5 ways to encourage timely customer payments

By on February 21st, 2020 in Industry Insights

Expanding a small business requires a consistent and a steady, growing cash flow. Especially in the early stages of growth, a single, large payment or several smaller payments being delayed could mean the difference between keeping your doors open and closing up shop. 

Your consumers may delay or cancel their payment for any number of reasons: a more urgent financial need arose, they had a disagreement with you about your product or service, they simply forgot to pay, or they adamantly refused to pay for no reason at all. Navigating these situations with your customers can be a challenge and can take time and valuable resources. You have to consider:

  1. How much effort you’re willing or able to put into pursuing payment
  2. How much time you will spend on individual accounts
  3. Whether or not you’re willing to damage a customer relationship (or even lose them as a customer) to secure payment

Unfortunately, there is no right answer to these questions, and your business’ response will vary from case to case. 

Not everyone will pay what they owe

As delayed payments begin to pile up, many small businesses will begin to try to collect on these payments themselves, and the outside options are often limited due to traditional agencies having account volume or account value minimums. Traditional agencies are also seen as greedy, uncompromising, and even sometimes threatening according to a study published in the Journal of Business Ethics. You may only see 50% of whatever they are able to collect, and then also lose out on your customer relationships.

Some customers won’t pay. Period. Newer digital debt collection strategies can help to collect on these accounts and even build up your business’ reputation with consumers, but before you commit to using a 3rd-party collection service, there are some steps you can take to get closer to 100% payment rates! 

1. Have a clear plan for offering credit 

Negotiate payment terms in advance, write them down, and limit how much risk you take on each transaction. It can also help to adopt pre-paid models whenever possible and require a payment instrument before you let customers use your product. 

Your risk team should also be wary of newer customers without an established credit history. If you see a customer start using your product or service and they run up a significant balance in their first few days or weeks, monitor their account carefully. If you run an eCommerce business or a marketplace, frequent and aggressive purchasing sprees from new customers are a major red flag and should be examined before they become larger issues.

2. Charge and invoice promptly

By issuing your invoice or charging a payment instrument immediately following the completion of a job, you can secure payment without leaving room for evading payment.

Beyond that, you can build a (preferably automated) process for following up on chargebacks, outstanding balances, or invoices early and often. There is a careful balance between “often” and “too much” though, so be careful as you set up your contact cadence. Even if you don’t get paid on time, keeping yourself at the top of customers’ minds increases awareness and prepares them to negotiate payment terms when they’re able.

3. Make payment frictionless

Keep a payment instrument on file for your customers and verify it with a $0 authorization. You can also expand your available options and make it easy to set up multiple forms of payment; the more backup payment options you have on hand, the better your chances of completing payment. 

4. Talk to your customers like people

A few stray consumers may actively or angrily refuse to make a payment, but most of your customers want to stay out of debt. If you approach every delayed payment in this way, you can approach payment (and collections) with human in mind, and you can end up retaining a valuable, long term customer.

Customers that you work with may be able to provide invaluable feedback to your team’s processes. Make sure to follow up and talk to them!

Your small business’ goal with receivable management isn’t only to prevent late paying customers, it’s also to retain positive relationships with the most valuable ones. Don’t let a temporary situation ruin a beneficial long term relationship.

5. Prepare an escalation structure

Investing in preventing late paying customers can pay dividends to your bottom line, but retaining some expert help in the event you can’t collect on a delinquent account can be an effective strategy as well. Your risk team may be experts themselves, but accounts recovery is a complex industry to navigate, and if you don’t plan on building a full, first-party collections team in-house, you can form connections with other agencies. 

Having a small business collections partner as a last resort also increases your chances of recovery by informing customers that a delayed payment will likely move to collections. Consumers often recognize that having an account in collections can damage their credit scores and will do their best to pay if they are able.  

It’s not easy to prevent customers from missing the occasional payment, but by following a thorough process you can resolve delayed payments before they can damage your business. 

