What are accounts uncollectible?

By on October 3rd, 2019 in Debt Collection
Hands holding hundred dollar bills

Debt collection agencies work to recover money on behalf of creditors. Unfortunately, not every debt is collectible, and it’s important to recognize these edge cases before they become bigger problems.

What are accounts uncollectible?

Accounts uncollectible, also known as uncollectible debts, are accounts owed that have almost no chance of being paid off. While it is better for the customer’s credit score and overall financial health, as well as for the lending company’s growth to receive these payments, there are some debts that will simply never be paid. There are several reasons that this may be the case:

  • A customer is not reachable
  • A customer is unable to pay
  • A customer declares bankruptcy
  • A customer disputes the debt

While some debts may reach a point where they become uncollectible, there is a lot that can be done before those delinquent accounts reach the point of no return. Debt collection agencies serve to lessen the impact of accounts that become uncollectible and work to prevent them from becoming bad debts

The longer a company waits to adopt a collections solution, the more accounts they risk becoming uncollectible. We’ve already looked at some reasons why a debt may be hard to collect, but if a customer owes a debt, they have to pay it, right? Unfortunately, companies that make this assumption end up with debts on a timer.

A debt may reach its statute of limitations for collection.

Each state has distinct requirements that affect how long companies and collection agencies can legally collect on a debt. While a select few states have statutes that extend the collection window to up to 15 years, most are limited to somewhere between 3 and 6 years.

Once a debt ages out of these windows, it is considered a “time-barred debt.” Collecting a time-barred debt is possible, but the approaches are limited and creditors can no longer sue to demand collection.

Even if the debt is new enough to be collected, TrueAccord’s customer data indicates that new accounts (those in collections for fewer than 90 days) are four times more likely to begin a payment plan than those who’ve been in collections for more than six months. 

Those same new accounts are also eight times more likely to begin paying off a debt than those who have been in debt for longer than two years. This rapid decline means that creditors need to act quickly to prevent an account from slipping away.

How do you avoid accounts uncollectible?

If a customer has not paid a debt for one reason or another then companies are working against the clock to collect. The typical solution to recouping otherwise uncollectible debts is to hire a third-party debt collection agency. Many agencies operate by reaching out to customers and requesting (or demanding) payment for a debt, hoping to instill a sense of urgency in the customer.

One of the issues with this approach is that customers are forced to engage on the collector’s time rather than on their own. TrueAccord recognizes that when customers work on their own time, they are given power over their financial freedom and are more likely to commit to a payment plan. 

Another key issue with the traditional collections model is a lack of proper analytics. While call centers may reach hundreds of customers daily, each call can vary wildly due to the personal nature of a phone call. Digital-first collections strategies allow agencies to regularly send consistent messages and accurately test which of those messages prompt the most engagement and, ultimately, lead to payments. 

Any amount of uncollectible debt directly translates to a loss for creditors. The best option available to companies that wish to avoid losing out on delinquent accounts entirely is to embrace a digital-driven debt collection strategy. Uncollectible accounts will only get more difficult to recover over time, and if teams wait too long those accounts will truly be untouchable. 

What do debt collection agencies do?

By on September 25th, 2019 in Debt Collection
Coins spilling out of jar

Whether you’re trying to collect on small accounts or massive debts, working with an agency can help to improve your business’ bottom line. There are different approaches to the collections process and understanding those differences, the role of agencies, and the industry as a whole can help you make the right decision for your business.

What is a debt collection agency?

A debt collection agency, or debt collector, is a company, team, or individual that works to recover money on delinquent accounts. While some large companies opt to dedicate internal teams to the collections process, smaller and mid-sized companies opt to work with 3rd party debt collection agencies.

How do debt collection agencies work?

Collections agencies function as a financial service for companies that seek to outsource their collection needs and provide consumers a point of contact for paying off their debts. Agencies can work with a variety of companies and collect one or several types of debt, including:

  • Credit card debt
  • Medical debt
  • Car loan debt
  • Home loan debt
  • Personal loan debt
  • Business debt
  • Student loan debt

Delinquent balances that would otherwise sit unpaid are compiled into a portfolio for the debt collection agency to manage. These debts are still owned by the crediting company, and the collection agency functions as a liaison between the creditor and consumer. This relationship does not come without a cost. 

