The collections industry is not, and cannot be a one-size-fits-all business. First-party creditors’ strategies necessarily differ from those of third-party collections firms, and those for B2B recoveries differ from consumer recoveries.
Within those broader distinctions, there is a need for granular approaches to collections, identifying and strategizing around the differences between debtors both individually and as identifiable groups or classes. One key differentiator is a given account’s level of delinquency. The use of new and sophisticated social media intelligence tools, such as Spokeo for Business, can help collections professionals fine-tune the debt recovery process for each stage of delinquency.
The Debt Collection Process is Part of the Customer Journey
First-party creditors increasingly recognize that occasional delinquencies are a part of the overall “customer journey,” and the larger relationship with customers or clients. The cost of overlooking that simple reality can be high: in one recent survey, 86 percent of consumers said they’d stop dealing with a brand, even one they’d previously been loyal to, after as few as two negative customer service experiences.
Collections-oriented outreach is exactly such an experience, from the debtor’s point of view. The value of a given debt, then, must be weighed against the individual debtor’s value as a long-term client or customer. It’s widely recognized that the cost of retaining a customer is much lower than the cost of acquiring a new one, A seminal study by Bain & Company at the turn of the century argued that a 5 percent increase in retention could yield a 25 percent increase in profit, a finding that was expanded a decade ago by a Harvard Business Review study that demonstrated increasing customer retention rates by 5% could increase profits by up to 95%.
The rise of social media has increased the stakes as well; a single customer complaint can now potentially go viral and cause significant reputational damage. A well-told story can go viral even when it falls short of the full truth, as in the case of a Texas man arrested by armed US Marshals over his student debt.
Social Media Is a Valuable Resource Despite its Risks
Social media’s prominence holds promise, as well as risk. It provides an avenue of communication with customers, publicly as a venue for brand-building and information sharing, and also through private messages for individualized and account-specific inquiries. Even third-party collections specialists can utilize social media to soften their image, humanize their personnel, and promote the various avenues they provide for consumers to establish contact or make payment arrangements. Social media can also be a valuable channel for collections agencies to position themselves as thought leaders on a mission to help people understand the paths available to them to get caught up on their debt.
Beyond its potential for direct interaction, social media also provides a rich source of consumer/debtor data. Unlike legacy sources of regulated data, which are relatively static, consumers interact with online social platforms frequently, which means that they frequently self-report information that may be useful to collections agents. When filtered through a potent aggregation and analysis tool like Spokeo for Business, social media data and other forms of open-source intelligence can be used to increase debtor contact rates, and ultimately, recover more debt.
Each stage of delinquency poses its own challenges and benefits from a suitably focused collections strategy. Before we look at those in detail, it’s important to note that you should not alter your collections strategies and tactics until your proposed changes have been thoroughly reviewed by your legal and compliance teams. The ramifications of Regulation F are still being tested in court, and your use of social media and digital communications methods could create potential compliance issues in a given jurisdiction.
Refining a Debt Recovery Process for Each Stage of Delinquency
Maximizing customer retention is a long-term business goal; maximizing debt recovery is a short-term financial goal. Finding the correct balance between the two at each stage of the debt recovery process is an ongoing challenge. Deft use of a top-tier social media aggregator like Spokeo for Business can help surmount the unique challenges posed by each of these stages.
For discussion purposes, we’ll define early-stage collections as delinquencies between 31 and 90 days of a delinquency; mid-stage collections as falling between 91 and 120 days; and late-stage collections as those extending beyond 121 days.
The most important step in refining a separate strategy for each of these groups is segmentation: Rather than placing the entire collections portfolio in a single bucket, they should be segregated by age with early-, mid-, and late-stage delinquencies each being diverted into a separate stream for collections purposes. This may require an update to your software toolkit.
Early Stage Collections: 31-90 Days
The imperative to preserve good relations with the customer is at its strongest in early-stage collections. A briefly late payment isn’t necessarily a sign of trouble; these missed payments can be attributed to numerous factors, including (but not limited to):
- A simple and genuine oversight on the debtor’s part.
- Contact information for the debtor is outdated, and they are not receiving statements or bills.
- Temporary job loss or other transient financial difficulties.
A primary goal, and challenge, is the need to establish communication with a newly-delinquent debtor. This requires creditors to verify the accuracy of existing contact information, acquire updated contact information should the existing data prove dated, explore additional avenues of communication, and identify the most promising communications channel. Then, they must reach out at the time and through the channel that is most likely to result in successful contact.
