What does the future hold? We don’t own a crystal ball but we work with some deep thinkers with decades of experience, who’ve been watching this industry evolve over the years. Tim Collins (CCO), Sheila Monroe (COO), and Kelly Knepper-Stephens (VP of Legal) shared their predictions and expectations as we go into 2019 and what we all need to think about.

Read our 2018 predictions here.

Credit cycle downturn leading to bad behavior

Many financial institutions are predicting a downturn in 2019, which will prove to be the year’s biggest macro trend impacting behavior across the board. While several creditors already started tightening their underwriting criteria, almost none have sufficiently adapted their collections practices to take advantage of new technologies and will have to scale call center servicing as more consumers default. With the increase in roll rates and bad debt, creditors will be tempted to turn to old habits and increase aggressive calling tactics while they struggle to adapt to our now digital-first world.

The new BCFP rule isn’t a big surprise

We have been expecting the new debt collection rule ever since the process started in 2013. Now with the confirmation of Kathy Kraninger as the new Director of the Bureau of Consumer Protection we may see the rule sometime early next year. The journey has been long and the scope of the rule changed multiple times, and some have hypothesized that the new administration may impact the content of the proposed rule. When the NPR comes out next year we however expect it to be very similar to the Bureau’s outline of the proposal presented in 2016. We expect the focus on disclosures, limitations on contact frequency, and some support for new communication channels that will fall short of a litigation-proof formula.

The NPR won’t be the only law passed impacting debt collection

Consumer complaints are forcing both sides of the aisle in the House and Senate to try and pass legislation to update the TCPA and empower not only the FCC but the BCFP and FTC to bring the robocalling crisis to a swift conclusion. The TRACED Act is the latest but won’t be the last and provides for criminal and increased civil penalties. These changes will make legitimate businesses pause calling to make sure they are not included and could be a field day for plaintiff lawyers.

Litigation to remain roughly the same as in 2018

The BCFP will publish a new rule and the FCC may engage in more enforcement activity but we do not expect anything to impact litigation activity in the debt collection market. Legal theories may change, one statue may be slightly over-represented vs. the others but overall numbers will not change much. The plaintiff attorney/collection agency game will continue to look more like a cybersecurity firm’s bug bounty program than courtroom drama, and we think it’s time to treat it as such and move on.

Robocalling increases exponentially

In 2018 we had a robo-call task force that impacted right party contact across the board as it swept collection calls together with spam calls. We don’t see this trend subsiding, but in fact increasing. With a record 5.1 billion robocalls made in October and technology is going to simplify the work of spammers for a long time before it catches up with blocking them, and the increased illicit activity will continue to encourage broad stroke prevention measures that are certain to continue hurting collection calls and RPC. Adding to that, financial institutions continue to adopt digital communication channels and the rise of digital-only “neobanks” will continue to educate consumers against using their phone. The combined effect will underline the continued crisis in phone-based collection efforts.

Increased use of technology to contact consumers

When TrueAccord was started in 2013, digital communication and AI were rarely heard of in debt collection. This was completely reversed in 2018 as these two topics have been frequently discussed. We expect 2019 to be a breakout year when more creditors and collectors will adopt multiple channels including chat, email, IVR, and texting, all driven by AI, to improve contact rates. Technology has matured as well as the industry’s interest and clients’ demands. We will be tracking those solutions and the market’s reaction to them as they scale.

M&A activity to increase dramatically

The new BCFP rule and robocall blocking activities will put tremendous pressure on small and medium agencies. Coupled with major creditors reducing their agency network, and new technologies requiring a large upfront investment, we expect further consolidation in the debt collection market. While prices may remain higher than they used to be, we expect more small and medium agencies to offer themselves up as owners worry about increased uncertainty and mounting costs. The deep-pocketed shall rule the segment.

Overall, we expect an eventful, challenging, and incredibly interesting 2019. We look forward to meeting with peers in upcoming events and discussing these developments as we see them unfold through the year.

As the owner of a startup, you know a non-paying customer can have a serious impact on your cash flow. Getting the money owed can be a tricky task, which is where debt collectors could be beneficial to you.But if you have never used a collection agency before, you may not know where to start.

To help you in your search, here are 5 tips for startups looking to work with debt collectors…

1.   Exhaust your options first

No business owner wants to get debt collectors involved. In an ideal world, all your customers would pay on time without the need for calls and reminders. Unfortunately, that’s just not realistic. Customers come up with all manner of excuses as to why they can’t pay and, as a startup, you need to break through those. But before you get a third party involved, it’s important you exhaust all of your options. Dealing with the situation on your own could be the most cost-effective method of retrieving your money. Develop a structured escalation process for your business as a way to oil the debt collection process. Of course, no matter how hard you push, some clients will continue to push back, which is when you need the help of a debt collection service.