Debt collection agencies are paid based on a percentage of the debts that they are able to collect. This traditional collections model often extends to individual collectors whose earnings are paid out on a commission structure. Traditional debt collection agencies and their agents, therefore, are incentivized to reach customers however they can.

It’s important to recognize when a debt (or portfolio of debts) may no longer be collectible and what you can do to engage customers before their accounts reach that point.

Debt often can be tied to feelings of anxiety, stress, and depression, and when these feelings are met with persistent contact, rather than understanding, they can worsen. It is for this reason that the Consumer Financial Protection Bureau is working to make changes to existing debt collection laws and better protect consumers from predatory practices.

Debt Buyers

While typical agencies work with creditors that own the debt, debt buyers will outright purchase hard-to-collect debts. A debt may be considered hard to collect if it is nearing its statute of limitations for collection, a particularly small debt, or if other agencies have been otherwise unsuccessful in collecting it. Accounts with similar features (amount owed, age of the debt, amount of communication) will be grouped together, sold, and managed as a single portfolio.

If, for example, thirty customers owed Creditor A $100, but their debts went unpaid and ignored for a long period of time, Creditor A may no longer feel it is worth the time or resources required to pursue them. A debt buyer would purchase these debts at a fraction of the total. Creditor A would recover a small portion of money they were not able to recover, and the debt buyer would then be able to freely pursue the debts for their own profit.

It’s important to recognize when a debt (or portfolio of debts) may no longer be collectible and what you can do to engage customers before their accounts reach that point. Using customers’ preferred communication channels and engaging with customers empathetically can help them recognize collections for what it is: a financial service.

The future of debt collection agencies

Expanding laws and developing technologies are gradually reshaping the collections industry. While the market itself may not change substantially (there will always be creditors, customers, and collectors), the ways in which collection agencies conduct their business will change drastically. 

Updates to the Consumer Financial Protection Bureau’s regulations, along with evolving digital debt collection tools are driving a new era of collections practices. TrueAccord is dedicated to seeing these changes made real with our customer-focused, digital first collections strategy. Selecting the proper strategy for your business can make an enormous impact, but a proper collections strategy takes time to build, so get planning!

Industry Insights Webinar: Best Practices in Mitigating TCPA Risks

By on August 13th, 2019 in Debt Collection, Industry Insights

Join industry experts David Kaminski of Carlson & Messer and TrueAccord’s own Kelly Knepper-Stephens on August 14th, 2019 at 12pm EST as they dive into the Telephone Consumer Protection Act and how teams in the credit and collections spaces can best understand the coming changes. Here is the snippet from AccountsRecovery.net:

“The Telephone Consumer Protection Act has become a landmine of legal issues, thanks to court rulings and new rules that are going to reshape how companies communicate with individuals over the phone.

In this webinar, sponsored by WebRecon, a panel of leading compliance experts from the credit and collection industry will share their insights into how companies can best manage their TCPA risks and help understand the changes that are on the horizon.”

Click here to sign up for the webinar before it fills up!

TrueAccord and the Future of Digital Debt Collection

By on August 6th, 2019 in Debt Collection, Industry Insights, Product and Technology

In January 2019, AccountsRecovery.net launched a survey of more than 100 companies in the credit and collections industry to “assess the penetration of digital communication tools and how much they are being used in the industry.” “Digital communication” includes channels such as email, text messaging, and web portals that work to reach to consumers. 

However, these channels are secondary to outbound calls and paper mail, practices that have remained unchanged for decades, even though 70% of companies believe that digital communications have had a moderate to significant impact on their collection rates! Updating these channels for the modern age can improve the collections experience for both the customer and collector. Let’s find out how!

Communication Channels

Email

According to the AccountsRecovery survey, more than half of the companies that took part in the survey are using email communication. A majority of respondents also said that they are sending emails to or receiving emails from fewer than 20% of their users. This means that 80% or more of their customers are regularly receiving calls from collectors to discuss resolving their debts rather than receiving digital communications. 

According to TrueAccord’s 2018 consumer survey, the majority of consumers using our site would rather resolve their debts online than through other channels. With such a large number of consumers interested in online engagement, it’s easy to see why we’ve leveraged digital channels to modernize the collections industry.

We use email communication as our primary form of contact at every stage of the customer lifecycle, and each message is customized for the individual.

