Debt Collection Challenges and Tips to Overcome Them

Debt collection is not an easy industry to be a part of. But in this article, we want to tackle the most common debt collection challenges.

Different lenders have different ways to collect unpaid debts. The speed they act, their attitude when they contact you, and the further action they might take, all differ.

This means we can’t tell you exactly what will happen, and when, if you fall into arrears, but we can give a general idea of what to expect.

Debt Collection Challenges

Debt collection is a crucial aspect of the financial industry that involves pursuing unpaid debts from individuals or businesses. The debt collection industry faces several challenges and trends, which include:

Keeping up with regulatory changes

Debt collection is highly regulated, and changes in laws and regulations can significantly impact debt collection practices. Debt collectors must stay up-to-date with all applicable laws and regulations to ensure they comply with them.

Adopting technological advancements

The financial industry is increasingly using technology, and debt collection agencies are no exception. Debt collectors are now leveraging tools such as automation, artificial intelligence, and machine learning to streamline their processes and enhance efficiency.

Meeting increased consumer protection standards

Consumers are now more aware of their rights, and regulatory bodies are making efforts to provide greater protection for them. Debt collectors must ensure they follow the relevant laws and regulations related to debt collection to avoid legal action.

Ensuring data security

Debt collection agencies collect and store a vast amount of sensitive information, making them a target for cyber-attacks. It’s essential for these agencies to have robust data security measures in place to protect their clients’ and consumers’ data.

Navigating economic conditions

Debt collection is significantly impacted by economic conditions, such as recessions or financial crises. During these periods, consumers may struggle to make payments, leading to an increase in debt collections.

In summary, debt collection is a challenging industry that requires continuous adaptation to changing laws, regulations, and economic conditions. Debt collectors must stay updated on industry trends and challenges to effectively pursue unpaid debts while complying with applicable laws and regulations.

How customer behaviour changed

Likewise, in the consumer arena, the purchasing and consumption patterns have changed and will still echo for years. Amongst all the unpredictable things that happened, we saw patterns occurring globally:

• The economic impact
• The erosion of brand trust
• The rise of digital
• The migration to remote working

These common trends are showing pressure on consumers, impact on businesses, and so on the economy. As the consumer-brand relationships are likely to, companies need to re-evaluate how they build trust with their customers in this new world. The brands that can communicate proactively and engage their customers through personalization will adapt easier and be more successful.

Regardless of the size of your business, a common concern in the past year has been cash flow management. Therefore, finding the right debt recovery methods is more crucial than ever.

The trust in debt recovery agencies was always on thin ice, so companies need to meet the needs of their customers first and come up with different tactics of recovering debt. VoiceSage’s customer engagement specialists advise that payment simplification and proactive communication are the two factors that will improve collection rates, and therefore cash flow management.

Finding the best collection methods

If you are looking to increase collection rates, keep the communication flowing. And that doesn’t mean harassing people, sending aggressive written notes, or making it impossible for people to reach out.

In 2020, according to Credit Services Association (CSA) figures recorded in its Data Gathering Initiative, more than three-quarters of a million borrowers received additional covid-related forbearance from DCAs.

The CSA’s Chief Executive, Chris Leslie comments “Conversations between customers and lenders made a big difference in 2020.”

Borrowers could also prevent difficulties if they engage in communication with creditors at an earlier stage to discuss repayment plans and affordability.

So, how can this be fixed?

Proactive communication

Ensuring that debt is paid in time requires special consideration. Methods like proactive communication are what we like to refer to when you reach the right person, on the right channel, at the right time.

Offer self-serve options

A debt collection agency that offers no option for customers to self-serve makes it hard to connect and build trust. The debt collection space already has a negative image that many companies are trying to rectify. Also, many people might not want to speak directly to an operator due to the embarrassing nature of being in debt. Make it accessible to self-serve while adding the option to talk to a live agent when the need arises.

Present payment plans

Make it achievable for the customers to pay back the debt by setting payment plans. Arranging an affordable and flexible repayment plan means that you found a tailored solution for individual income and expenditure. This brings mutual satisfaction to customers and collectors.

Improve debt collection and cash flow management

One option to collect payments faster in a secure, cost-effective manner is using VoiceSage’s Rich Media Messaging solution that can improve cash-flow management and payment rates by up to 65%.

Another debt collection idea is to send automated payment reminders to scale up your debt collection processes and reduce operational costs by lowering inbound calls from customers with an effective communication strategy.

And lastly, use Interactive Voice Messaging (IVM) campaigns to push a customer to an agent to make a payment or an inquiry.

Adopting self-service collection options can achieve up to 20% ROI and reduce high inbound call volumes by 30%. VoiceSage can help you free up your agents’ time for higher-value tasks, improve CX, and earn recognition with self-service collection options running 24/7 365 days.

Conclusion

VoiceSage has a wealth of knowledge in the debt collection space and can help you create an optimized collection process that will increase payment rates, operational efficiency, and customer satisfaction.

Book a demo now, and we’ll be happy to help you.