If delays begin to grow out of hand, you can always reach out to a digital debt collection agency like TrueAccord! Let our team know if you have questions.

3 essential digital channels for collections

By on February 13th, 2020 in Industry Insights

The debt collection industry is in the midst of rapid change. With the decline of the effectiveness of phone calls and upcoming legislation from the CFPB that includes limiting call volume, it’s more important than ever that your company’s collections strategy diversifies and introduces a digital, multi-channel approach to communicating with consumers.

Determining what digital channels work the best for your collection strategy isn’t an overnight decision, and using them effectively is another hurdle entirely. When reviewing potential communication channels, you have to consider how you want to use them, how you plan to scale them, and what the investment will be for doing those things properly.

Email

According to the State of Collection 2019, email is the most commonly used digital channel used to communicate with consumers in debt (beating SMS text messaging by 45%). Its frequency of use, however, does not mean that it is necessarily being used effectively. Sending manual emails haphazardly can lead to mixed results at best.

Trying to send emails at the scale required of a dedicated agency, however, is even more difficult, and poor email management can lead to low deliverability rates, poor domain authority (you may end up relegated to spam folders), and can even end up getting your company’s sending domains blacklisted from reaching any of your consumers. Figure 1, below, shows Debt Collector A’s email sending volume.

Figure 1

Sending hundreds of thousands of emails per month can seem like an effective strategy at face value, but when deliverability is taken into consideration, that appearance changes.

Figure 2, below, mirrors the bar graph in Figure 1 and represents the percentage of the emails sent from Debt Collector A that are delivered to an inbox vs. those that are filtered into a spam folder.

Figure 2

A 2019 email client market share study by Litmus shows just how valuable it can be to understand how to work with individual email service providers that all come with their own unique challenges and filters to protect their users. Gmail, for example, maintains 28% of email users, but only 1% of Debt Collector A’s emails are reaching Gmail users.

Cost

Emails can be an effective strategy, but doing so effectively at scale requires extensive infrastructure. That infrastructure includes five major things, including bringing on email experts to work with email service providers, detailed performance tracking, and creating valuable content for your consumers to engage with. Simple email may not cost much, but building a powerful email-driven strategy from the ground up won’t be cheap or easy.

Emails can serve as the foundation of an omni-channel digital strategy, but creating an ecosystem for consumers to engage at their convenience requires more than one tool.

SMS text messaging

Smartphones abound, and when Americans are sending roughly 26 billion text messages every day, it’s easy to see the potential in the texting as a collections communication channel. Millennials spend 3X more time texting than calling or emailing, and they hold an average of $4,712 in consumer debt (not to mention mounting student debt) which makes them prime targets for daunting debt collectors hounding them about a balance. This can be intimidating and turn consumers further away from wanting to work with you.

SMS allows for fast, direct contact with consumers that are on the move, don’t have time for a phone call, and may have breezed past an email or two. By creating a flexible system with multiple touch-points across different channels, you can create an organic system of contacting consumers rather that gives them the power to contact your team when and where they want.

Key uses for SMS:

  1. Payment notifications
    1. Following up with customers to confirm a payment can help to reassure them that their next step toward financial freedom is done and increases transparency between your business and consumers. 
  2. Payment reminders
    1. Even consumers on a payment plan might forget once in a while. A ping with a text message can be just enough of a nudge to remind them to log in and make their scheduled payment.
  3. Providing instant access to their account
    1. By providing a one-click option for a consumer to make their payment, you can make taking the next step easy! Pairing this option with a simple online payment portal gives consumers the opportunity for a full self-service experience.
  4. Tracking your performance
    1. As is the case with other digital channels, tracking your data and performance is easier than ever with texting. You can A/B test messaging and get consistent results for improving engagement.

