Software for bank debt management and loan collections is on the rise due to increasing consumer debt. Information about debt from the latest Federal Reserve consumer credit report confirms there is more debt in the U.S. now than in four decades. Consumers’ debt grew to nearly $4.5 trillion in February 2022.
CARM-Pro™ is the US’ most-widely-used software for bank debt management and loan collections.
The Benefits of Debt Collection Software For Banks
Bank debt collectors are bracing for debt collection payments and compliance woes as business and consumer debts rise and more loans enter default. They need access to benefits of debt collection software for banks.
For example, bankers are seeking more information about ways to automate the process of collection and recovery in order increase their collection capacity and productivity with current or fewer employees.
One way that creditors at banks and credit unions can automate debt collections and improve their debt management process is with proven automated technology such as CARM-Pro™ – Collections and Recovery Manager Professional by Intelligent Banking Solutions™.
Top Features of Software Designed To Manage Bank Debt
A number of features should be considered when comparing options for automated debt collection technology. Top features of software designed to manage bank debt include: system configuration, flexibility, user interface, debt collections support, scalability, technology, and customer support.
Automation for Managing Debt Collections
Vital features of leading software such as CARM-Pro™ – Collections and Recovery Manager Professional by Intelligent Banking Solutions™ include unlimited flexibility; ease of adaptation to internal banking policy; depth of configurability; and range of scalability that is much greater than all core banking systems. In addition, anyone can access and configure CARM-Pro™ to their work needs.
Automated Debt Collection Software Product Feature Comparison Checklist
Selecting the best debt collection management system is vital for banks and credit unions. The option comparison checklist below can help credit collection professionals to compare the tools and features of automated debt collection software. It outlines the benefits of CARM-Pro™ – Collections and Recovery Manager Professional by Intelligent Banking Solutions™, for bankers to compare with other products such as their current system’s native core module, and other software products.
|KEY FEATURES OF CONTEMPORARY AUTOMATED DEBT COLLECTION SOFTWARE:||CARM-Pro||Native Core Mod|
|Adapts easily to unique client requirements with tools specific to bank & credit union debt collection||YES||?|
|Integrates with any core servicing platform using standard interfaces for real time integration||YES||?|
|Accepts unlimited assignments and work lists based on any debtor or account criteria||YES||NO|
|Includes comprehensive system setup/tools, data screens, letters, standard messages, reports, etc.||YES||NO|
|Automates work flows easily & intuitively fully-automated or collector-action initiated tasks||YES||NO|
|Supports all debtor communication channels letter, email, SMS/text, voice message delivery||YES||NO|
|Documents all internal steps & processes per each financial institution’s unique internal policies||YES||NO|
|USER INTERFACE (UI)|
|Deploys on any UI/Device/System hosted or on-premise; Windows or browser||YES||NO|
|DEBT COLLECTIONS SUPPORT|
|Supports collection of any debt / delinquent receivable consumer, mortgage, commercial, card, DDA, etc.||YES||NO|
|Interfaces seamlessly with multiple servicing platforms mortgages, installment loans, DDAs, cards in various servicing systems||YES||NO|
|Special Asset Support / cradle to grave debt collection bankruptcy, foreclosure, repossession, litigation||YES||NO|
|Integrates related services monitors bankruptcy, deceased, judgements & liens, full skip trace||YES||NO|
|Supports debt collection for any size financial institution, all banks & credit unions; all current & future growth strategies||YES||NO|
|Intuitively built with commonly-used industry technologies non-proprietary software system||YES||NO|
|U.S. based, dedicated client service team dedicated support for financial industry clients||YES||?|
|Live support from experienced banking professionals, live troubleshooting, live training, client conferences||YES||?|
|Proven reliable single-source product and service built to support FI debt collection efficiency & compliance||YES||NO|
|Inclusive annual client conference produced for clients of CARM-Pro™ by IBS, Inc.||YES||NO|
|On-demand 24/7 access to video training library||YES||NO|
How Financial Institutions Benefit From Automated Software
Automated software enables financial institutions to increase efficiency, achieve consistent compliance, reduce bank debts with fewer employees, and decrease costs.
