraging new technologies and digital tools to enable debtors to fulfill their obligations is convenient for the customer. It empowers organizations (especially those that juggle multiple accounts) to run their operations successfully.
Although not entirely obsolete, face-to-face tactics nowadays tend to fall short of the mark and, in most cases, fail to give the expected results. Automation is the first step toward more effective debt collection solutions that make it easier for debtors to understand their options. Collectors should not underestimate technology's power when meeting the consumer's demands while still optimizing their collection endeavors. A digital-first contact strategy can easily bridge the gap between reality and expectations in the overall past due consumer experience and help collectors achieve their goals.
Using debt collection software is an excellent way to eliminate friction in the customer journey before it even happens. It helps them avoid common obstacles like:
- Inconvenient payment methods
- Undesirable communications
- Ill-timed calls
2) Ability to automate and scale
Automating debt collection is an excellent way to accommodate surges in past-due accounts. AI technologies empower companies to scale up their debt-collecting operations without having to hire more agents and spend valuable resources they could need elsewhere. The right debt collection software allows companies to computerize basic and complex tasks for added convenience. Implementing chatbots and virtual assistants enables them to free up live phone agents and operators and use these human resources to improve productivity in other critical areas.
The ability to automate and scale will ultimately empower debt collectors to improve their rates and increase the speed of their collection process. By enabling companies to pick the best approach to contact and collect from their customers, automation is the most reliable resource available today to improve quality control across the debt-collection industry.
3) Segmentation based on likelihood to self-cure and prioritization
When handling multiple past-due accounts simultaneously — often hundreds of thousands — it becomes increasingly harder to keep tabs on all of them without proper segmentation. Classifying customers into different categories with similar attributes allows businesses to differentiate between those customers that could benefit from human contact and those that could respond to automated messages. Reserving live-agent interactions to higher value accounts at risk will allow lenders to optimize human resources.
Segmentation promotes a more personalized customer experience that helps organizations elevate their debt-collection tactics. When done right, it lets collection teams scale the collections process, increase the number of accounts they work with, and seamlessly recover more receivables at a lower cost and through less work.
4) Flexible options for past-due customers to tailor payment plans
When customers struggle to pay back their debt, showing them some flexibility may be the best way to get them back on track. Calling a past due client to demand payment in full is unlikely to get a debt collector as far as they could get if they were flexible. Looking at the total amount in their statement may be daunting and make them feel helpless if they're going through financial difficulties that prevent them from fulfilling their previously acquired financial obligations. Yet, dividing that amount into a few friendlier-looking installments could be just what they need to feel like there's a light at the end of the tunnel.
Organizations must consider the amount they owe to build a realistic yet attractive payment plan that a past-due customer may respond to positively. However, they should also consider the customer's:
- Ability to pay
- Payment history
- Reasons for becoming delinquent
- Length of relationship
Keeping these aspects in mind is yet another way to keep all organization-customer interactions personal and make them more effective.
5) Customer-oriented experience
A positive and straightforward experience for past due customers equals retention. Customer-oriented operations that focus on making the client's life easier and offer a way to make efficient and secure payments are the best way to keep a client's business. Debt collection software can allow organizations to accept online payments without a third-party merchant getting involved for added security and lower costs. Additionally, organizations can send notifications and prompts to past-due customers when needed.
Self-service portals are all the rage right now, and for good reasons. They let past-due customers set up online payments, build a payment schedule, and review their payment history, among other perks, without human input. This gives customers the impression that they're in charge and makes them less likely to show resistance when it's time to pay back — unlike receiving a call from a collection agency.
Final Thoughts
Creating a healthy, customer-centered debt collection process is the best approach to getting customers to work on resolving their debt. Many best-in-class collections teams are already implementing strategies and practices to help their past-due customer achieve their payment goals. The best approach to collecting from past-due clients is to listen to their needs in building a flexible customer-first experience.
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