Here, Spokeo for Business’s powerful search can speed up and simplify the process. Unlike legacy providers, Spokeo is not limited to relatively slow-moving sources of regulated data. A quick search of the more than 12 billion data points at our disposal can link the debtor to current and prior phone numbers, addresses, and emails, as well as public accounts on 120+ social platforms.
This provides a wealth of potential avenues for communication, and a review of the debtor’s most active social platforms can often yield insights into both the times of day when they’re available and how they’re most likely to be reached.
Potential Strategies for Early-Stage Delinquencies
Prioritize Informal, Digital Communications: The McKinsey Company makes a strong case for prioritizing digital communications channels over the more formal, traditional use of physical mail or telephone calls. These channels include push notifications through the creditor’s app (where applicable), SMS text messages, and private/direct messaging through social media platforms. Consumers have expressed a preference for this kind of communication, and McKinsey’s research has shown that it decreases collections costs and increases recovery rates.
Set Up Automated Reminders in Your Software: For that portion of your customer base that misses payments through “busyness” and legitimate oversight, automated reminders represent a powerful strategy. These can be sent via email, SMS text, social media message, or in the form of a push notification. In each case, customers must be given the opportunity to opt out of receiving future communications through that channel.
The timing of such reminders should be monitored, and their success rates quantified for management purposes. They can begin on a proactive basis before the payment is due or on a reactive basis after it is due. Reminders a day before or a day after the due date and periodically through the first 90 days are appropriate options. A Spokeo search can help ascertain the best channel for these efforts.
Keep the Tone Light, Friendly, and Service-Centric: These early-stage delinquencies should be approached from a customer service perspective: you’re simply helping a valued customer remain in good standing. The tone and content of all communications should be friendly and empathetic. Whenever possible, messages should be drafted and approved in advance, and where individualized content is necessary, your collections team should have clear style guides emphasizing which words and phrases can and cannot be used.
Give Your Debtors Payment Options: With early-stage collections specifically, it’s important to draw lessons from marketing. One of those lessons is that the more friction you can remove from the payment process, the likelier your customers are to use them. In the case of collections, this means opening the door to as many payment options and methods as your software stack can reasonably accommodate. This should include multiple self-service options that aren’t dependent on interaction with a human during set hours.
Mid-Stage Collections: 91-120 Days
Delinquencies that remain unresolved past the 30-day stage typically involve either more significant issues on the debtor’s end or greater difficulty in opening communications. If the difficulty lies in the debtor’s circumstances, a degree of empathetic flexibility can help maintain the customer relationship and lead to a successful recovery.
Difficulty in locating the debtor may result from a number of potential causes, including but not limited to:
- A long-distance move.
- A debtor deliberately evading contact.
- Longer-term job loss
- The debt, or the debtor, may be fraudulent.
Potential Strategies for Mid-Stage Delinquencies
Build Some Flex into Your Payment Arrangements: Customers who have missed a payment may, for the same reasons, struggle to adhere to an overly rigid payment arrangement. Building a degree of flex into such arrangements can help preserve the customer relationship and even be treated as a marketing opportunity. If a current payment proposal might consist of breaking the overdue amount into three biweekly payments, for example, the option of pushing one of those payments to the end of the cycle might be presented as an empathetic measure rewarding the customer’s loyalty.
A corresponding incentive for on-time completion of the payment arrangement on its original terms (perhaps a modest discount on the debt) can provide a counterweight and encourage the debtor to complete repayment by the originally scheduled date.
Routinely Scrutinize Mid-Stage Debt for Signals of Fraud: Most companies carry some percentage of fraudulent debt on their books, often without knowing it. Fraud is on the rise, economy-wide, and can show up on your books in the form of fraud committed against the nominal debtor or by the debtor. Potential examples include identity theft, the use of the client’s personal information in the construction of a synthetic identity, or customers making use of their accounts but then challenging the debt as fraudulent. Scrutinizing mid-stage delinquencies manually, through machine learning, or both can help identify fraudulent debt.
Turn to Social Media (SOCMINT) for Hard-to-Find Debtors: For those debtors who have proven difficult to trace, Spokeo for Business’s ability to draw on the full spectrum of social platforms can be invaluable. Spokeo’s beginnings as a social media aggregator are clearly visible in its ability to link the customer data you currently have (SS#, legal name, address, phone number) to public accounts on well over 120 social platforms. Spokeo’s search results frequently also reveal previously unknown email addresses and phone numbers linked to the customer, which in turn may be connected to further social media platforms.
Scrutinizing those accounts across multiple platforms can yield a trove of self-reported information that can be used to establish the debtor’s whereabouts, including photos with identifiable landmarks or geo-tagging, check-ins at specific businesses, or incautious and revealing public posts. Whether the debtor has been deliberately evasive or simply oblivious, these new avenues of investigation can help creditors establish contact.