When you’re considering what to include directly as part of the content of a text message, keep in mind that people expect texts to be short! Length aside, make sure to avoid:

  1. Sensitive information (e.g., account balances, credit card information, etc).
  2. Misleading information
  3. Threatening consumers
  4. Harassing consumers

Text messages have a 209% higher response rate than phone, email, or Facebook, and part of the reason for that is that they are digestible and often feel informal and friendly. On the flip side, misleading, threatening, and harassing texts not only deter engagement and damage your brand, they are also illegal.

Plus, the CFPB’s proposed rules will give consumers the ability to opt out of text messaging, and your texting numbers can still be blocked manually. Be selective with the messages you send and consider the consumer experience.

Getting started with texting using certain software companies can be as cheap as pennies per message. Full-scale agencies like TrueAccord also make use of SMS tools as part of a broader collections strategy alongside other digital tools.

Direct drop voicemail

Direct drop voicemails (also known as ringless voicemail drops) are a unique channel that can help supplement a digital communication strategy but can’t do much on their own. Rather than an agent calling a consumer directly, a voicemail is delivered to the recipient’s inbox without their phone ringing (hence the name).

The consumer still receives a message from a pre-recorded voice that can relay much of the same information that they would have gotten from an agent, but they do not feel the urgent response pressure associated with a phone call. Much like text messages, direct drop voicemails can be used sparingly as a touch point to remind consumers of upcoming payments or ask them to check an email or call an agent back.

From a cost perspective, direct voicemail offerings can range from a few cents to a few tenths of a cent depending on the provider, and many companies will charge based on successful drops rather than a flat charge for the volume sent which can avoid costs incurred for out of date or incorrect phone numbers.

Both direct drop voicemails and text messages are legally classified as phone calls by the TCPA as the law applies to “placing a call or text to a consumer using the consumer’s mobile number.” Be careful with when and how you decide to use either channel in your collections strategy!

As consumer preferences and collections law continue to evolve, we should expect to see rapid growth in both existing digital channels as well as the emergence of others! Effectively integrating these tools into your strategy together can create a much larger impact than any one channel in isolation, and teams that build these systems today will be the future leaders of the industry very soon.

4 tips for improving your collections strategy this tax season

By on January 23rd, 2020 in Industry Insights

The 2020 tax season is getting started early this year! The IRS will begin accepting returns for the 2019 tax year as soon as January 27th, but what does this mean for your business? According to the National Retail Federation, in 2018 and 2019, 34% of consumers intended to use their tax refund to pay off debts. With over $142 billion distributed through refunds last year, that leaves us with somewhere around $48 billion dollars directed toward debt payments across the country.

With numbers like that, it’s no surprise that tax season is to debt repayment rates what the winter holiday season is to massive retail sales. Let’s take a look at how you can make good on collecting while it’s on your customers’ minds this season!

Provide flexible payment options

US consumers have racked up over $4 trillion in debt, and that total has been steadily increasing for years. For many consumers, paying off a debt in full or even in the amounts offered can seem insurmountable. This is especially true of consumers that have multiple debts to pay off. 

With a surplus of tax return money burning a hole in their pockets, they have an opportunity to begin to relieve some of their debt pressure. By providing consumers with more flexible payment options, they feel comfortable knowing that they are taking steps toward financial well-being without having to commit their entire refund to a single payment.

In fact, we’ve seen that 60% of consumers that start on a payment plan will pay in full, settle in full, or remain active on that plan once they’ve started it! Getting your foot in the door can make all the difference.

Make yourself accessible

Being able to offer new payment options to consumers is one thing, but getting a hold of them to discuss those options is an entirely different challenge. Traditional collections agencies continue to work on a call and collect system, and they are reaching fewer and fewer consumers. As the number of consumers interested in answering their phones continues to decline, businesses have to consider new contact channels.