2.   Check their reputation

Your startup’s branding and reputation is one of the most important factors when it comes to determining future success. So, when you’re hiring a debt collection service, think of them as an extension of your company. The way they behave is going to reflect positively or negatively on your business. Do extensive research on the reputation of any debt collector you are thinking of using. If you get the decision wrong, you could end up with an agency that repels customers, damages your brand, and possibly lands you in legal hot water. However, using a trusted third party such as TrueAccord can actually help to increase client retention and improve brand perception. Don’t let a second-rate debt collection agency ruin it with poor service.

3.   Understand your client

As an entrepreneur, you will probably understand your client deeply. It’s important that the collection agency you choose understands them too. Many collection services deal with the process in a one-size-fits-all manner. However, you will see more return when you choose a firm that understands how your clients work. TrueAccord uses innovative machine learn to analyze consumer behavior, leading to a fuller understanding of clients’ quirks and preferences. From there, we know the optimal way of communicating with each debtor and which repayment packages they are most likely to accept. That’s why we have anywhere between a 50% to 500% better collection performance than our competition.

4.   Know the process

Before you hire a debt collection agency, you should have a good understanding of their processes. You need to know what will be expected of you and what information you need to provide. Typically this will include information on the debtor, so make sure you keep all this information well-organized and easy to find. You should also understand how the company will behave during the collection process. Ensure the agency you are going to work with will be able to provide you with full control and visibility over client interactions. If they are unwilling to show you their client interactions then this should serve as a red flag and you should stay well clear.

5.   Review the costs

For any startup, cash flow is going to be integral to success. You should make sure to optimize the debt collection process to increase the amount of money that comes in from your debtors. The key to maximizing your returns is choosing a collection agency that is both successful and cost effective. Speak to any agency you are working with and make sure you understand their charges. Different agencies work with different contracts so it’s important you get to grips with the fees before handing over your business. Lowering your costs and increasing the money coming in is the best way to turn this tricky time into something positive.

Bottom line: Tips for startups looking to work with debt collectors

Hiring a debt collection agency can be a daunting task for a startup business. You are effectively trusting a third party with your reputation during a highly delicate period.

Get the wrong agency and it could end up damaging your business. However, get the right one and your startup could receive the cash it is owed with its reputation as good as ever.

Recovering rent from a tenant can be a headache for any landlord. You can try every play in the book but, sometimes, they just don’t want to pay up.

At this point you might be considering a debt collection agency to get paid for the rent owed to you. But is that a wise idea?

Let’s take a look at the pros and cons of using debt collection for past due rent.

Pros

Reduces hassle

Whether you’re a full-time landlord or renting your house for extra cash, you’re bound to be extremely busy. Hiring a debt collection agency reduces the time put into chasing tenants. This will free you up to work on your other projects. Furthermore, landlord-tenant relationships can sour in these types of situations. Using an agency will limit the contact you have with them — saving you a load of stress.

Better expertise

There’s no one-size-fits-all process to debt collection. What might be effective for one debtor might not work for another. A debt collection agency should use the best method possible for getting the money from your renters. TrueAccord, for example, uses algorithmic machine learning to analyze consumer behaviour. This helps us to personalize our service leading to far higher debt collection rates than our competitors, and learn from consumer behaviour so we’ll get better over time, even if we start without any knowledge of your product or service.

Legally safer

Debt recovery is a complicated process and not one we are subjected to on a day-to-day basis. You may not know the laws inside out and you don’t want to put yourself into legal hot water by making demands you aren’t allowed to make. Collection agencies are in the business and will have a far greater knowledge of the ever changing rules on the topic. Remember to always pick a company that takes this part of the process seriously. Our machine-based approach provides much better collection compliance than others thanks to its predictability, real-time monitoring and easy auditability.

Collects money

Ultimately, the main benefit of hiring a debt collector is getting paid. It can be a tough decision to hire a debt collector, especially if you have come to know and like your tenants. But, at the end of the day, you have fulfilled your end of the contract and the tenants need to do the same. Using a debt collection service can be the least messy way around getting the money owed to you.

Cons

May damage reputation

As a landlord, your business could live or die on its reputation. If you hire the wrong collection agency you could do serious harm to your good name. It’s important to realize there are unscrupulous collectors out there and to mitigate for that. Do your research to find a company that delivers a great consumer experience. Remember, you are hiring a third party company to deal directly with your clients. You should always take you time to do background research whenever this is the situation.

