Tag: collections

Synthetic identities can run several levels deep and be so complete that you don't find them until they reach collections

Debt management is becoming increasingly complex. People don’t answer their phones anymore. There are many, many communication channels available (email, text, website, etc.) and just as many preferences from consumers regarding how they communicate.

Lenders and financial institutions can help their customers get on the right financial foot for 2019 by helping them maximize their tax refund.

Tax season sees collections growth every year, as many use their tax refund to pay down debt. Find these consumers to maximize your collections efforts.

With a maximized approach to collections, you can see an uplift in performance of 5% to 30% in Key Performance Indicators against traditional techniques.

Knowing which of your customers may receive a tax refund is critical. Trended data can help collectors understand who will use it to pay down debt.

The collections space has been migrating from traditional mail and outbound calls to electronic payment portals, digital collections and virtual negotiators. Now that collectors have had time to test virtual collections, we’ve collected some data points. Here are a few:

As more collectors transition from "dialing for dollars" to digital solutions, they are seeing early results and success with virtual negotiation tools.

Many clients use the same debt collection strategy they’ve used for years never considering the customer experience for the debtor

Debt collections - Create a better consumer experience during the debt collection process.

Mandatory updates to data reporting and collections procedures have been announced and implemented. Have you made the required changes?

It should come as no surprise that reaching consumers on past-due accounts by traditional dialing methods is increasingly ineffective.  The new alternative, of course, is to leverage digital channels to reach and collect on debts. The Past: Dialing for dollars. Let’s take a walk down memory lane, shall we? The collection approach used for many years was to initially send the consumer a collection letter recapping the obligation and requesting payment, usually when an account was 30 days late. If the consumer failed to respond, a series of dialing attempts were then made, trying to reach the consumer and resolve the debt. Unfortunately, this approach has become less effective through the years due to several reasons: The use of traditional landlines continues to drop as consumers shift to cell and Voice Over Internet Protocol (VOIP) services. The cost of reaching consumers by cell is more costly since predictive dialers can’t be used without prior consent, and the obtaining and maintaining consent presents its own set of tricky challenges. Consumers simply aren’t answering their phones. If they think a bill collector is calling, they don’t pick up. It’s that simple. In fact, here is a breakdown by age group that Gallup published in 2015, highlighting the weakness of traditional phone-dialing. The Present:  Hello payment portal. With the ability to get the consumer on the phone to negotiate a payment on the wane, the logical next step is to go digital and use the Internet or text messaging to reach the consumer. With 71 percent of consumers now using smartphones and virtually everyone having an Internet connection, this can be a cost-effective approach. Some companies have already implemented an electronic payment portal whereby a consumer can make a payment using his or her PC or smartphone.  Usually this is prompted by a collection letter, or if permitted by consumer consent, a text message to their smartphone. The Future: Virtual negotiation. But what if the consumer wants to negotiate different terms or payment plans? What if they want to try and settle for less than the full amount?  In the past – and for most companies operating today – this translates into a series of emails or letters being exchanged, or the consumer must actually speak to a debt collector on the phone. And let’s be honest, the consumer generally does not want to speak to a collector on the phone. Fortunately, there is a new technology involving a virtual negotiator approach coming into the market now.  It works like this: The credit grantor or agency contacts the consumer by letter, email, or text reminding them of their debt and offering them a link to visit a website to negotiate their debt without a human being involved. The consumer logs onto the site, negotiates with the site and hopefully comes to terms with what is an acceptable payment plan and amount. In advance, the site would have been fed the terms by which the virtual negotiator would have been allowed to use. Finally, the consumer provides his payment information, receives back a recap of what he has agreed to and the process is complete. This is the future of collections, especially when you consider the younger generations rarely wanting to talk on the phone. They want to handle the majority of their matters digitally, on their own terms and at their own preferred times. The collections process can obviously be uncomfortable, but the thought is the virtual negotiator approach will make it less burdensome and more consumer-friendly. Learn more about virtual negotiation.

Every portfolio has a set of delinquent customers who do not make their payments on time. Truth. Every lender wants to collect on those payments. Truth. But will you really ever be able to recover all of those delinquent funds? Sadly, no. Still, financial institutions often treat all delinquent customers equally, working the account the same and assuming eventually they’ll get their funds. The sentiment to recover is good, but a lot of collection resources are wasted on customers who are difficult or impossible to recover. The good news? There is a better way. Predictive analytics can help optimize the allocation of collection resources by identifying the most effective accounts to prioritize to your best collectors, do not contact and proceed to legal actions to significantly increase the recovery of dollars, and at the same time reduce collection costs. I had the opportunity to recently present at the annual Debt Buyer Association’s International Conference and chat with my peers about this very topic. We asked the room, “How many of you are using scoring to determine how to work your collection accounts?” The response was 50/50, revealing many of these well-intentioned collectors are working themselves too hard, and likely not getting the desired returns. Before you dive into your collections work, you need to respond to two questions: Which accounts am I going to work first? How am I going to work those accounts? This is where scoring enters the scene. A scoring model is a statistical algorithm that assigns a numerical expression based on known information to predict an unknown future outcome. You can then use segmentation to group individuals with others that show the same behavior characteristics and rank order groups for collection strategies. In short, you allow the score to dictate the collection efforts and slope your expenses based on the propensity and expected amount of the consumer to pay. This will inform you on: What type, if any, skip trace tactic you should use? If you should purchase additional data? What intensity you should work the account? With scoring, you will see different performances on different debts. If you have 100 accounts you are collecting on, you’ll then want to find the accounts where you will have the greatest likelihood to collect, and collect the most dollars. I like to say, “You can’t get blood from a stone.” Well the same holds true for certain accounts in your collections pile. Try all you like, but you’ll never recoup those dollars, or the dollars you do recoup will be minimal. With a scoring strategy, you can establish your “hit list” and find the most attractive accounts to collect on, and also match your most profitable accounts with your best collectors. My message to anyone managing a collections portfolio can be summed up in three key messages. You need to use scoring in your business to optimize resources and increase profits. The better data that goes into your model will net you better performance results. Get a compliance infrastructure in place so you can ensure you are collecting the right way and stay out of trouble. The beauty of scores is they tell you what to do. It will help you best match resources to the most profitable accounts, and work smarter, not harder. That’s the power of scoring.

