100% Committed to Bank and Credit Union Collection and Recovery

Improving Lending with Bank Debt Collections Technology With or Without Dodd-Frank Reform

Loan impact on the bank debt collections process from Dodd-Frank reform requirements and other legislative changes is currently unclear.  One certain situation is that bank collection software needs to help lenders adapt to regulatory changes via a number of robust and flexible capabilities.

Amount of loan volume, as well as changes to investor, guarantor, and insurer collection rules, are examples of changes to the way regulation requirements affect lending.  Lender pressure to increase net income is another challenge that’s prompting banks to implement robust debt collections technology.

Credit reform questions from bank loan account service people include how to overhaul parts of the sweeping Dodd-Frank financial reforms enacted in 2010 in response to the 2008 financial crisis. 

Lender impact, however, on the application and terms of this regulation and whether it will slow down bank lending is debatable.

Former President Donald Trump and Congressional Republicans promised to roll back a wide range of federal regulations, with Dodd-Frank a top priority. While sweeping in scope, the law Congress enacted left the responsibility of precise rule-making to a patchwork of regulatory agencies.

Money lending by community banks to more small business borrowers is encouraged by proponents of Dodd Frank reform, who contend that small businesses need it, along with protection from detrimental loans. 

Credit access may become restricted for businesses and consumers, opponents argue, if Dodd Frank clamps down too hard on financial institutions.

Loan statistics information for banks since the passage of Dodd-Frank doesn’t back up opponents’ claims, according to CNBC.  Loans to businesses and consumers continued to hit new heights, for example, since the law took effect in July 2010. Former Massachusetts congressman Barney Frank, the Democrat who co-sponsored the law, said that only one provision in the more than 850-page law directly restricted lending.

“It’s the one that says, ‘Please don’t lend money to poor people; you can’t lend money to poor people who can’t pay you back for their mortgages,’” he told CNBC. “Literally that restriction on irresponsible subprime mortgages is the only lending restriction.” Other parts of the law, he said, promoted lending.

Lender financial institutions must implement proven collections technology, regardless of the legislation’s future form. They must also institute checks and balances; and integrate compliance to handle lending requirements. The ideal solution is to implement fully automated debt collection technology to optimize and positively impact the bank’s bottom line.

How Technology Can Improve Lending for Community Banks and Credit Unions

In recent years, regulators maintain a sharp focus on financial institutions’ collection operations.  All entities with loans related regulatory or financial responsibility have tightened collection obligations. These include state and federal regulators, investors, insurers, guarantors, and more. A fact of life is the scrutiny of each lender environment by state and federal authorities.

For a number of reasons, emphasis on regulation produces these types of operational anxiety for bankers:

A best-of-breed automated debt collection system is powerful technology that can:

Improve the Collection Process with Modern Collection Software Communication Tools

Financial institutions gain variety of flexible options to communicate with debtors via industry-best banking collections software.

Collection departments can access these communication channels with best-of-breed banking collections software:

Letters, Notices – Every action concerning sending a letter, form, notice, or any other documentation to a debtor can be configured in a robust collection system for automatic completion based on customized selection criteria. For each document, a comprehensive debt collection software system will identify a required debtor action within a specified time frame, configure the next automatic step; create a tickler in the collection system on the appropriate next action date; and direct the collector when to take the required manual next step. The system will also create and store an electronic copy to the institution-wide document imaging environment.

Emails — All actions allow for email communications to be configured in the collection system based on each bank or credit unions’ selection criteria for each message. The system can create and send emails automatically without human intervention. The system can also ensure documentation with the date, the time, and who sent what communication to which borrower. For each document that identifies a required debtor action within a specified time frame, it will define the next step to happen automatically within the collection system; create a collector tickler in the system on the appropriate next action date, and direct the collector to take the next required manual step.

Text Messages — The positive rate of contact with borrowers makes text messaging a very effective communication method. As one of the most scrutinized collection steps, texting requires precise compliance. Debt collection software enables collectors to add a message to the core account servicing system. This message allows for recording a debtor’s home, work and probable mobile device number. Typically a collections team cannot differentiate whether phone numbers are for a mobile phone, Voice over IP phone, or a landline. This is vital information because specific requirements regulate communication to different types of phone numbers. In order to comply with these requirements, the collection system must be able to identify each type of phone number (mobile, VoIP, landline).

Communication compliance is one of many ways that a powerful collection system resource can help financial institutions to maintain compliance. A collection system vendor should guide the organization regarding how to seek approval to text people, as well as maintaining records of that approval. Importantly, a vendor can also automatically block targeted text messages to cell phone numbers the institution lacks debtor approval to use; including “stop” requests interactively set by the debtor (the cell phone number owner) after granting approval.

Best of breed collection system services can determine approval and automatically create and send text messages with no human intervention. It can also document the communication date, time, and who sent what to each borrower. For each text identifying a required debtor action, within a specified time frame, the robust software can configure the next step to automatically happen. Otherwise, the system creates a tickler file on the appropriate next action date, directing the collector to take the required manual next step.

Voice Messages — Historically, calling debtors was the primary action for collectors. Today, most homes don’t even have a landline. More than half have mobile service only, according to the U.S. Health Department. Further, only 6.5% of home phones are landlines only. 

It is a false assumption that creditors cannot make automated calls to mobile phones. Like all debtor calls, it is critical that automated cell or VoIP calls be compliant with all regulations.

One case is the delivery of an automated voice message to a mortgage holder where the mortgage involved a sale to Freddie Mac or Fannie Mae.  If the debtor can press a button on their phone to connect to a live agent, that automated message is deemed compliant.

Financial institutions can save all their collectors from wasting time – dialing, listening to a phone ring, listening to a voicemail greeting before leaving a message; or hearing a disconnected number error. Additionally, to be compliant, collectors must maintain clear documentation of every call attempt and result. Robust collections systems provide powerful flexibility and the ability to personalize messages.  Loan officers in some institutions prerecord messages for borrowers. 

Bankers can leverage high-end collections technology to tailor, record and automatically deliver high-quality digital messages.  All for less cash money and time than the cost of manual calling.

A collections system vendor should offer this service strategy without requiring a customer to use special phone or dialing equipment.

The Value of Comprehensive Debt Collection Software

A flexible and robust collection system should allow customers to automatically engage via their communication channel of choice. It does not seek to completely remove traditional human contact, even when loan volume increases.  Financial institutions should view technology as supporting, not replacing, customer engagement and connectivity.

Virtually every core system has a native collections module. This basic version’s capabilities are often inadequate for today’s bank debt collection environment. The competitive merger-acquisition market of core account processing systems is maturing. Therefore, most lender service vendors don’t invest the money required to research and develop updates that can keep these modules current with today’s dynamic, demanding market.

Today’s collections environment demands comprehensive debt collection technology that is supported and serviced by knowledgeable support professionals. A financial institution’s net income will improve with integrated collections software that can maintain or reduce costs; prevent some charged off debt; increase recoveries, and improve compliance.