Effectively contacting consumers in debt starts with meeting them where they are: online. Your consumers are filing their W-2s, adding up their assets, and managing their incoming returns through tax software and banking apps. By reaching consumers by email, SMS, or even push notifications, you can introduce your payment plan options where they can see it without the pressure of a call from an agent.

Personalize (and humanize) your communication

Great payment options that consumers can afford? Check.

Reaching consumers when and where they are? Check.

Now how do you work to get consumers to follow through if you don’t have an agent on the phone? When a company is selling a product or service, there is a clear distinction between sales and branding. As you ramp up your tax time collection strategy, consider the impact of building trust in your brand rather than pressing consumers to pay right then and there. 

Even the most compelling payment options on the market and the most stellar team of collectors in the industry can’t solve for the fact that your customers may have other debts that they are making a priority. But if they recognize your brand as the one they can communicate with, as the team that understands their struggle, as the team that’s willing to work with them, they’re more likely to pay. Not only that, they’re more likely to work with you again in the future!

Partner with the right team

Many businesses, especially smaller businesses, take responsibility for collecting outstanding balances on their own, but collections is a complex industry from both a tactical and legal perspective. Compliance can be a massive, tangled hurdle for even the most diligent teams to clear. By finding the right debt collection agency to partner with, you can save you and your team the time and resources that would be invested in recovering lost revenue (and navigating the 538 new pages of the CFPB’s collections rules) and focus on what you do best.

Tax season is on its way, and customers want to clean up their debts as much as you want to recover on their delinquent accounts. Providing a compassionate and accessible collections strategy can offer great results for both your company and the consumers you serve, and if you need some back up, make sure you find the right agency for you.

Still looking for a new collection strategy for tax season 2020? You can reach out to our team to get started today!

Tips for hiring a debt collection agency for your small business

By on January 16th, 2020 in Industry Insights

In any industry where money is exchanged, debt is an inevitability. For small businesses, even small transactions can add up quickly and late payments, delinquent accounts, and chargebacks can start to bury an otherwise thriving business. This is where a debt collection agency can help your business succeed. 

Recovering payments on otherwise lost accounts probably sounds great, but let’s do some research before you get started! Here are a few things to consider when you begin looking for a collection agency for your small business.

1. Where can they collect?

Collections agencies can provide financial services to businesses ranging from those in their local area to companies across the country, but it’s important to validate that they can operate in your state! Local collectors may not have the licensing authority to collect across state lines. 

Larger collection agencies may also work across the country and even specialize in collecting certain types of debt for a given industry, such as point of sale transactions, credit card, rent to own products, loans, etc.

2. What industries do they serve?

The needs of B2C (business-to-consumer) businesses are dramatically different than those of primarily B2B (business-to-business) business lenders or tech start-ups. Collectors that specialize in specific verticals can ramp up and start collecting effectively, faster because of their familiarity with consumers in that space. Don’t be afraid to ask a collector for their experience working with other businesses like yours!

3. Are they legally compliant?

Beyond the local and state level access, federal regulations play a large part in a collector’s operational ability. Keep your business safe and verify that the company you’re interested in working with has a comprehensive compliance management system.

A proper system will be designed to be in compliance with the Fair Debt Collection Practices Act as well as other state and federal regulations.  Also, ask what preparations the company has made for compliance with the upcoming Consumer Financial Protection Bureau’s newly proposed rules.

When you begin your research into new agencies, consider visiting their Better Business Bureau page or looking through their Google Reviews. Consumers that have had particularly negative or even legally questionable experiences with the business may help you to recognize red flags before they become an issue for you and your team.

4. What is their pricing structure?

The price on any purchase for your business can make or break the decision to invest in a new product or service, and finding a debt collection agency at the right cost is no different. Most debt collection agencies will be priced in one of three ways: flat fee, contingency, or a hybrid model. 

