How the Pandemic Has Changed
Debt Collection
COVID-19 has dramatically altered the way Americans conduct business, socialize, travel — and handle their debts.
Massive unemployment and 2020’s economic downturn resulted in less spending and more financial struggling than ever before. In such uncertain times, unpredictable debt payment should be expected. Not surprisingly, debt collection practices are changing, as well.
It’s All About Relationships
Creditors and collection agencies alike are realizing more than ever that the consumer relationship is paramount. Which means these relationships need to be nurtured, even before the collection process begins. If there’s already a positive relationship with the consumer, the chances of getting paid are greatly increased.
When communicating with consumers, both timing and tone are critical.
Perfect Timing
During times of extreme financial stress, continual attempts to contact the consumer can often backfire. This is where accurate data can help immensely.
In this post-COVID world, knowing when a consumer is most likely to be available to discuss debt payment options is increasingly important. But you’ll also want to know which consumers may have been adversely affected by the pandemic. This will require extra effort on the collector’s part to dig deeper when gathering data.
Obsolete data can significantly impede debt recovery efforts. But not only that–it will weaken your ability to personalize the consumer experience. And personalization is key to pre-empting future delinquency. That’s why the most successful collectors continually refresh their data for accuracy and use that data to appropriately time any communications.
In a Manner of Speaking
Collectors must employ some finesse when controlling the tone of a collection call. Remembering to smile, especially at the beginning of the call, is often helpful.
It’s important to let consumers know that the creditor and collector are not their enemies. Empathetic listening lays the foundation for establishing trust. The next step is to validate the consumer’s feelings and remind them that you both share the same objective: Getting them out of debt.
Be aware that many consumers are feeling particularly anxious during these stressful economic times. They could very well be struggling through Covid-related issues that go way beyond their overdue bills. So consideration plays a huge role in determining how a collection call will transpire.
Sometimes this means that repayment terms must be extended or otherwise adjusted. Or it may mean accommodating unpredictable income fluctuations, or even deferring payments. Industry data indicates that consumers are most likely to repay the debts they believe are most manageable. Collectors who display the most flexibility during times of economic uncertainty will recover the most past-due debt.
Multiple Payment Options
Offering multiple payment options has also been shown to increase the likelihood of payment, particularly during times of economic stress. For instance, some consumers may not wish to speak with a collector at all. Providing an online payment portal empowers them to conveniently pay whenever and however they’re able, without speaking with a representative.
The most effective payment portals provide various functional capabilities, such as payment deferment, term adjustment, financial information updates, and a dispute facility.
—Article Continues Below—
Another option would be to offer a prompt-payment discount for paying a debt within a certain time frame. A simple discount of 10 or 20 percent can go a long way toward resolving many overdue accounts.
Yet another debt collection strategy would be to extend the payment period. Typically, overdue debts are broken down into monthly payments over a certain time period, such as a year. But if a consumer can’t afford the monthly payment, this could be adjusted to three-year financing.
Some creditors and collectors even allow consumers to set the payment parameters, within reason. When consumers construct their own payment plans, choosing an amount and payment period that works for them, they tend to keep up their end of the bargain.
Surviving COVID
No one can accurately predict how long the current pandemic will last. For the time being, debt repayments will continue to be erratic, especially with periodic government assistance. Creditors and collectors who concentrate on nurturing consumer relationships, remaining flexible, and offering multiple options are the ones who will survive the storm.
Sources:
Featured Image: Adobe, License Granted
Inside ARM
Forbes
The Clinton Courier