April 23, 2013
Collecting baseball cards: Easy.
Collecting on delinquent loans or written-off debt: Difficult.
If only it were easy as collecting baseball cards.
Although the process of collecting on consumer or commercial debts may never be an easy one, there are certain things that loan servicers can do to make it smoother for everyone involved. So says Tim Bauer, President and CEO of St. Louis-based National Asset Recovery Services, Inc., a diversified Accounts Receivable Management (ARM) firm. According to Bauer, there are five best practices loan servicers and debt collectors can implement to help their firms collect better.
Comply with state and federal laws and regulations According to Bauer, many servicers and collection agencies have tried too hard to strike a balance between collecting effectively while adhering to the federal Fair Debt Collections Practices Act and other state or local collection regulations. “I really don’t believe it is a balancing act. There is only one priority: It’s essential to put the greatest focus on the side of compliance,” advises Bauer, a 25-year veteran of the ARM industry. “The most effective collectors are able to do that. They treat customers with dignity and respect. They are good listeners. They are empathetic.”
Always create a positive customer experience Good collection efforts are diplomatic and require a sense of urgency without sacrificing customer satisfaction. Bauer says the barometer should be a CSAT score, short for “customer satisfaction.” In its simplest form, CSAT is expressed as a percentage between 0 and 100, with 100% representing complete customer satisfaction. Effective collections, whether doing it in-house or through an agency, require recognizing that people or businesses with delinquent accounts are customers too. “Sooner or later, they will be back in the market possibly looking to buy from your brand, or the brand you represent,” Bauer notes.
Recruit and hire the right people On the whole, the collections business features some of the highest employee turnover in any industry. Hiring the right people for the right roles requires a tried and true search and interview process. The riskiest thing any organization can do is to bring in a new employee into their business. This endeavor is made more risqué when servicing or collections organizations fail to adhere to a vigilant hiring process that includes asking the right interview questions and engaging in a thorough background check. Good hiring practices are developed over time and require discipline as well as patience.
Retention of employees As mentioned above, the collections industry is renowned for high employee churn with some agencies seeing over 100% churn in a given year. “It seems obvious but it needs to be said: Reduced attrition translates to better performance,” says Bauer. “Incenting your servicers and collectors properly and treating them with respect are important. Overall, servicers should make the work environment a compelling place for your employees to come each day,” says Bauer.
Scoring and segmenting accounts “Scoring and segmentation of accounts helps servicers work smarter, not harder,” says Bauer. If you have a good sense of the profile of the account holder, you have a good idea of what level of resources to put behind the collections effort.”
Collecting on debts is as old as commerce itself. But this fact alone does not mean the process is any easier today than it was in the early 1900s. Arming your organization with a clear strategy that includes the elements discussed above, however, will make the servicing of loans and delinquent debts almost as easy as collecting baseball cards.