Mobile and Text Messages

The prevalence of smartphones has made reaching out to users on their mobile devices an effective and essential channel for communicating with customers. Unfortunately, only 21.6% of collection companies are actively using text messaging as part of their outreach strategy! Even some of the largest agencies in the industry are only texting about ¼ of their customers. 

More than 65% of companies in the collections space that are not currently using text messaging as a channel are concerned about two things: a fear of being sued or not fully understanding what is and is not allowed of them. 

TrueAccord has taken steps to directly address these issues by hard-coding compliance parameters directly into our system, so we are able to securely reach our users where they are: on their phones. In fact, more than 85% of our web traffic comes from smartphones and tablets, and we are able to drive traffic to the right pages through push notifications on those devices. These notifications serve the same purpose as text messaging but are uniquely catered to that specific customer’s needs.

Web Portals

Portals and landing pages created for consumers should be exactly that: designed with them in mind. The vast majority of companies in the collections space have portals specifically designed for customers to manage their accounts, but 75% of those companies report remarkably low engagement through those pages. 

Creating an engaging portal means answering the question: “How can we make the experience personalized for the customer?” TrueAccord embraces this in its design methodology; Shannon Brown, TrueAccord’s Product Design Manager, says that our “we’re not pushing offers to them, we’re looking for information [about the nature of their debt] to customize for their needs.” Our design embraces our mission of giving consumer’s control of their financial health. 

You can learn all about TrueAccord’s design philosophy by listening to our full interview with Shannon here!

By focusing on developing interconnected, customized content that reaches users through multiple channels, we can reach consumers via email and mobile push notifications with the goal of bringing them back to our website. 

The debt collection industry at large has a long way to go to meet consumer expectations about financial services. Our machine learning algorithm optimizes which message to a customer to send on what channel, addressing those expectations and letting users manage their debt at their own pace. This is also why we work to provide our users with as much visibility into their debt as possible through easily accessible digital channels.

Yes, 866-611-2731 is Our Number. Why is That so Important for TrueAccord?

By on May 23rd, 2018 in Company News, Debt Collection, Industry Insights
TrueAccord Blog

We wanted 866-611-2731 to be recognizable.

TrueAccord was built as a consumer facing brand from day one. We have one number, 866-611-2731, that we use for outbound and inbound calls. Our name is distinguishable, not a three letter acronym. We have Google reviews and an online presence. We wanted consumers to easily find, research, and comment on our presence. We want to make a difference.

You can’t help consumers if they don’t know who you are

Being in debt is scary, confusing, and generally not a great experience. When consumers are bombarded by calls from unknown numbers or worse, callers who pretend to be from their area code, their trust in phone calls erodes. Less trust leads to fewer contact rates, and disengaged consumers. Running away from your debt is a bad idea if the alternative is working with a customized, personalized, and digital first experience that actually helps you pay down what you owe. We wanted people to know who’s calling.

The thing is, debt collection can be a stepping stone. When turned into a cooperative and personalized experience, it can be a first step to getting back on your feet. People get into debt for many, diverse, largely unexpected reasons: divorce, job change, healthcare issues for them or a loved one. By making debt collection accessible, TrueAccord aims to be a part of your growth journey, not just focus on helping you pay a single debt. You’ll find customized payment options, an easy mobile experience, and a helpful customer service team (when you call our number, 866-611-2731).

Having a recognized number helps us call *less*

When consumers don’t pick up, the most common strategy is to call again. Agencies may call a number 5 times per day. At TrueAccord, we don’t think this is a good experience. When we call a consumer, even once, our recognized phone number allows them to find us online and be convinced that they want to talk. From there, going to our website or finding one of our emails in their inbox is a breeze. Self service is welcoming and easy. No more aggressive repeated phone calls when it’s least convenient.

Being customer-facing and helpful is our #1 goal. If you see 866-611-2731 in your caller ID, know that we’d love to help

Call us or click a link. Great experience in debt collection isn’t a myth anymore. That’s why we started TrueAccord, and why we want you to have an easy time finding us and talking to us.

Writing High Performing Compliant Content at TrueAccord

By on May 22nd, 2018 in Debt Collection, Industry Insights
TrueAccord Blog

Moving collection communications online means moving away from phone calls. Writing to consumers at scale draws a lot of scrutiny because of regulatory requirements and user experience considerations. Hear our Managing Paralegal and Director of PMO, Antonia Wong, discuss this with our Head of Design, Shannon Brown.

