3 things to avoid with in-house collections teams

By on May 6th, 2020 in Compliance, Industry Insights

When more than one-quarter of American consumers have debts in collections it’s easy to see the rising need for any company to have a collections strategy. Working to get a dedicated internal team up and running to collect effectively can be a resource-intensive project, especially for small businesses. 

Creating the infrastructure for a collections team includes building extensive policies to protect your business from compliance violations, carefully training agents (or building incredibly complex digital infrastructure), and hiring collections and recovery experts to support these new efforts.

Once you have the logistics of your collections department sorted out, it’s time to start reaching out to your customers. Here are important things to avoid when you get started.

Wait to start collecting

“Too late” can come all too soon when it comes to recovering on aging accounts. A series of small payments or even a single large payment can cause issues for small businesses, but missed payments—especially in a recession—can pile up quickly for anyone. Avoid getting too far behind (and potentially sabotaging your growing email strategy) and get ahead of the problem.

While you gradually build an internal collections team, you can also consider partnering with a third-party debt collection agency. Having a partner on retainer can prepare you for working with a growing number of accounts as your business expands. These strategies aren’t mutually exclusive either, and you can gain greater insight into the performance of both teams by comparing their respective strategies and methods.

Reveal a debt to a third party

The Fair Debt Collection Practices Act (FDCPA) clearly states that it is illegal to expose an individual’s debt to third parties—including friends, family, neighbors, co-workers, and employers. The FDCPA was established in 1977, and it primarily focuses its regulation toward traditional call-and-collect debt collection agencies (with a team of collectors calling consumers on the phone). 

Though the FDCPA was primarily focused on call-and-collect technologies, its rules still apply to other communication channels. Collectors attempting to call consumers must be wary of leaving voicemail messages that directly state that they are calling to collect a debt due to the potential risk of someone else listening to it. The law regulates how your teams can (and cannot) use social media to get connected with consumers. 

Use confusing or unclear verbiage

Even if you are sending messages directly to a consumer’s inbox you can potentially violate communication compliance regulations. In the case Lavallee vs. Med-1 Solutions, that the defendant (Med-1 Solutions) did not provide the consumer with the required initial disclosures. The consumer received an email and had to click an unknown link and navigate a series of tasks before accessing information related to their debt. The email did not convey any information about the debt, and the court ruled that this series of steps meant that the email did not constitute a “communication” for the purpose of collections.

Any communication to a consumer from a debt collection agency must explicitly state who it is coming from and why (read more on the mini Miranda here), and masking that intent (either purposefully or not) can lead to more compliance troubles. While it is strongly recommended that you borrow metrics from marketing teams to enhance digital communications, be careful with taking too many queues from marketing language. All content sent by TrueAccord’s teams are processed through a legal review before they’re ever sent to a consumer.

As a collector, your first step to reaching your collection goals is having a well-organized team to support your efforts. Collections and recoveries at major companies can account for hundreds of employees, but a new department won’t appear overnight. Remaining careful as you scale your team and their strategy can save you from potential lawsuits and ensure a positive consumer experience. 

Are you looking for a debt collection partner to help answer some questions? Talk to our team today to see how we can help build your digital collections strategy together.

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