10 Oct Collections is a Contact Business
A serious issue in the industry is lack of good contact information when accounts roll past due and it is time to speak with the customer. This problem is particularly pronounced in situations where the servicing group was not part of the origination process. Examples include Student Loans, Auto Finance Groups and portfolio acquisitions. In some cases 60-80 percent of delinquent accounts do not have good phone numbers.
Collection of delinquent accounts is difficult enough when customers are reasonably reachable by phone. The discussion with the customer, especially the first one, is the most important ingredient in finding workable payment solutions. Letter strategies can be useful to engage customers early in delinquency but have little real impact later. Delinquent accounts past 30 days that have no reliable phone number for the customer are at grave risk of rolling to loss without any form of customer engagement along the way.
To improve the likelihood of speaking with a customer when they are delinquent, it is imperative that good contact information be secured and maintained throughout the relationship. Treat every new account as an opportunity to welcome the new customer and verify contact information. This is especially true if the origination process was managed by a different group (education institution, auto dealer, acquired portfolio, etc.).
Certain segments deserve closer attention than others and experience always points those out. Put the accounts on the dialer right away and see if phone numbers are valid. Make these segments part of the overall production strategy. If you get bad numbers at placement those accounts are problems waiting to happen. It is not good enough to send a welcome letter. Relationship building is always appropriate through welcome calls, first payment reminders or simply telling the customer you appreciate their business. Sometimes problems in customer ability to meet obligations can be identified and worked out before accounts actually become delinquent. Production strategies that incorporate pre delinquency calling are an important part of loss mitigation.