May lose tenant

You should be prepared for the fact that if you work with a debt collector, you may lose your tenants. This could get pretty costly if you can’t find someone to fill the now empty accommodation. However, this doesn’t have to be the case. Finding a debt collector, such as TrueAccord, that works with the consumer to help them out of financial difficulty could save you. We aim to make our communication informative, actionable, and compassionate. This reflects much better on you, and could help the tenant become financially stable.

Could be expensive

Debt collection agencies can be expensive, which is why many landlords choose to chase the payment themselves. However, this is rarely a cost-effective or productive use of your time. Instead, you should look for a debt collection agency that works for you. Furthermore, we can offer a lower fee than other companies with a better chance of retaining your tenant. Overall, it’s the easiest way to bring in the most amount of money for the lowest costs and much better priced than hiring your own accounts receivable clerk.

Bottom line: Using debt collection for past due rent

Using debt collection for past due rent is a tough decision for any landlord. There are plenty of positives, but you also need to consider the negatives.

Picking the right debt collection agency is the best way to reduce the negatives. Speak to TrueAccord today to find out how we can help you recover your past due rent.

Client Success works with our clients big and small to on-board them, tune collection performance, exchange data and find opportunities to experiment. In this short podcast, our Senior Director of Client Success, Pej Azarm, talks to our CEO about his function and how it works with clients.

Chargebacks are a form of transaction reversal that serves to protect customers and merchants from fraud committed by either party in a transaction. It is common in situations where a cardholder wants a refund on an item previously and wrongfully purchased from a merchant. It also applies in instances where a cardholder was charged for items that they never received or in cases where due to technical hitches, a mistaken charge was imposed on them.

Primarily, a chargeback serves to ensure that the funds of a cardholder are safe no matter what. While it may present a good ground for cardholders to get refunds of their cash, sometimes, it can be abused; in some cases, chargebacks as a result of buyer remorse or other types of abuses reach 40% of chargeback volume. It can spell doom to the merchant when consumers misuse this provision.

Financially, it affects the bottom line of merchants, sometimes up to 1-5% of revenue. When the customer cannot or won’t pay up, or resorts to wrongful chargebacks, it makes their financial situation worse.

Merchants are aware of the imminent risk of a chargeback when a customer is not satisfied with a good or service; thus, they go out of their way to ensure that the best is delivered to the customer, that service is impeccable, and that there are no billing errors.

As a merchant, you are going to deal with many chargebacks in the course of trading. If you are engaging in genuine business, then it comes as an imperative to guard against unnecessary chargebacks. You cannot stop people from filing chargebacks, but you can fight illegitimate chargebacks, the result of buyer remorse or abuse. Determine which issues are raising these chargebacks and address them. Always ask for the direct signature of the cardholder or employ a fraud prevention service if you deal with expensive items. Only allow consumers to ship to their billing addresses. In these ways, you can safeguard against unnecessary chargebacks from dishonest consumers.

Finally, if you are faced with chargebacks and cannot have them insured by a fraud prevention service, or represented back with your bank, sending chargebacks to collection agencies may be a great way to get paid. But what are the pros and cons of doing so?

The Pros

Improved Asset Recovery

Consumers may file a chargeback but keep the product. Sending it to collections may enhance the process of recovering all these assets from such clients, both product and payment. Collection agencies are good at what they do and can handle the task of asset recovery better than you. Their chances of recovering lost funds are better than yours, both because of their broad experience and the fact that they are, at the end of the day, a collection agency. The mere thought of being contacted by a debt collection company often drives consumers to make good on their obligations.

Guards against Chargeback Transaction Fees

When a chargeback is filed, the card company immediately charges some fees relating to processing the chargeback. The fee ranges from $20 to $150 per transaction. Even when a consumer cancels the chargeback, these fees will still have to be paid. When you have a genuine case of buyer fraud, sending the chargeback to collections may help you overturn the tables and recoup the fee in addition to the chargeback, based on the terms of service the consumer agreed to on your website.

It Deters Crafty Consumers

Some consumers are just out there to get freebies. Some can be problematic. Some pay when they want to. Entertaining such can weigh you down as a business. Sending those consumers to collections may deter them from filing illegitimate chargebacks in the future, and send a clear message to future abusers. They will know better than to practice their devious ways on your business. Doing so with the right debt collections partners will get you deterrence while protecting your brand.

Enables You to Focus on Developing your Business

Instead of focusing on your energies fighting off chargebacks or building internal teams to deal with the minutiae of accounts receivables, sending them to collections relieves you the hustle. It allows you to maintain focus on things that are essential to your business. You can focus on giving exceptional customer service to your loyal customers.