  • A flat fee is a one-time service payment that coincides with signing a contract and will vary depending on the volume of accounts that are being collected on.
  • A contingency payment plan is a performance-based payment model where the collector only profits from the accounts they are able to collect on. Signing a contingency contract will typically outline the percentage that they will collect per account and may change from portfolio to portfolio. 
  • A hybrid model is often a custom solution that begins with a flat fee contract and expands out to accomodate more accounts if the collector is exceeding expectations. 

5. What communication channels are they using?

The debt collection industry is undergoing a massive change, and many collections agencies are struggling to adapt. Call-based collections has been the norm for decades, and a large percentage of debt collection agencies still rely on sending letters (91%) or making phone calls (89%) as their preferred contact channels. 

Unfortunately, these channels are no longer the ideal channels for consumers. Collection agencies that embrace digital channels (email, SMS messaging, etc.) are more likely to reach consumers when and where they like to communicate, and help to humanize the collections experience.

If you’re interested in learning more about the future of communication strategies in collections, you can read here!

Working with a debt collection agency may seem like a risk, but finding the right solution for your business can mean recovering revenue that would have otherwise been entirely lost. Just make sure that your new partner is the right one for your business. What other questions do you have about what it means to work with a collection agency? Let us know!

A new decade for debt collection

By on January 8th, 2020 in Industry Insights

A new year often marks the time for resolutions and major change. Goals are set. Budgets are ready to go. Product roadmaps start to unfold. For us, change and growth don’t just start and stop in January. TrueAccord is working to be better every day, and this year is no different.

We know that the collections industry is changing quickly, and we’re ready to ride the wave. Check out what TrueAccord’s leadership has to say about the future of collections and what we expect to see in 2020 and beyond!

Ohad Samet, CEO

We’ve seen a recent growth of digital debt collections strategies for to the benefit of both collectors and consumers. As the industry jumps forward, what do you see as the biggest challenge facing teams in the collections space?

The collection industry has been fighting a losing battle against the demise of phone calls as a valid contact channel. Rule changes and consumer behavior are rendering phone calls obsolete, and we’ve started to see the result in consolidation and closures. This trend will accelerate in 2020, and the realization will come, whether in 2020 or subsequent years, that companies will need to adapt.

And what makes this change such a significant challenge to existing collectors? Could a traditional call-based agency simply start sending emails to consumers in debt?

This shift isn’t only a conceptual one; it has deep technological and operational implications. Operating digital channels at scale is a new challenge, completely different than calling using a dialer, and traditional providers will find it increasingly difficult to catch up at scale. 

Emails and text messages aren’t simply cheaper alternatives to letters—they are two-sided, complex media that require data and inference infrastructure that’s difficult to build and maintain, especially with thin margins. Clients will need to re-evaluate how they work with a narrowing landscape of skilled, at-scale providers who can handle this new world.

Sheila Monroe, COO

As Ohad mentioned, the collections industry has largely remained unchanged for years and relied heavily on call-based collecting as its primary contact channel, what will make the 2020s different?

Technology is advancing exponentially. When combined with the lightning speed of adapting consumer expectations and a regulatory landscape driven largely by consumer advocacy, leaders in this industry will anticipate and create the way forward. Those playing catch up, or missing the cues, will inevitably struggle to survive. 

Those that lead the charge in the 2020s will drive a focus on machine learning, AI, advanced analytics, and automation as the entire industry finds itself at a tipping point in this new decade.  

New technologies are often developed to address a specific problem. What is the main issue you feel these new technologies are working to solve? 

The digital revolution has already started. Much of the technology exists, and many creditors and collectors are experimenting with digital channels such as SMS and email. That said, being able to close the gap between consumer expectations and creditor or collector offerings represents a high hurdle for many in this space that more complex machine learning and AI can help to address.

Kelly Knepper-Stephens, VP of Legal & Compliance

Rapidly advancing technology is complex in and of itself, but collections is also a carefully regulated industry. The last major update to collections law was in 1977, long before most of today’s technology was even a possibility.

