The Latest Collection Management in Banking Advancements
Collection management in banking is an increasingly hot topic as banking and credit union executives face an unprecedented volume of loan delinquency and charged off debt as they plan their 2021 budgets.
This guide provides bank and credit union leaders with the latest tips and strategies for meeting the challenges of contemporary debt collection by improving their collections and recovery operations.
Now more than ever, collection and recovery departments need effective loan collection management systems that employ robust debt collection management software. The traditional manual tracking systems that collectors once relied on to maintain borrower accounts and manage risk are inadequate to handle the forthcoming volume that modern debt collection management systems can.
CARM-Pro™ Collection and Asset Recovery Manager – Professional is bank debt collection management software specially-developed to support modern bank and credit union loan recovery strategies. CARM-Pro™ enables collectors to efficiently work more accounts with fewer touches, using enhanced workflows to automate tasks, expand borrower communication channels, and ensure ethical and compliant practices.
For example, a bank or credit union can define which communication method (call, voice message, letter, email, text) goes to which group of debtors. CARM-Pro’s full automation then perform these communications and document that they were performed – without involving human interaction.
The most contemporary and user-friendly collection system in banking, CARM-Pro™ is valued by hundreds of banks and credit unions throughout the U.S. as the best collection management software available.
Banks and credit union collections professionals are starting to employ different strategies and techniques for how they assign and work accounts based on debtors’ past due payment history patterns. CARM-Pro™ technology implements these contemporary credit collection management strategies and helps bankers to preserve customer relationships while pursuing delinquent customers.
Robust Cloud Based Debt Collection Management Software
Web-based cloud collection management software enables bankers to safely and easily increase their account capacity while outsourcing vital IT functions and processes. For example, cloud-based software is constantly backed up and restored, and key security protocols such as virus detection, malware scanning, and intrusion detection are always up to date and professionally managed through the cloud.
CARM-Pro™ provides the convenience of cloud based debt collection management software, but it can also reside on a financial institution’s server for institutions that require on-premise implementations. It enables bankers to readily connect and access the system and their files, with no need to maintain costly in-house infrastructure and equipment. Financial institutions gain advanced specialty resources and the opportunity to reduce or refocus their on-site IT staff.
The Impact of COVID-19 on Debt Collection for Banks and Credit Unions
The worldwide pandemic is one of the new and leading forces increasing the need for advanced collection management in banking.
In early 2020, Coronavirus concerns initially led to the furlough of many employees, in anticipation of an eventual return to work. During this time, states restricted financial institutions from pursuing foreclosure or repossession while workers were furloughed.
The longer-term economic effects of Coronavirus have led many employee furloughs to result in permanent unemployment. This change in consumer and borrower employment status has led many states to allow banking and credit union professionals to resume their pursuit of loan repayment.
Indeed, financial industry leaders should expect a major upsurge in each progressive phase of the debt cycle. More consumer loans will exceed their grace period, leading to past due delinquency, then write offs collateralized by foreclosures or repossessions, and litigation management in some cases.
In anticipation of the growing volume of delinquencies and charged off debt, banks and credit unions are currently increasing their allocation for future losses (ALLL and CECL). They are also seeking to replace inefficient manual technologies and repayment-tracking systems with systems that can handle increased volume, manage risk, and enable their collections staff to work smarter, not harder.
Use Best-of-Bread Loan Recovery Software
Today more than ever, banks and credit unions must implement loan recovery systems that use best-of-breed loan recovery software to support their bad loan recovery strategies. The best collection management software integrates seamlessly with core banking systems of banks and credit unions, and provides a more advanced and complete solution than the core system’s very basic native collection software. It can also consolidate accounts from multiple servicing platforms into a single collection solution, giving collectors a complete picture for each debtor.
Intelligent Banking Solutions, Inc. is a proven industry leader dedicated to honing its one-industry, one-product loan recovery software system, CARM-Pro™ Collection and Asset Recovery Manager–Professional as the best-of-breed tool for comprehensive credit collection management in banking.