The Cons

It’s an Added Cost to Your Business

Using collections is an added cost to your business. Most collection agencies charge fees from recovered funds, with some base fee to start using their service. Fees can be as high as 40% of dollars recovered, from money that you thought was already in your pocket. While this may seem high, consider this: 40% of $0 is still $0. Other than a low monthly fee, you’d be paying out of dolalrs the agency recovers for you. If you hire a full time accounts receivables clerk, that person would be paid monthly no matter what they collect.

May Dampen Customer Relationships

Collection agencies may use not-so-friendly approaches to debt collection. Some consumers may suffer emotionally, and that may mark the end of your relationship with that customer. That is why it’s important to choose the right collections partner. Go for experts that focus on UX, high NPS, and great customer reviews on Google and the BBB. There is a wide selection of collection partners and you shouldn’t settle for one that hurts your brand or doesn’t get your business.

The above consideration highlights just some of the pros and cons associated with sending chargebacks to collections. Do you have more information on the pros and cons of sending chargebacks to collections? Please share with us below.

What can debt collection for startups do for your business? Founders grapple with this question when faced with chargebacks and unpaid balances. Is debt collection for startups right for me? What can it do to my business? What will it do for my brand? Should I do it myself or outsource?

Is debt collection for startups effective?

Debt collection is a natural part of the customer life cycle, and neglecting it often creates more problems than it prevents. As a machine learning based, digital first provider with high consumer satisfaction scores, we know it’s an effective tool that can be used without the historically negative connotations and with positive brand impact. Debt collection augments your internal A/R efforts, adding a partner who not only has access to tools you don’t have, but also has more negotiation experience and a ton more data – on the right channel, time, tone, and offer to use with individual consumers.

Is debt collection for startups right for you?

Do customers owe you money for a post-paid service or chargebacks? Are you happy with your A/R process, or is it a draining effort that no one in your team likes taking care of? If recovering lost funds is painful, as it is for most, you need help. Debt collection is a cheaper alternative to simply losing the money or keeping an in house collections team, especially if the relationship with the customer has become adversarial.

We think that debt collection has a strong relationship component. When defaulted customers pay through us, they often do so because they feel that they’re being heard for the first time since their dispute with our clients started. Sometimes a customer has a bad customer care experience, a billing error, or a misunderstanding about an invoice, and suddenly they’re 90 days behind. A lot of late customers are just making excuses – but we’ve built the expertise for dealing with them at scale.

Buy or build?

You should talk to your customers before sending them to us. A structured process is key to not only getting paid yourself as well as our success for you down the road. It always helps to start the process in house (don’t forget to teach them how to handle excuses). After the first 15-30 days past due you can ship them over and let us take care of them. A good debt collector will recover money; a great collector will recover money, plus some of your old customers, and help you grow your business.

Interested in trying us out? Sign up here!

Chargebacks are frustrating. Debt collection for chargebacks can help.

Chargebacks are a part of doing business, but they’re also incredibly frustrating. It’s a slow, disjointed process that can hit 1-2% of your GMV. Chargebacks create multiple issues.

• Chargebacks take time to get to you. A consumer can take months to charge back and while the majority of chargebacks come in in the first 30-60 days, not all of them do. You may lost revenue you thought you had several months after you book it.
• Chargeback dispute is manual, slow, and often ineffective. Chargeback often arrive by snail mail with very little time to respond, and evidence collection and submission is tedious.
• Many chargebacks are caused by buyer’s remorse and abuse of credit association rules. As high as 30% of eCommerce chargebacks may be the result of remorse, spouses using the other’s card without their knowledge, or just friendly fraud.

Many businesses start their own payment operations teams, focusing on detection and prevention. There’s a lot you can do in detecting fraudulent and abusive behavior in advance. When you don’t, and representation doesn’t work, debt collection for chargebacks is a tool you must consider.

Can debt collection for chargebacks really help?

Debt collection for chargebacks is an effective complimentary process, working hand in hand with representation to increase your recovery rate. The customer is liable for paying you based on your terms of service, even if you can’t charge their card.  Debt collection, especially with a digital-first solution, will improve your chances to recover and reduce your risk of alienating your customers. Clearing out the reason for their chargeback might help you win them back as customers.

You must approach these customers with the right mind set. TrueAccord is exceptionally good at handling disputes, not only blindly go after the money. By listening to your customer, we are able to discern with greater accuracy whether the chargeback was a result of fraud or something else. We lead the customer into paying back what they owe, telling us their story and giving you feedback, and getting them back to paying status. It’s a win all around.

Interested in trying us out? Sign up here!