Increased Efficiency and Compliance
Automated debt collection technology can customize and streamline the process of collecting past debts owed to financial institutions.
Many required and repetitive tasks of the collection process can be fully automated with a powerful automated debt collection system, while some actions require human intervention.
Ways that debt collection automation enhances efficiency and compliance:
- Ensures the correct type and order of each required collection step
- Simplifies and streamlines all collection steps and borrower customer interactions
- Documents how and when each step of the collection process took place
- Alerts creditor professionals if steps in the process did not take place
A common practice among banks is to sell customers’ bank loans to investors, while other loans have insurers, or guarantors. Banks must service them according to specific contracts. Example types of investors, insurers, and guarantors include:
- A federal agency such as Freddie Mac and Fannie Mae is an investor
- A private mortgage insurance company is an insurer
- A federal agency such as VA, FMHA is a guarantor
- A state housing authority can serve to back mortgage products
All loan contracts between banks and these service entities contain very specific qualifying language.
If one of the loans that another entity owns but the bank services for them becomes delinquent, the bank must do several things in a specific order and time frame to maintain compliance with the contract.
As delinquencies rise, these entities respond with aggressive policing and enforcement of contract parameters. Automated debt collection tools help debt collection professionals efficiently and consistently comply with investor, insurer, or guarantor rules and avoid the consequence of broken contracts that harm the bank’s net income. For example, CARM-Pro™ – Collections and Recovery Manager Professional by Intelligent Banking Solutions™ helps to efficiently achieve consistent compliance by enforcing internal policies.
Reduced Bank Debt with Fewer Employee Hours
As loan payment delinquencies rise, banks are faced with adding more people, or the preferred option of using automation tools to improve efficiency and reduce reliance on full time employees.
Traditionally, the solution is the addition of more people to process loan recovery. But the employment market is tight. The best way to reduce bank debt with fewer employee hours is to deploy contemporary technology to gain productivity, which is easier today, and a better path to long-term ROI.
For example, leveraging CARM-Pro™ to streamline/automate processes can make financial institutions more efficient with the same or fewer FTEs.
Cost Savings with Automated Recovery Software
Examples of important ways that bankers can reduce costs of debt account maintenance with automated debt collection and recovery software tools such as CARM-Pro™ – Collections and Recovery Manager Professional by Intelligent Banking Solutions™ include:
Automated Messaging and Calls – reduces costs by eliminating the need for people to make calls and removing the risk of human errors. All calls are scheduled and automated within defined parameters. For example, debt collectors at banks or credit unions can leverage an outbound messaging module such as CARM-Pro™ to customize and automate consistent message delivery.
Automated Letter Preparation, Documentation, and Distribution – decreases overall costs of letter production and communication by reducing or eliminating the many micro-steps involved with non- automated or semi-automated letter production. For example, debt collectors must request loan payments with 15-day demand letters to all debtors whose mortgage loans were sold to Fannie Mae or Freddie Mac. Letters like this must be produced according to clear rules that define who should receive or not receive a letter or other specific communication.
Debt collectors at banks and credit unions can dramatically improve compliance and decrease costs with a fully automated letter module such as CARM-Pro™. CARM-Pro™ configures communications such as demand letters into work flows so they happen exactly as defined, consistently and with proper documentation.
Proof of Claim Monitoring – decreases costs (money spent and employee labor required) for debt collectors to research and process proof of claim submissions. Bankers automatically receive bankruptcy information as any of their debtors file a bankruptcy, or experience bankruptcy status changes. Debts recovered in the proper time frame helps avoid losing bank assets when customer bankruptcy converts to unsecured debt.