Collection Strategies and How TrueAccord Fits Into Them

By on May 15th, 2018 in Debt Collection, Industry Insights
TrueAccord Blog

New to collections? Looking to understand the moving parts? Or maybe you’re an experienced strategist looking to understand how to best use TrueAccord? Hear our Head of Business Development, Jason Hass, and Head of Client Services, Pej Azarm, talk about these important topics.

Comparing TrueAccord Operations with Bank Operations

By on May 8th, 2018 in Debt Collection, Industry Insights
TrueAccord Blog

Hear our Director of Operations, Lauren Sawicki, talk about the differences between running operations for a major bank versus TrueAccord. While both are collections related, the differences can sometimes be staggering.

The Intelligent Alternative to Debt Collection Call Centers

By on March 6th, 2018 in Compliance, Debt Collection, Industry Insights, User Experience
TrueAccord Blog

As is often the case in evolving industries, it takes time for technology adoption to begin transforming the way companies do business. For debt collection, many organizations are still relying on an aging and outdated process to pursue debtors and recover revenue – the collection call center. Dozens or even hundreds of collection reps spend their days on the phone lines, methodically and painstakingly pursuing consumers who have racked up debt in the hopes that some will actually pan out.  

Unfortunately, call centers are fraught with challenges that can have a debilitating impact on the collecting organization, the company’s brand and reputation, and the consumers on the other end of the phone, who in many cases truly want to regain control of their financial lives. Among the many problems call centers face:

They’re Reactive and Emotional Environments

When individuals are the driving force behind an emotional transaction like a phone collection call, it’s not hard to have a bad day – especially when reps tend to garner low base salaries and are incented with commissions and bonuses to succeed. If a consumer rudely hangs up on a rep, for example, it’s easy to fall into a retaliatory frame of mind and call back multiple times simply to harass the debtor. Reactive and emotional responses from a rep can lead to bad exposure and higher risk of complaints or even legal action. Even voice analytics systems that monitor language used by reps are not infallible, as reps usually know what trigger words to avoid (such as “garnishment” or “lawsuit”) and how far they can push the envelope and not be flagged.

Even Hiring More Reps Doesn’t Really Scale

Many companies see hiring more reps as a simple solution to get as much coverage as possible. This conventional wisdom looks good on paper, until your realize more reps also means more training, more compensation, more resources and more oversight to monitor every active rep’s calls. Moreover, it is difficult to match staffing needs to varying workflows. If business is brisk and opportunity is high, it makes sense to have more workers. But all companies experience ebbs and flows in business activity, so when it comes time to scale down, they are forced to eliminate call center positions, then scale back up when the demand returns. Such fluxuations create a complex and unsustainable model for smooth debt collection execution.  

Ultimately, It’s All About Risk

Large call centers create the potential for more problem interactions with debtors and a greater probability of complaints and lawsuits, and risks and costs can rise exponentially when you consider how long it takes to manage each incident. Interviewing the violating rep in question, piecing together what happened and facing legal action or an angry regulators all create instability and unpredictability.

Consider Automating Debt Collection – and Making It Smarter

How can you overcome these inherent problems with debt collection call centers? Progressive organizations in the credit card, consumer loan, ecommerce, technology and telecom industries are all turning to a more sensible and intelligent approach to replace the call center strategy: Automation engines that replace most collection activities offer a more proactive system that has compliance, risk mitigation, content and costs all built in.

Here’s what it looks like:

Start with an Intelligent, Machine-learning System

Today’s automated collection systems, like those pioneered by TrueAccord, rely on a process that goes far beyond outbound calls. Combining outbound emails, text messages and other channels with an intelligent machine-learning system that sees what type of interaction each recipient prefers, you create a less obtrusive environment that debtors are more likely to respond to. In most cases, consumers are the ones taking the initiative to call collection reps directly to solve the debt issue, reducing the number of calls you need to make by up to 95 percent and lowering the number of agents you need on staff. And because the TrueAccord platform automatically monitors every call and interaction and uses pre-written and pre-approved content, you’re protected.  

Control and Monitor Your Content

Code-controlled compliance is critical to ensuring that reps are sticking to script and aren’t sending improper content to a consumer. With TrueAccord, compliance is built right into the system. Messaging for emails and other interactions are pre-defined and pre-approved so you don’t have to micromanage every agent’s conversations. The system also makes it very easy to track and measure the effectiveness of your program and allows multiple approvers to oversee and continually improve the process.