We’ve spoken before about how the CFPB’s NPRM has set out to make major changes to existing laws in order to incorporate new technologies into collections regulation. How will those updates shape the industry going forward into 2020?

The NPRM, which should have a final rule sometime this year, makes clear that “modern” forms of communication (email, text, and others) are methods by which agencies can use to communicate with consumers. Those agencies who haven’t invested in these technologies yet are all starting to broaden their communication tools now in order to prepare.

As we move into the new decade, innovative agencies will continue to build out ways to reach consumers based on their preferences, using tools we don’t even know about today. We might even see the reputation of the industry shift as these friendlier collection methods allow consumers the freedom to choose how best to communicate and resolve their debt.

Looking ahead

Consumer communication preferences are evolving, new channels are becoming available to collectors, and merging these shifts together will be the key to successful collections through the 2020s.

How to Build Your Business’ Reputation Using Digital Collections

By on November 6th, 2019 in Industry Insights
five people putting their hands in for a deal

The age of the internet has brought about an age of transparency and exposure. News can travel around the globe in seconds thanks to the power of social media, and this visibility means that a company’s business practices, day to day operations, and mission are just as clear and present in the market as their products and services. Brand matters, and nothing helps to build or break a brand’s reputation faster than social proof

Today, companies don’t win just because they have the best products and services, they win when they provide the best customer experience and allow their customers to share that with the world. Companies that do this well are experience disruptors. Creditors looking for collections solutions can struggle to provide a positive collections experience (no customer wants to be in debt after all), but we know that it’s possible to build your brand and still collect on debts at the same time.

Stay ahead of compliance

This should go without saying, but collections teams that stay up-to-date and even ahead of federal and state compliance meet with fewer customer complaints and lawsuits. In an industry where not using (or even over-using) the right language can lead to a lawsuit, ensuring compliance must be the first step in providing a consistent, secure, and positive brand experience. 

Creditors and customers alike benefit from collections systems that keep compliance at the forefront. New regulations like the CFPB’s proposed rules can add new layers of complexity to the collections process. Thankfully, digital collections strategies can aid in coding compliance directly into outreach and minimizing human error!

Be transparent

Speaking of using the right language at the right time, using clearcut language that helps consumers understand their debt is essential to building a brand that is seen as reliable and trustworthy.

Building your brand with a modern, digital collections strategy is essential because today it isn’t just about reaching consumers and requesting payment.

While compliant language is a large part of transparency, making it easy for customers to understand the exact steps they have to take to get out of debt and how they can work with a team to pay off that debt helps smooth the process. When steps to get back on track are clearly outlined and presented in a way that is digestible to the least sophisticated consumer, the debt payment experience is better for everyone.

Adapt to changing customer expectations

Customers expect their financial services to be exactly that—services; they want their tools to work for them. If someone can do all of their day-to-day banking through an app, they shouldn’t have to wade through stacks of paper mail and phone calls in order to resolve a debt.

Traditional collections models have made some technological advancements, but are still largely bound to call-based collections practices. Financial technology experience disruptors like Rocket Mortgage have simplified and digitized their services to meet consumer expectations. NerdWallet says that their “document and asset retrieval capabilities alone can save you a bunch of time and hassle.”

Make a change

Digital debt collection agencies are dedicated to saving consumers time and hassle by reaching them via email and push notifications instead of calling in the middle of dinner. Customers can respond to outreach and utilize payment systems at their own pace. 

Building your brand with a modern, digital collections strategy is essential because today it isn’t just about reaching consumers and requesting payment. Companies build reputation by providing a proper experience. How they collect is why they win. 

TrueAccord is redefining the collections experience for creditors and customers alike. Click here if you’re interested in learning more!

What are accounts uncollectible?

By on October 3rd, 2019 in Industry Insights
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 Industry Insights
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 from the creditor, and assisting the creditor in recouping the loss and reinvest that capital. 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!