The Importance of Client Support for Loan Recovery Management Systems
The true test of how well any loan recovery management software supports the unique loan recovery strategies of banks and credit unions is the level of dedicated client support behind the software.
For example, CARM-Pro™ Collection and Recovery Manager – Professional on-premise or cloud based debt collection management software is built, sold, and supported by U.S.-based Intelligent Banking Solutions (IBS). From the privately-owned firm’s New Hampshire headquarters, the IBS team has earned its outstanding reputation for customer support of its single-focus banking software solution.
IBS President Rob Daley explains that his team prides itself on personal response to all support inquiries. He notes, “When clients call, they speak directly with the person who either developed, sold, installed, or services their CARM-Pro™ on-premise or cloud collection management tool. We are single-product, single-industry experts who know what our callers are talking about, and can solve their issues quickly.”
Implement the Best Debt Collection Strategies for Banks
Through 2021 and beyond, bank customers and credit union members are likely to maintain and add borrower accounts with several financial institutions. This means that the best strategies for debt collections – and indeed the overall best debt recovery strategies – must enable financial institutions to compete for loan recovery using robust soft collection tactics before their strategies must turn to hard collection tactics.
Leverage Skip Tracing Software for Collections
Skip tracing techniques are methods that creditors and loan originators use to locate any delinquent debtor that is past due on his or her promise to pay and does not respond to a creditor’s attempts to contact them.
Skip tracing techniques provide creditors with a variety of ways to locate borrowers who have “skipped” town or otherwise changed their contact information such as home or workplace address, email or phone number.
Skip tracing debt collection is typically not as much an issue for community financial institutions as it is for indirect lending specialists, since community banks and credit unions tend to have deeper customer relationships with their customers and members.
However, skip tracing software for collections is an important part of any loan recovery strategy, and in the 2021 debt-recovery environment, banks and credit unions will benefit from the access to the best skip tracing software.
CARM-Pro™ seamlessly integrates with Lexis Nexis, a world leader in data aggregation processes. Lexis Nexis provides access to continually-updated data from the three main U.S. credit bureaus, the U.S. Post Office National Change of Address Database, bankruptcy courts across the nation, and more.
CARM-Pro™ supports skip tracing software for collections by seamlessly accessing and integrating updated borrower contact details into automated workflows that enable efficient communication with debtors.
Collection Compliance: Follow the FDCPA Compliance Checklist
The purpose of the Fair Debt Collection Practices Act (FDCPA) is to prohibit third-party, non-bank or credit union debt collectors from using unfair, abusive and deceptive practices to pursue repayment of outstanding debt. The FDCPA pertains only to consumer debt incurred for household, personal, and family purposes.
Regarding bank collection compliance, under FDCPA compliance standards, bank and credit union loan recovery specialists who act in the name of their own institution are not classified as debt collectors by the Federal Trade Commission. Bankers may attempt to contact borrowers by reasonable means such as the telephone. However, in the spirit of debt collection compliance with FDPCA rules, they must avoid abusive methods such as offensive language and threats of violence.
New Hampshire-based Intelligent Banking Solutions, Inc. has compiled a list of practices prohibited by the FDCPA, as well as an FDCPA Compliance Checklist, available as a PDF download titled, Guide for FDCPA Compliance – A Checklist for Banks and Credit Unions.
Leverage Automated Debt Collection Software
Banks and credit unions can comprehensively benefit from an automated debt collections system that they can customize to reflect their brand and corporate culture.
Automated collections software enables financial institutions to reduce costs and increase return on investment without adding collections staff.
CARM-Pro™ – Collection and Recovery Manager – Professional is the number one automated debt collection software for banks across the U.S.