Create a Far Better Consumer Experience

Once you begin dealing with consumers on their terms and personalizing the experience for them, you create a more collaborative and cooperative environment – and improve your chances that they’ll remain a customer. Change the nature of the conversation so that’s it’s less adversarial, and you’ll improve customer retention and lock in better recovery rates. There is also less incentive for a rebel rep to push the boundaries because they’ll be working with consumers, not against them.

As the debt collection industry matures, there is a huge opportunity for companies to take a positive step forward, recovering more revenue in less time and changing the nature of their debt collection business along the way.

To hear our CCO and CEO discussing the Perils of Call Centers, check out our podcast.

Real issue for debt collectors is the irrelevance of telephones

By on February 6th, 2018 in Compliance, Debt Collection, Industry Insights, User Experience
TrueAccord Blog

Originally posted on American Banker’s BankThink blog.

In the past few years, the debate over limits on financial institutions’ electronic communications with consumers has focused on an outdated device: the telephone.

That is very well how the debate could continue under new leadership at the Federal Communications Commission, as industry supporters will likely urge the FCC to ease up on robo-calling restrictions.

In 2015, the FCC disappointed the financial services industry, which had wanted more flexibility on robo-calling restrictions. The agency’s ruling under the Telephone Consumer Protection Act went further, all but ending debt collectors’ use of robo-calls to cellphones. Then-Commissioner Ajit Pai, who is the new FCC chairman, wrote a scathing dissent. In it, Pai wrote, “The TCPA has become the poster child for lawsuit abuse.”

He is correct. In debt collection, TCPA litigation increased 31.8% from 2015 to 2016 while Fair Debt Collection Practices Act litigation decreased during the same time period. This isn’t surprising. The FDCPA puts a cap on damages while the TCPA does not. Furthermore, the 2015 FCC ruling provided broad and ambiguous definitions with many openings for legal action.

Lawyers have been making a living out of suing and settling with debt collection agencies for a long time – often in a way that can seem abusive. The industry is advocating for Pai to undo a lot of that perceived harm by reducing collectors’ TCPA-related compliance and litigation costs.

But if Mr. Pai loosens the rules on robo-calls, he will hurt consumers by subjecting them to more unwanted calls and also hurt debt collectors and creditors by allowing them to sink back into short-term complacency about their collection methods while the world changes around them.

Phone calls are losing relevance as consumers migrate to communicating with companies over digital channels. Indeed, the tech company Neustar reports that 97% of business calls go unanswered. Yet, some debt collectors are trying to stop regulators from placing limitations on their calling strategies – strategies that are harmful to consumers who don’t even want to communicate by phone.

To be sure, some debt collectors are acknowledging the communication trend.

Take, for instance, Albert Cadena, president and chief operating officer of USCB America. Cadena took the stand at the Consumer Financial Protection Bureau’s field hearing on debt collection in Sacramento, Calif., in July, and said: “Communications is a key thing in our industry. We talk a lot about reaching out: letters, calls. The key thing … is to respond, communicate, talk to the collections agency whether it’s first party or third party.”

Perhaps unwittingly, Cadena was suggesting that communication is not as effective as it could be, and that traditional modes of communication (calls and letters) have become largely ineffective.

His remarks were made the day after the CFPB published its outline for a proposed regulation in debt collection – a document that was more than three years in the making and published a year after the FCC’s broad TCPA ruling. In the bureau’s outline were sections that point to the direction the industry should actually focus in on when communicating with consumers: email and text message.

The Trump administration may defund the CFPB, and the FCC may roll back its TCPA ruling. Debt collectors may hope for simpler compliance requirements and less frequent enforcement actions. However, in terms of the policy around telephone communications, both supporters and detractors of these agencies’ regulatory agenda are debating about a disappearing world. A policy focused on phone calls and written letters is inconsistent with a new generation of borrowers that responds to emails and social media posts. This debate is still focused on the minutiae of the FDCPA, a rule from the 1970s that forbids the use of postcards, while some consumers never set foot in a bank branch or talk to a banker.

Not all industry players are ignoring these realities. Several large issuers and banks have been leading the charge in shifting from call-heavy, to digital-first and consumer-friendly collections. The CFPB’s proposal explicitly calls out email and text messages as technologies for debt collection. The future of the industry lies in adapting to consumer behavior and the fact that consumers are not answering their phones.