Lavallee v. Med-1 Solutions Confirms Common Sense Email Principles

By on August 26th, 2019 in Compliance, Industry Insights

On August 8, 2019, the Seventh Circuit Court of Appeals (7th Cir.) released its long-awaited verdict in the case of Lavallee v. Med-1 Solutions, LLC, 17-3244 (7th Cir. Aug. 8, 2019). The court ruled that Med-1 Solutions, LLC did not properly provide the validation notice as required by the Fair Debt Collection Practices Act.

Additionally, the court held that the first email Med-1 Solutions, LLC sent did not constitute a debt collection communication. Despite the unsuccessful method by which Med-1 attempted to email the initial communication, it is possible to do so in a compliant manner consistent with the current interpretation of the FDCPA.

The court’s decision

The Court held that Med-1 Solutions, LLC did not properly deliver the validation notice to the consumer. Med-1 sent the Plaintiff an email, but the email did not contain the text of the validation notice.

Instead, the email contained a hyperlink to a page where the Plaintiff would have had to enter personal information, and then take four additional steps in order to open a PDF containing the full initial demand letter with the required validation notice language. 

The Court reasoned that Med-1’s email did not constitute a communication because the email did not have any content relating to a debt. The Seventh Circuit reasoned that the “email conveyed three pieces of information:

  • The sender’s name (Med-1 Solutions, LLC)
  • Its email address
  • The fact that it ‘has sent … a secure message.’ ”

The email did not convey any information about the debt so it did not constitute a communication.

The FDCPA requires debt collectors to provide the validation notice in the initial communication or within 5 days of the initial communication in writing. Since the email did not constitute an initial communication, the Court found the initial communication happened over the phone. Med-1 Solutions, LLC, however, did not provide the validation notice during that call or in writing within 5 days because the company believed that their email satisfied the requirement. 

How to provide a validation notice in initial communication via email

When sending an initial communication by email, the content in the body of that email must contain all the validation notice requirements (15 USC § 1692g). It should:

  • Identify current creditor
  • State the amount owed
  • Provide the validation statement explaining the customer’s dispute rights

With the right information provided in the initial communication customer’s are more likely to recognize the account and trust that the email is from a legitimate debt collector. It should contain information on:

  • How to unsubscribe from future emails
  • Telephone contact information
  • The business’ hours of operation

Beyond that, it should comply with any other state, federal, or local obligations such as whether or not to provide a disclosure or other information. These are some of the principals embraced in the CFPB’s proposed debt collection rule. Had Med-1’s email contained this information in the body of the email, the result in the case would have been different.

Limited content emails 

The Seventh Circuit’s decision also highlights a concern with sending limited content communications via email. This case reinforces the importance of developing an email strategy and fully understanding deliverability requirements. This can ensure emails are delivered and not identified as spam and filtered away from a recipient’s view.

A full deliverability strategy may consider several factors including, but not limited to ISP reputation, providing relevant content in the body of the email, and more technical aspects of email such as throttling, bounces, and bulking. These elements can greatly affect an email’s ability to reach its intended recipient and ultimately convey its message.

Med-1 Solutions, LLC did not have a prior relationship with the Plaintiff, they did not remember receiving the email, and they did not click on the hyperlink provided in the email. As the lower court noted in its decision, the Department of Homeland Security warns consumers from clicking on links received in emails from unknown senders. The Seventh Circuit decision showcases the ineffectiveness of using a limited content message to reach and engage a consumer.

TrueAccord and the future of digital debt collection

We work to create a digital environment that places customer experience at the forefront of our collections strategy. This means ensuring not only personalized content delivered through our machine learning technology, flexible payment options, and digital access for customers to manage their debts. We do all of this via software that guarantees compliance.

If you want to learn more about how our technology can change your strategy, reach out to our team here!

TrueAccord and the Future of Digital Debt Collection

By on August 6th, 2019 in 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 “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.