There have never been more ways for businesses and consumers to interact. On the whole, this is a good thing, providing plentiful opportunities for businesses to contact consumers for marketing purposes, feedback, or promotions. The downside to this always-connected relationship between businesses and consumers is that sometimes, it can be difficult to choose the best avenue for making contact.
This is especially pertinent in the collections industry, where debtors are often reluctant to receive incoming communications from their creditors. Traditional methods, such as physical mail and phone calls, and newer methods, such as email, are all familiar to consumers and easily tuned out. In many cases, then, a debt collector’s text message may prove more effective than these other forms of communication.
Why SMS May be Better Than Collections by Mail, Phone, or Email
The use of SMS (text) messages as a means of contacting debtors may offer significant advantages over older techniques.
Recent robocall legislation (the TRACED Act) has compounded the difficulty of reaching debtors by phone, for example. In a recent survey of ACA members, 78 percent of respondents indicated that they had seen collections calls blocked and 74 percent had seen their calls mislabelled by Caller ID systems. Almost 66 percent of respondents reported seeing a decrease in right-person contacts (RPCs) as a result.
Research by the McKinsey company, conducted pre-pandemic, showed that banks and card issuers relied heavily on telephone calls and physical mail for outreach to delinquent accounts, with those methods accounting for 66 percent of all contact attempts. Text messages accounted for only 7 percent of contact attempts, but digital channels (including texts, emails and push notifications) reported much higher success rates than calls and physical mail. Older methods resulted in a 50 percent success rate, while digital methods yielded a payment 73 percent of the time.
While numbers won’t map neatly from marketing to collections, statistics gleaned from the marketing industry can still provide a useful benchmark for collections professionals. Marketing sources place the open rates for commercial emails at around 20 percent, while those for text messages are well over 90 percent. The click-through rate — the likelihood of an in-text link being used by the consumer — is also significantly higher in text messages. The text channel, in short, is both underutilized and highly promising.
Locating Contact Information for SMS Collections
While text messages hold great potential as a collections tool, there are potential challenges to their use. The first, and arguably the most important, is simply locating the correct telephone number to use for text messaging, including identifying that the number is a wireless number.
The data available from legacy providers is largely limited to phone numbers that have been used by the debtor in an interaction with the financial system. While these numbers may remain valid, they may or may not be the number that is used primarily by the debtor. Open-source intelligence tools like Spokeo for Business can remedy that deficiency.
A quick search of the debtor’s name and known phone numbers on Spokeo for Business’s new Right Party Contact tool will return additional telephone numbers associated with the debtor, and also provide information indicating which numbers are currently in active use. These numbers are gleaned from Spokeo’s rich pool of open-source intelligence, consisting of billions of data points drawn from over 5,000 sources, as well as regulated data. (Thus, Spokeo for Business’ Right Party Contact solution can only be used by collections and other permissible use cases, which would exclude purely marketing use cases.)
Search results may also include a number of email addresses or social media accounts, which, in turn, may be tied to additional phone numbers. If one phone number proves ineffective as a contact channel, this provides a number of alternatives.
Best Practices for Debt Collector Text Messages
Uncovering valid contact information for debtors is an essential preliminary step, but the successful use of SMS in collections requires more than a current contact number. As with any other tool, leveraging text messaging successfully requires a conscious strategy, careful planning, and attention to best practices.
A representative selection of these points and practices might include:
- Identifying the optimal moment to reach out to debtors with overdue accounts.
- Constructing an effective script for such text messages.
- Fine-tuning text message scripts through extensive A/B testing.
- Including a reminder of the amount due in each text message, and providing multiple easy payment options within the message.
- Providing debtors with multiple contact options for replying to your text, speaking with a representative, or making payment arrangements.
- Utilizing a third-party service that enables bulk sending of text messages, for cost-effective recovery campaigns.
There’s no need for collections professionals to reinvent the wheel: collection text message examples are plentiful on the internet and can be found through a simple online search. Treat these as templates, tweaking the wording to keep it consistent with the rest of your company’s communications with debtors. A/B testing with a subset of your debtors can help you refine the tone and content of the messages.
Similarly, decisions around the timing of the text messages can be refined through testing, the experience of collections professionals in peer group companies, or research conducted by industry publications. If you opt to use a third-party provider for your text messaging campaign, assistance with many of these points may be negotiated as part of their contracted services.
Providing Multiple Contact and Payment Options for Debtors
If locating current contact information for debtors is the essential preliminary step, and constructing an effective debt collector test message lies at the core of a recovery campaign, one important stage of the process still remains: securing the debtor’s payment. Online retailers have learned through experience that removing friction from the payment process notably improves the likelihood of a successful sale.