Late-Stage Collections: 121+ days
Late-stage collections represent a tipping point. After 121 days, the mandate to retain the customer fades and often becomes secondary to the desire to recover the debt. This also marks a stage of the process where first-party creditors may opt to cease recovery efforts entirely and leave the debt in the hands of third-party collections professionals.
It’s difficult to generalize about how these decisions should be made. Each creditor has its own criteria dictating how expensive a given recovery can become, in terms of time or money, before writing off the bad debt becomes the lesser of two evils. In some instances, a case can still be made for working with the customer and preserving the longer-term relationship.
In late-stage collections, decisions surrounding whose business is worth keeping cannot be made intelligently without data. Some of that information – such as order and payment history – may already exist within the creditor’s files. The remainder must be gleaned from other sources, including open-source data and social media aggregation tools like Spokeo’s.
These difficult-to-capture details may include:
- Extenuating circumstances that identify debtors who remain fundamentally sound and, therefore, likely to rebound and remain valued customers.
- Debtors who have died or become incapacitated.
- Debtors who are currently incarcerated.
- Debtors who are deliberately understating their income or concealing assets or collateral that might be used to satisfy their debt.
Potential Strategies for Late-Stage Delinquencies
Identify the Lost Causes: Spokeo searches draw from courthouse records, among other sources, and may help identify those debtors who have a criminal conviction (courthouses vary in how quickly their records are updated, but this information seldom comes into play before the 121-day mark).
Similarly, identifying a debtor’s social media accounts through a Spokeo search can uncover posts revealing deaths, catastrophic illnesses, complaints about identity theft and fraud, and numerous other factors that render making contact with the debtor unlikely. In the case of a deceased debtor, the estate may still discharge an outstanding debt once probate has concluded, or purchase protection insurance may make the debt good to the creditor.
Where recovery is unlikely, creditors can turn a negative (writing off a debt) into a positive (goodwill and potentially good publicity) by reaching out to the debtor or their survivors with an offer to write off the debt on compassionate grounds.
Triage Debtors Worth Preserving Relationships With: A burning question in late-stage recoveries is “Is this a customer relationship we want to preserve?” Spokeo is not a credit reporting agency, and search results cannot legally be used to assess a given customer’s creditworthiness or to review or collect a consumer’s account. However, Spokeo searches can return information such as the location of assets and collateral owned by the debtor.
Focus on Bad-Faith Debtors: A relatively small percentage of debtors refuse to engage with collections efforts, either because they consider themselves entirely unable to pay their debt or because they’ve chosen to deliberately avoid settling their accounts.
The latter may also misrepresent the state of their finances or actively conceal property that has been used as collateral in order to secure credit. Spokeo’s billions of data points can help uncover unsuspected connections to the debtor. In some cases, if a debtor has incautiously used the wrong number or email when setting up an account, even a “burner” phone might potentially be linked back to the specific debtor. Spokeo searches can also turn up associates and family members of the debtor and, in turn, provide their online accounts.
Scrutinizing the social media posts of a debtor’s friends, coworkers, and family members may reveal details of the debtor’s location (including place of employment). However, it bears keeping in mind that under FDCPA, collections agents are not permitted to contact a debtor’s friends, family members, or coworkers as part of the collections process. It can also reveal the current location of property that has been used as collateral and can be seized by the creditor.
New Tools Empower Creative Solutions
Even long-standing challenges can become more manageable when new and powerful tools become available. Within the collections industry, not one but two new toolsets show significant promise: various forms of artificial intelligence (AI) can now be used to fuel interactive customer-facing chatbots, and to provide analytics-based improvements in customer service and loss prevention; while powerful open-source data aggregation tools like Spokeo for Business empower collections teams with new ways to identify, locate and communicate with debtors.
Reach out to Spokeo’s team through our Skip Tracing and Collections page to explore how your own collections team might use Spokeo for Business and to arrange either a demonstration or a hands-on trial of the product.
Sources
Newswire: 86 Percent of Consumers Will Leave a Brand They Trusted After Only Two Poor Customer Experiences
Bain & Company: Prescription for Cutting Costs
Harbrooke Company: Social Media Crisis Communications Case Study: United Airlines Breaks Guitars
Texas Monthly: What’s Really Going On with Student Loan Debt Collection in Texas?
McKinsey Company: Holistic Customer Assistance Through Digital-First CollectionsFederal Trade Commission: As Nationwide Fraud Losses Top $10 Billion, FTC Steps Up Efforts to Protect the Public