Startups live and die by customer acquisition and growth, and that is where they spend most of their time and effort. However as many startups find out, retention is key to continued growth. Active current customers spend more, and are more likely to use other services your offer as well as refer others to your service. As part of our debt collection for startups service we meet many consumers who’ve churned and left an unpaid bill. We’ve learned that customers who churn sometimes provide businesses with the most important feedback.

Why do customers churn? The vast majority don’t do so with malicious intent, even if they leave an unpaid balance behind. Most of these situations involve a service or product dispute. A disappointed customer feels that paying is unfair, even if they agreed to a charge in advance. Some have real cash flow or billing issues. What do you gain from talking to these customers, or from using a service to engage with them?

1. They have the most pointed feedback for issues with your product or service. Deciding not to pay is a strong decision often driven by an exceptionally bad experience. This is the equivalent of a bug bounty program – finding what went wrong while recovering money. Debt collection for startups should be focus on soliciting that feedback, not only getting you paid. Listen to the content rather than the style, and you’ll discover a plethora of relevant product and process feedback.
2. They care enough to make it noticed. Not paying is a strong signal, and you want to unpack what happened. The same issue this customer identified may impact thousands more who, instead of not paying, just churn – or hurt your referrals. You need to talk to them to find out what’s going on.
3. They often owe you money. There is revenue to be recovered by reconciling with churned customers, both money they owe and future income. While TrueAccord offers debt collection for startups, our NPS is 60 – mostly because we offer a positive experience in a negative situation. Engaging with these customers or using a partner to do so can turn their perception by 180 and change your relationship trajectory.

Getting paid is a difficult job, and one that small businesses often struggle with. Customers will surprise you with excuses and disputes that can severely influence your cash flow. In this post we’ll discuss ways to engage with your customers early so you won’t have to send them to small business collections.

Prepare to Receive Less Than 100% of What You Are Owed

Some customers won’t pay, no matter what you do. They may disagree they need to pay at all, irresponsible, or genuinely had a life event that impact their ability to pay. You’ll eventually need to use a trusted third party like TrueAccord to get these ones to pay. Accepting this saves you time and heartache – there’s a limit to the number of calls and reminders you should offer late payers and a limit to the time you or your team should spend on them. Still, there are ways to get closer to 100% even before using a small business collection service.

Reducing the Rate of Late Payers

Preventing late payments requires a structured process to keep them aware of their obligation, deal with expected excuses, and following up until you get paid. Specifically, pay attention to the following:

Be planned with giving out credit. Negotiate payment terms in advance, write them down, and limit how much risk you take in every transaction. Adopt pre-paid models whenever possible, and require a payment instrument before you let customers use your product. Beware of new customers, those without a long established history, that run up a balance on their first days or weeks. 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 stopped and examined by your risk team.

Be prompt in issuing your invoice or charging a payment instrument post completion of a job or with following up on late payments. Have a process for following up on chargebacks, outstanding balances, or invoices early and often, even if you end up sending some balances to a small business collections partner. Even if you don’t get paid on time, keeping on top of customers increases awareness and prepares them to negotiate payment terms when they’re able to.

Be frictionless in your methods of payment. Keep a payment instrument on file even if your model is post payment, and verify it with a $0 authorization or random charges. The more payment options you have, especially the more backup payment options, the better your chances of getting paid. PayPal was able to recover more than 95% of failed ACH payments thanks to using cards as backup payment instruments.

Be polite in your communication with your customer. They might not pay you today, but end up being a valuable long term customer if you just work with them through their current situation. Your goal with your receivable management process isn’t only to prevent late paying customers, it’s also to retain relationships with the most valuable ones. Don’t let a temporary situation ruin a beneficial long term relationship.

Be ready to escalate. You may invest a lot of effort in order to prevent late paying customers, but you are not an A/R expert and are not planning to become one; your team isn’t either. Using a third party takes emotion out of the equation, allows customers with service disputes to express themselves, and creates an opportunity to negotiate. Having a small business collections partner as a last resort also increases your chances of recovery just by informing customers that it’s an option. We don’t like it, and we’re always focused on great UX, but the negative perception “debt collection” evokes can work in your favor.

Bottom Line

It’s not easy to prevent late paying customers, but following a process, a few best practices, and using a strong small business collections partner can get you paid much sooner than you usually do. Think through your on-boarding, billing, and follow up process to significantly reduce the number of people who end up not paying – and talk to us when you’re ready to hand them off.

Interested in trying us out? Sign up here!

In this short talk, our CEO Ohad Samet and our Senior Manager of implementations, Robert Rodriguez, discuss the concept of a smoke test in high stakes integrations in collections and how they can help reduce errors and create early success.