While — again — marketing does not map directly to collections, convenience has become a “table stakes” consumer expectation and cannot be ignored. A representative sampling of steps companies can take to improve the payment experience include:
A “Customer Journey” Audit
Performing an audit of the online payments page, assessing key factors such as load time, user satisfaction with the interface, and any “pain points” where dysfunction causes users to abandon the transaction.
Improved Payment Options
Offering support for a wider variety of payment options, including one-touch payment partners such as Paypal, Google Pay, and Apple Pay, and enabling in-app payments where applicable.
Increasing the Number of Channels for Inbound Communications
Providing as many avenues as possible for debtors to establish contact after receiving your text message, for the purpose of making payments or payment arrangements. This should include:
- A presence on the major social media platforms (Spokeo searches can tell you which platforms are well-represented among your own debtors) with an option to be routed to collections team members through a link or QR code.
- Automated chatbots which can interact with debtors, and set up payment plans. While some consumers still appreciate dealing with a human, others are happier not having to do so. This also eliminates any time-of-day restrictions, making the payment process accessible 24/7 for those working awkward shifts or irregular “gig economy” hours.
- Providing an option for incoming texts, as well as your own outgoing collections messages. Inviting debtors to engage simply by replying is simple and intuitive, and the prevalence of phishing attacks means that some consumers may be unwilling to tap in-text links.
Potential Challenges Facing SMS Collections Efforts
Although the use of SMS text messages holds great potential for collections, it’s not a silver bullet, and there are some notable challenges that collections professionals may face.
Regulatory Ambiguity
Text messages are covered under both the Fair Debt Collection Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA), with slightly differing requirements. Under the TCPA, consumers must consent to contact through this channel, while the FDCPA does not require consent. The consent rule applies only to automated contact, and need not apply if the message is initiated by a human.
Regulation F was intended to update the FDCPA to improve the guidance on modern electronic communications with debtors, including text messages and direct messages on social media platforms. In practice, this is still being tested in the courts.
Call Blocking
While call blocking has become an issue with outbound collections calls, as noted above, it may also become a factor in SMS collections. Phone carriers and call-blocking apps may erroneously block legitimate collections texts, as they do with calls, and debtors may choose to deliberately evade future messages by blocking them on a given device. A Spokeo for Business search may reveal numbers for other devices associated with the same individual, though a debtor who blocks messages on one device may do so on another.
The ACA has addressed the FCC with its concerns over the blocking of legitimate collections calls in the wake of the Pallone-Thune TRACED Act and continues its advocacy work with both legislators and regulatory agencies, but in the short term, this may be a factor.
Improved Access to Debtor Telephone Numbers
As noted previously, telephone numbers available through legacy data providers may or may not be current. Similarly, on-file phone numbers used in first-party collection efforts may no longer be valid.
The far broader range of data sources available through Spokeo for Business increases the likelihood of finding a current, usable number to use for text messaging.
The Role of SMS Collections
In summary, while debt collector text messages are unlikely to fully replace phone calls and physical letters in the collections arsenal, they represent a significant opportunity. The McKinsey research cited earlier found that younger debtors significantly preferred to be contacted through digital methods, and that the higher-risk debt segment specifically preferred text messages.
Collection via SMS offers numerous potential advantages for companies as well: its effectiveness is shown by its high response rate, and its ease of automation keeps costs low. Automation also aids with compliance. The scripting of text messages affords ample opportunity for legal review, automated scheduling reduces the risk of violating the FDCPA’s limitations on the frequency of contact, and the exclusion of fallible humans from the process reduces the likelihood of a team member going off-message.
Constructing a successful SMS collections program is not a given, but improving your company’s access to debtor phone numbers can improve the odds. To learn more about how Spokeo for Business can help with that, or to arrange a demonstration or free trial of the product, click through the “Contact us” link on our Collections/Skip Tracing page.
Sources
House.gov: The Impact of Call-blocking and Labeling Technologies on the Accounts Receivable Industry
McKinsey Company: The Customer Mandate to Digitize Collections Strategies
Campaign Monitor: What are Good Open Rates, CTRs, and CTORs for Email Campaigns?
Attentive: SMS Marketing By the Numbers: 30+ Texting Statistics You Need to Know
Nuvei: Optimizing Payment UX: Three Effective Strategies to Drive Higher Conversion Rates
Oliver Technology: Texting in Debt Collection? LMKWYT!