4 ways collections can help consumers in a recession

By on April 1st, 2020 in Industry Insights

Consumer debt in the United States continues to climb into the tens of trillions of dollars, and as unemployment numbers continue to rise consumers are expected to continue to pay for essential services such as rent and utilities, companies are likely to see an exponential rise in delinquencies. All of these things together can cause financial spirals, especially for those already struggling to pay their bills.

In the midst of troubling economic downturn, it is the debt collection industry’s responsibility to remain a financial service and not create more damaging burdens. Here are four things you and your company can do to continue collecting and maintain customer relationships and loyalty even through challenging economic hardships.

Acknowledge the challenge

Communication is key. Your consumers have to know that they are seen and heard. Your mission has to help consumers navigate the challenges they’re facing.

Visitors to TrueAccord’s consumer website immediately see a banner drawing direct attention to the economic crisis. The banner links to a page with resources for those impacted (and available to those who are not impacted by COVID19) helping to answer the most frequently asked questions related to those with upcoming payments and in settlement plans. 

Provide non-collection related communications

Send communications that do not imply the existence of a debt. Do not mention any account, the balance due, or a demand for payment. Instead, provide other resources that can help anyone during this pandemic, like work from home opportunities, childcare assistance programs, and local resources for those in financial distress, including area food pantries and safe shelters. By providing tools that can aid consumers in need of help, you can be a guiding force for overcoming their financial burdens. 

Individuals in debt often need these resources year-round, not just in the middle of a crisis. These can include tools such as budgeting resources, debt payment calendars, or links to job boards for companies still hiring.

You may also consider sharing less direct financial resources such as educational tools that may be especially helpful to individuals seeking to improve their situation and parents hoping to address their family’s needs.

Extend payment plan lengths

One step that creditors can take that is simple but impactful and can help to alleviate financial concerns is to extend the length of consumers’ payment plans. Agreeing to longer payment plans gives consumers more time to pay, creating lower monthly payment rates, and leaving more dollars they can allocate to more immediate needs. 

Machine-learning and artificial intelligence can help to guide meaningful payment plan offerings. Read more about how new technologies are shaping digital debt collection.

Another step allows consumers to defer a payment. For many consumers in settlement arrangements, deferral may provide the assistance they need while not resulting in the loss of the settlement offer. In fact, North Carolina recognized this and passed this emergency law to make sure all consumers in the state have this option for the next 30 days.

Give consumers the power to manage their debts themselves

Implementing digital collections tools into your business can empower and educate consumers. Online portals and payment systems offer thousands of consumers the ease of access that they require of other financial institutions. 

Ideally, digital tools should extend beyond just payment options and should include opportunities for consumers to:

  • Make adjustments to the length and amount of their payment plans
  • Skip or defer a payment without losing a settlement
  • Dispute all or a portion of their debt
  • Apply for hardship pauses
  • Enter bankruptcy information

All without needing to speak to an agent.

The best debt collection practices should prioritize consumers’ needs and enable them to control their finances. It’s critically important to provide consumers with flexibility and the ability to customize when and how they pay.

Many in debt have tight budgets, live paycheck to paycheck, and sometimes are forced to choose between basic needs and paying bills. Leading the collections industry with compassion and empathy for those in need can make a lasting impact on consumers and creditors alike. 

Want to learn more about what we’re doing at TrueAccord and how we can help your consumers? Get in touch with us!

3 essential tips for managing chargebacks in eCommerce

By on March 12th, 2020 in Industry Insights

As more consumers shift away from physical stores and toward subscription services, online storefronts, and digital banking we have seen a growing number of chargebacks in the eCommerce space. In order to accommodate this, some companies even add costs associated with chargebacks to the price of their products (it’s estimated that for $100 in chargebacks, you are actually losing out of $240).

Other companies, unable to recoup losses themselves, send chargebacks to collection agencies, and they may be waiting for too long. Here are three things your eCommerce business can do to better understand chargebacks and mitigate your losses.

Analyze why the chargeback was filed

Not all chargebacks are fraudulent. Consumers may file a chargeback due to a billing error or an unauthorized purchase was made on their card. Doing an in-depth analysis of accounts prevents potentially damaging your own reputation with a consumer by sending them to collections without first seeking resolution. This also provides you with an opportunity to then reach out to your customers and understand the reasons they renege on their payment so that you can possibly prepare for similar situations in the future.

This also enables you to create a larger chargeback strategy. Being too lenient or allowing chargebacks to go unmanaged will leave you at a loss, being too strict may alienate otherwise loyal consumers, and investing time and money into smaller or more resistant accounts may lead to worse losses.

Developing a routine for who to reach out to and how to reach them based on historical behavioral data can help you to best recoup your losses before needing to send accounts to collections.

Start a conversation with your consumers

These communications can open more details than internal analysis. A consumer may have provided incorrect measurements for a garment or accidentally order 200 of something when they meant to order 20 and prompted a service dispute. You can work to maintain a relationship with the consumer and protect your brand. Chargebacks aren’t always driven by malicious intent, and you might be able to resolve the issue together.

Connecting with your consumer and resolving the situation is a best-case scenario post-chargeback. If you reach them and they continue to dispute the charge, cite your reasons and offer them an opportunity for response.

When you are supported by analytics, you have valid grounds to inform them that the chargeback will be sent to collections; ensure that you have documented your communications with them and send the account to your debt collection partner.

Find a debt collection agency before you think you’ll need one

The collections industry is often seen as a last resort for eCommerce teams, but waiting until your financial situation feels dire means that the collectors you hired are pressured to perform (and behave) aggressively and quickly. 

These collection strategies are often the foundation for the negative stigma surrounding the account recovery industry, and working with a debt collection partner that supports your brand and can collect chargebacks at a controlled, even rate provides you more flexibility. A more gradual effort can help you maximize your returns and protect your business.

Digital-first collection strategies can not only support but can help build your brand reputation! Read more about how they can help.

Partnering with the right collector can also, counterintuitively, help to prevent accounts from being sent to collections. The negative stigma of the collections industry extends to the minds of consumers, and many consumers fear the prospect of their accounts ending up in collections.

Whether this is due to the potential damage to their credit scores or their perception of traditional call-and-collect debt collection agencies, simply having a collections partner can help to reinforce your valid claim to payments before your recovery specialists ever see the account.

Chargebacks can be damaging to a business and catastrophic to small businesses. By effectively tracking them, understanding how to talk to your customers about their chargebacks, and recognizing when to escalate the issue to a partner company, you’ll be prepared to protect your eCommerce business.