What is skip tracing in debt collection?

By on May 12th, 2020 in Industry Insights

When a consumer falls into debt, and they are unable to pay off their accounts, debt collectors are brought on board to recover payments on these delinquent accounts. Occasionally, a consumer, feeling they are out of options and entirely unable to complete payment on their account will stop responding to communications from a collection agency. In some instances, breaking the line of communication is entirely accidental. 

If a person moves, and they don’t update a forwarding address, letter-based communications may be completely lost, and with 95% of collection agencies continuing to send letters, this can lead to a massive drop off! Consumers that have accumulated large amounts of debt may be forced to move frequently or are left without a home entirely. These consumers know that their debts will not disappear, so how do you communicate with them to discuss and resolve their account?

What is skip tracing?

Skip tracing is the process of collectors actively locating consumers that owe money on an account. The term comes from the phrase “to skip town,” and can make it seem like these consumers are intentionally abandoning creditors’ attempts to reach them. 

How is skip tracing conducted?

Skip tracing in collections is sometimes necessary to close out these long-forgotten accounts. Skip tracers are dedicated to gathering as much information about a consumer as possible in order to clarify their most accurate and up-to-date information. As more traditional collections methods are shifting to a digital approach so too is skip tracing.

Major names in the finance world like TransUnion and Experian offer powerful, data-driven, digital skip-tracing tools that help update contact lists live. These tools draw from accessible lists of user data to pinpoint consumers that may have updated their contact information elsewhere online including:

  1. Local exchange carrier listings
  2. White pages
  3. Credit files
  4. Other proprietary lists acquired by the company

Some third-party debt collection agencies also retain a dedicated skip-tracing service in order to accommodate these hard-to-reach accounts. Unfortunately, there is a chance that some accounts are simply lost, but by employing proper tools, even in-house collections teams can minimize the number of customers that skip out. 

Another important step in reducing the need for skip tracing all together is to gather consumer email addresses as another point of contact. Over 244 million people in the US have registered email addresses. They are not tied to locations, and most importantly for consumers in large amounts of debt: they are free to open and maintain. 

It is also possible that a customer may intentionally hope to evade a creditor if they feel they are being harassed by aggressive collections techniques or if there are no payment options that work with their budget. Fostering consumer relationships with customers that are past due on their account may seem counterintuitive to some businesses, but creating a positive customer experience should be at the forefront of any collections strategy. 

This extends to offering payment plans to accommodate customers at any point in their customer lifecycle. Working with these consumers proactively to build a plan that they can afford prevents the need for reactive measures down the line. In order to effectively contact consumers in debt, teams must adapt to changing consumer preferences, actively work with their customers, and encourage them to retake control of their finances. 

Using a consumer’s preferred contact channel can go a long way in preventing lost contact. Talk to our team to learn how going digital today helps you tomorrow.