How Debt Collections Services Have Evolved Through the Pandemic

In the long list of the pandemic’s collateral damage, deterioration in customer payment behavior ranks high. According to a CoreLogic report, about 7.3% of the United States’ home mortgage takers were in some stage of delinquency in May 2020 – the highest in five and a half years!

Despite best efforts from debt collection service agents, customers were in a tough spot because of growing job losses, slower demand and sales, and declining revenues. All debt recovery methods that had proven successful before the pandemic, such as cold calling, regular follow-ups, and debt restructuring, failed. Moreover, the government enforced stringent regulations to monitor debt collections, such as restricting the number of times agents could reach out to customers and specifying the tone used for communications.

Changing Gears

Companies were required to pivot their perception of debt collections. A new transformative era for debt collection was ushered in with empathy at its core. The first transformation was the shift in outlook – debt collection service providers had to reclassify “debtors” as customers. And that meant treating debt recovery as an extension of customer service.

Rather than pressure customers to pay up, the recovery process now involves working with customers to understand their problems, providing sustainable solutions such as extended moratoriums, staggered payments, late fee waivers and providing equal credits for what they pay. These practices found great success.

Self-serve options emerged as winners during the pandemic, giving customers a sense of empowerment in choosing their own delinquency solutions and repayment methods. When contact was required, companies that trained their collection agents to have sensitive, intelligent and self-guided discussions were able to establish strong relationships with customers, which in turn led to better collections success.

While delinquency rates are likely to reduce in the coming months, debt collection will continue to be an important cog in the wheel to help companies recover from the blow of the pandemic. Debt collection services that are customer-centric and considerate in their approach will continue to enjoy better results.

The Alldigi Solution

At the heart of Alldigi’s approach to debt collection is maintaining customer relationships. During the pandemic, our collections team devised methods that improved business goodwill while increasing collections.

Alldigi employed analytics and data solutions to craft contact strategies that improved contact rates for a subprime market credit card issuer in the United States who faced difficulty with borrowers. The result was a 76% increase in contacts per hour. When our agents got on call with customers, they worked out flexible payment options and extended timelines, which led to a 30% increase in collectibles per collector. The streamlined techniques also helped cut operational costs.

As we can clearly see, empathetic collections is the future of debt recovery services. As customer preferences evolve and regulations change to meet new demands of the market, collectors who are not empathetic will find it hard to succeed. Alldigi has been ahead of the curve, employing empathy every step of the way.