Benefits of CARM-Pro™ Automated Debt Collection Technology for Community Financial Institutions
- Account management capacity is doubled, tripled or more – without employing additional staff
- Automated workflows enable existing staff to easily work accounts
- Consistent compliance prevents exposure to fines and penalties
- Automated communications can be customized to embody brand values and personality
- CARM-Pro™ automatically monitors debtor status adjustments (bankruptcies, liens, litigation, etc.)
Use Collection and Recovery Software for Banks
Most core banking systems include a very basic collections module with static, cumbersome tools that do not support the needs of modern collections professionals. The system limits of these modules often force collection staff to compromise how they want to work accounts. Additionally, staff may need to leverage additional external tools to get the entire job done.
Today’s turbulent economic conditions demand that contemporary bankers use a dynamic loan collection and recovery system that includes robust debt collection and recovery software.
CARM-Pro™ debt collection software for banks is the single-source, dynamic solution that enables financial institutions to proactively manage all debtor accounts with dynamic, automated, customizable technology.
Prepare an Asset Recovery Management Strategy
The economic conditions of Q3 2020 through early 2021 will represent a smaller pool of charged off assets for financial institutions. But by early Q2 of 2021, bank asset recovery will be at the forefront of concern for bank and credit union CEOs.
As today’s growing delinquencies mature into charged off debt, they will require robust asset recovery systems that leverage technology for efficient asset recovery management. The best asset recovery software to use will be one that integrates with a collection management system and carries forward all debtor contact details and the complete record of previous communications.
For example, ARM-Pro™, the asset recovery management solution within CARM-Pro™ by IBS, provides an arsenal of opportunities for bankers and credit union loan servicing specialists to recover charged-off assets through automation, management, and workflow tracking using advanced, user-friendly CARM-Pro™ technology. ARM-Pro™ preserves all information gathered and documented during active account collection, improving knowledge for charged-off/special asset recovery pursuits.
Answers to FAQs About Collection Management in Banking for 2021
Debt Collection Management in Banking 2021
The significant consolidation of core account servicing system companies, coupled with the dwindling number of core banking system choices, has challenged core system providers to keep competitive with only the most mission-critical core processing capabilities. Consequently, they are typically unable to allocate software development resources to low priority modules such as the native collection module. Economic conditions created by increasing delinquencies often triggers banks and credit unions to move to a dedicated best-of-breed alternative. CARM-Pro™ Collections and Recovery Manager – Professional is robust debt collection and recovery software that’s proven to help institutions grow income and avoid non-compliance without adding FTEs.
Past due delinquencies and charged off debt reduce a bank or credit union’s net income, and increased delinquencies also increase Allocation for Loan and Lease Losses (ALLL). ALLL increases take increasing amounts of net income away. Furthermore, bank and credit union collection systems often lack high-end capabilities to handle increasing volumes, forcing the institution to increase FTE’s to keep up. Additional FTE’s increase expenses, further hurting net income. Often, these same systems have no charged-off recovery capabilities, forcing institutions to forego the potential of increasing net income through recovery efforts.
The best debt recovery strategy for banks and credit unions includes transition from an outdated manual debt tracking process to using proven, dynamic loan recovery software backed by a dedicated customer support team. The best collection management software integrates with core banking systems to provide a comprehensive set of tools such as customized collector workflows and automated communication methods. For example, CARM-Pro™ Collection and Asset Recovery Manager – Professional is scalable, on-premise or cloud based debt management software used by more than 1,200 financial institutions across the U.S. to enhance their collections and recovery efforts, grow bank income and lower costs through efficient use of resources.
The pandemic has forced banks and credit unions to revisit their debt collection strategies and proactively plan their 2021 budgets to include advanced tools for collection management in banking.
Banks and credit unions anticipate a much greater volume of past due account delinquencies that require consistent follow-up with borrowers to avert default and ultimately written off loans. Lenders who replace their inefficient manual collections management efforts with CARM-Pro™ Collection and Asset Recovery Manager – Professional debt collection management software system will be best-positioned to handle the volume increase and manage the associated risk without hiring additional staff.