Newsletter

Some Things We See Today - 02 March 2009

1. Nobody needs to be reminded about difficult economic conditions and the challenges that has brought. There is clearly diminished ability to pay in a larger segment of the customer base. That group aside, we have also noted that all the constant bombardment of economic bad news has created behavior changes among some of those with ability to pay. Some customers, distressed or not, are simply scared and uncertain about the future so they are putting off paying some debts for a while. The second is a segment that simply sees the situation as one where they can leverage they see as an entitlement opportunity to walk away from obligations. There is a finer line these days between “cannot” and “will not”. The difference is rarely clear from customer responses so we have to ask the right questions. The challenge to the account representative is far greater in terms of sorting out both the customer situation and suitable repayment options. There has never been a greater need for good phone skills and involved first line supervision.
2. This is the season for improved collection results. Tax returns and the added bonus of “stimulus” payments provide customers with resources for obligations. The best bet is that people will use that money to pay debts and save a little as well. In many cases the resources will not cover all obligations so the competition for these resources will be fierce. When working with customers, this source of income should be on the table. Customers will always want to “wait and see”, thus deferring any decisions until later. Sometimes it comes in the form of wanting to “wait to see what the government will do for me”. We believe the best way to manage “hold off” customer response is to show them how they can save money by contributing guarded resources from other places now and “paying themselves back” with the money from tax returns and stimulus. In fact, the money saved on fees and interest will actually give them more money at their disposal later. Doing this effectively requires the account representative to identify a source of current resources and show the customer how they benefit by contributing some of those resources.
3. Reason for delinquency (RFD) has always been something that has been introduced into the conversation as needed. Typically that has been with customers who say they cannot pay the amount due. Increasingly obtaining RFD has been an item of interest by internal audit groups. We see more need to accelerate the RFD question in the conversation. Too frequently this question is posed as some sort of obligatory out of context question that elicits a vague response from the customer. For example, “What is the reason you were not able to make these payments?”, “Uh, I just fell a little behind.”
   
   There are a few important points with regard to RFD
   1. Always keep this question in the flow of the conversation so the response can be clarified and used to find appropriate solutions. The customer, with a refusal, tells us when it is time to ask for more information on their current situation. If the customer pays the now due without refusal, then ask the question at the beginning of close.
   2. Clarify the customer’s exact situation. Responses are frequently are vague at first.
   3. Read the notes, if we have talked with this customer before, we may have the RFD in the notes. Asking for an update on a previously stated RFD tells the customer we are paying attention.
   4. Do something with the RFD. Different circumstances carry different possible solutions. Perhaps risk can use the RFD trends
   5. Using a respectful, not accusatory, manner to ask RFD questions always gets a better response in our experience.
4. Production of contacts is an important component to collection operations. This is especially true given that more customers will avoid contact when possible. There is a growing gap in propensity to pay between inbound and outbound calls. In short, fewer customers are responding to left messages. Clients are finding that the larger impact on roll rates will come from a robust outbound strategy.
5. We strongly recommend that all clients review their outbound production strategy to insure that the right customers are being called at the right time and at the appropriate penetration levels. Collectors cannot influence much what contacts they get. Management has to drive that end of the process.
6. Many clients are in the process of reviewing current programs and repayment plans to see if there are other viable tools available.