The new year has started, the champagne bottles recycled. Bye-bye holidays, hello tax season. In fact, many individuals who are expecting tax refunds are filing early to capture those refunds as soon as possible. After all, a refund equates to so many possibilities – paying down debt, starting a much-needed home improvement project or perhaps trading up for a new vehicle. So what does that mean for lenders?  As consumers pocket tax refunds, the likelihood of their ability to make payments increases. By the end of February 2014, more than 48 million tax refunds had been issued according to the IRS – an increase of 5.6 percent compared to the same time the previous year. As of Feb. 28, the average refund in 2014 was $3,034, up 3 percent compared to the average refund amount for the same time in 2013. To capitalize on this time period, introducing collection triggers can assist lenders with how to manage and collect within their portfolios. Aggressively paying down a bankcard, doubling down on a mortgage payment or wiping out a HELOC signal to the lender a change in positive behavior, but without a trigger attached, it can be hard to pinpoint which customers are shifting from their status quo payments. Experian actually offers around 100 collection triggers, but lenders do not need all to seek out the predictive insights they require. A “top 20” list has been created, featuring the highest percentages in lift rates, and population hit rates. Experian has done extensive analysis to determine the top-performing collection triggers. Among the top 15 to 20 triggers, the trigger hit rate ranged from 2 to 8 percent on an average client’s total portfolio, taking into consideration liquidation rates, average percent of payment lifts, lift in liquidation rates over the baseline liquidation, percent of overall portfolio that triggered, percent of overall portfolio that triggered only on the top-selected triggers, and percent of volume by trigger on the total customers that had a trigger hit. With that said, it is essential to implement the right strategy that includes a good mixture of the top-performing triggers. The key is diversifying and balancing trigger selection and setting triggers up during opportune times. Tax season is one of those times. Some of the top-ranked triggers include: Closed-Zero Balance Triggers: This is when a consumer’s account is reported as closed after being delinquent for a certain number of days. Specifically, the closed-zero balance trigger after being delinquent for 120 days has the highest percent of payment lift over an average payment that you would receive from a customer (at a 710 percent lift rate). These triggers are good indicators the consumer is showing positive improvement, thus having a higher likelihood for collections. Paid Triggers: This is when a consumer’s account is reported as paid after being delinquent, in collections, etc. Five of the top 20 triggers are paid triggers. These triggers have good coverage and a good balance between high lift rates (100 percent to 500 percent) and percent of the triggered population. These triggers are also good indicators the consumer is showing positive improvement, thus having a higher likelihood for collections. Inquiry Triggers: This is when a consumer is applying for an auto loan, mortgage loan, etc. The lift rates for these triggers are lowest within the Top 20, but on the other hand, these triggers have the highest hit rates (up to a 33 percent hit rate). These triggers are good indicators consumers are seeking to open additional lines of credit. Home Equity Loan Triggers: These triggers indicate the credit available on a consumer’s home equity loan. They are specifically enticing to collectors due to the fact that home equity lines of credit are usually larger than your average credit on your bank card. The larger the line of credit, the more you are able to potentially collect. To learn more about collection triggers, visit https://www.experian.com/consumer-information/debt-collection.html

By: Maria Moynihan Government organizations that handle debt collection have similar business challenges regardless of agency focus and mission. Let’s face it, debtors can be elusive. They are often hard to find and even more difficult to collect from when information and processes are lacking. To accelerate debt recovery, governments must focus on optimization--particularly, streamlining how resources get used in the debt collection process.  While the perception may be that it’s difficult to implement change given limited budgets, staffing constraints or archaic systems, minimal investment in improved data, tools and technology can make a big difference. Governments most often express the below as their top concerns in debt collection: Difficulty in finding debtors to collect on late tax submissions, fines or fees. Prioritizing collection activities--outbound letters, phone calls, and added steps in decisioning. Difficulty in incorporating new tools or technology to reduce backlogs or accelerate current processes. By simply utilizing right party contact data and tools for improved decisioning, agencies can immediately expose areas of greater possible ROI over others. Credit and demographic data elements like address, income models, assets, and past payment behavior can all be brought together to create a holistic view of an individual or business at a point in time or over time. Collections tools for improved monitoring, segmentation and scoring could be incorporated into current systems to improve resource allotment. Staffing can then be better allocated to not only focus on which accounts to pursue by size, but by likelihood to make contact and payment. Find additional best practices to optimize debt recovery in this guide to Maximizing Revenue Potential in the Public Sector. Be sure to check out our other blog posts on debt collection.