Recovering debt cost-effectively is the industry’s bedrock competency, and accordingly, it attracts a lot of attention. Collections agencies must constantly find ways to improve the debt collection process — those improvements may be incremental or occasionally revolutionary, but over time, they’ll effectively modernize debt collection.
Ultimately, many of these improvements revolve around helping your individual collections agents work more efficiently and effectively. Here are 10 of our best suggestions for improved individual and collective performance.
1. Streamline Debt Collection by Using the Debtor’s Preferred Communications Channel
Much of the friction that occurs between debtors and collection agents revolves around simply establishing contact. Traditionally, demand letters and follow-up phone calls have been a reliable one-two punch, but voice calls and physical mail are increasingly out of sync with consumers’ expectations.
Regulation F put limits around the use of phone calls, but also facilitated the increasing use of digital channels, including email, texts, and even social media private messaging. Determining which channel a debtor prefers for communications purposes and then using it removes a source of potential friction and helps maximize your agents’ use of their time.
2. Use Tech to Extract Actionable Information from Debtor Data
The customer files agencies receive from first-party creditors vary in quality and content. Primary contact information is usually prominent, but other pertinent material, such as the dates of previous contact or prior payment arrangements, may be buried in text documents that aren’t easily or quickly parsed in bulk.
AI-powered data extraction tools are available to automate that process, scouring documents for specified key pieces of information. Essentially, they do for internal data sources what Spokeo for Business does for external ones. The data extracted this way can then be utilized to fuel communications, negotiation strategies, and other aspects of your collection strategy.
3. Automate the Easy (but Time-Consuming) Steps
Much of AI’s promise revolves around its ability to automate tedious and time-consuming processes (like extracting usable data from piles of documents, as we just covered in the last tip). In the context of the collections, that might include things like generating collection letters, texts, and other messages or expediting the creation of post-contact reports.
A suitable AI-fueled tool can mesh the debtor’s data with a wider array of templates, choosing the correct one for a given situation based on the debtor’s history, the degree of delinquency, and even the chosen communications channel (because a template that works in email is not ideal for text, and vice versa).
4. Make Sure Your Agents Use Effective Scripts and Templates
How tightly do you drill your agents on proven-effective words and phrases? It’s a major focus in sales, and should be for collections professionals as well. Many industry sources offer lists of words and phrases that do and don’t work in spoken or written communications. Monitoring and contrasting your own high and low performers will also provide insights.
Once your agents are accustomed to your scripts and templates, solicit feedback from them and debtors as a counterpoint to the raw statistics. Efficacy is the top consideration, but negative feedback can indicate a need for further refinement.
5. Prioritize the Most Promising Debts
One of the most powerful ways to make your agents more effective is by prioritizing some accounts over others. Some have a higher dollar value while some are more likely to be resolved quickly, and weighting those attributes – so you can find the “sweet spot” where they intersect – means you’ll be able to prioritize your agents’ valuable time on the most lucrative portion of your portfolio.
Maximizing your agents’ effectiveness by focusing on these priority accounts can bring about a large bottom-line improvement in gross and net revenues.
6. Invest in Improved Skip-Tracing Tools
Right-person contacts are a key performance indicator within the industry, and for good reason. Until that contact is made, no recovery can take place, and locating the correct contact can be difficult. Societal changes (high mobility, the gig economy, the large numbers of un- and under-banked Americans) have made it more difficult to establish contact when working with legacy data providers.
Spokeo for Business excels at this, harnessing billions of data points from thousands of sources, including both regulated and unregulated data (notably, social media). It provides game-changing functionality for your collections team.
7. Consciously Sharpen Your Team’s Negotiation Skills
A really good collections agent develops a substantial and varied skill set — but explicit training in negotiation skills is often overlooked. Yet, this is a core competency: once contact with a debtor is established, negotiating a payment plan is a fundamental part of the collection process.
Commercial training materials and workshops come at a cost, but should pay for themselves through improved outcomes.
8. Embrace Payment Flexibility
Along with negotiation skills, empower your collections agents to personalize payment plans to meet the debtor’s circumstances. This reduces friction in the collection process, causing less stress for agent and debtor alike, and reducing the likelihood of forcing the debtor into an unsustainable payment plan.
Agents should also have the freedom to use incentives creatively as a driver for regular, on-time payments. Discounts in exchange for paying down debts early, or the option of skipping a payment if needed after a predetermined number of on-time payments, can be powerful tools.
9. Broaden the Available Payment Options
Personalization has become a major driver of consumer behavior, and collections professionals ignore it at their peril. One important form of personalization lies in the number of payment options you offer. The fewer options, the more time your agents must waste on cajoling debtors or explaining workarounds.
Aside from traditional options such as cash, checks, wire transfers, and credit cards, you should also add the ability to accept payment through digital wallets and or app-based fintechs. This may require upgrades to your software stack or negotiations with your payment processor, but it will remove a pain point for your agents.
10. Lighten the Workload Through Self-Service Options
Collection is inherently stressful, which impacts recruitment and retention. Those difficulties lead to high workloads, which in turn increase stress and subvert retention efforts, creating an unfortunate cycle. Creating and improving self-service options for debtors through your phone system, website, app, or social media platforms can lighten that workload substantially, with wide-ranging benefits.
Every debtor-initiated contact or self-arranged payment represents a cost saving for your agency and cuts down on human agents’ workload. That initial investment in technology, in turn, enables you to focus your human agents’ time on higher-value recoveries. It’s a net positive for all parties.
The Bottom Line: Improve the Debt Collection Process
Each of these suggestions can work in isolation, though they’ll be more powerful when combined and integrated into a larger effort to modernize the collection process.
The simple reality is that consumer behavior has changed radically over the past one to two decades, and the industry must change in response. Shrewd use of improved technology is fundamental to that process of change, and an intelligence tool like Spokeo for Business is precisely the kind of cost-effective tech that can fuel improved revenue, faster recoveries, and lower costs.
To speak with our team about how the product can improve your own workflows, or to arrange a demonstration or no-cost trial of Spokeo for Business, please reach out to us through the contact information on our Collections and Skip Tracing page.
Sources
McKinsey & Company: The Consumer Mandate to Digitize Collections Strategies
Numerous: 10 Effective Ways to Use AI for Administrative Tasks in 2024
US Federal Deposit Insurance Corporation; 2023 FDIC National Survey of Unbanked and Underbanked Households