Proof of Claim Monitoring & Process Steps – Manual vs. Automated
Collection departments at banks and credit unions must follow several specific steps soon after a debtor files for bankruptcy. Debt collectors can save money and increase compliance by using automated debt collection software versus completing several manual steps.
Manual Steps Required (Without Automated Debt Collection Software)
- Receive and process a notification email about bank or credit union customer bankruptcy
- Obtain an exact match of debtor name to name of creditor institution. For example, the creditor contact on file cannot be both, “1st National Bank” and “First National Bank”.
- Manually reconcile/update any mismatched information
- Manually log into the bankruptcy court system files
- Manually locate the debtor information
- Manually review the bankruptcy filing
- Manually determine the number of days until Proof of Claim submission is required
- Manually process Proof of Claim action to prove that the bank or credit union has legitimate standing and legal claim to the debt
Automated Software Benefits (with Automated Debt Collection Software)
Without the costs (money and time) of humans completing the above steps:
- Automatically monitors court records for debtor bankruptcy filing
- Securely maintains debtors by Social Security number to ensure an exact name match
- Automatically completes all steps outlined above, leading up to Proof of Claim
- Automatically completes and files Proof of Claim actions on-time, every time
Automated Information Monitoring of Debtor Changes – reduces costs (both money and time) of miscommunication with debtors due to outdated contact information such as phone numbers, addresses, account numbers, etc.
Advanced Monitoring Modules – reduces costs by alerting collections professionals of these changes in borrowers’ status, so they can take action in timely ways:
- Judgements & Liens
Information About Loan Collections and the Debt Collections Process
Consumer Financial Protection Bureau
Compliance enforcement is becoming more aggressive in the current political and economic environment. The Consumer Financial Protection Bureau (CFPB) is *The Consumer Financial Protection Bureau (CFPB) was created as part of the Consumer Protection Act. Historically, the
CFPB has levied billions in fines and penalties on bank and credit union debt collectors for CFPB violations. This is another key reason why automation for managing debt collections is so important.
Fair Debt Collections Practices Act
The Fair Debt Collection Practices Act (FDCPA) is a law designed to protect consumers from prohibited abusive loan recovery practices. The process of payments recovery, as well as access to consumers’ credit details and communication with debtors, is all covered in the FDCPA’s summary of limitations on creditors. The FDCPA regulates only personal consumer loan recovery. It does not address business or commercial loans.
More information about the Fair Debt Collections Practices Act guidelines, including an FDCPA Compliance Checklist, is available in the article, How to Automate Debt Collector Compliance.
Bank Collections Compliance with Automation Software
Bank compliance officers must review state and federal regulations and interpret them to internal bank policies. To achieve consistent compliance, bank debt collectors must enforce each policy.
Internal Bank Policy Adherence Increases Compliance
Robust automated bank collections compliance software such as CARM-Pro™ – Collections and Recovery Manager Professional by Intelligent Banking Solutions™ can be configured by anyone to follow your compliance officer’s interpretation of the regulations into internal banking policies.
Financial institutions simply define each required action, and CARM-Pro™ configuration ensures actions happen as specified. For example, when a compliance policy requires that borrowers are sent certain letter types on day 15 and day 29, CARM-Pro consistently does it.
Consumer Debt Is Increasing
The amount of debt that consumers took on increased by nearly $42 billion. These debts are loans for deferred payments that account for a seasonally-adjusted annual increase of 11.3% over last year. This increase in debts represents a record high that exceeds prior accounts and expectations of economists.
Information about inflation data from the Consumer Price Index reveals a 40-year high, according to the Bureau of Labor and Statistics. For example, consumers now experience prices rising faster than they have since 1982.U.S. BUREAU OF LABOR STATISTICS
People are spending more money for products and services as companies react to the state of high inflation.
Inflation in consumer spending and payments of bills for products and services is calculated by the Personal Consumption Expenditures Price Index. This index rose more in February 2022 versus the previous year. The amount of increase was 6.4%. This data accounts for the highest rise since 1983, according to a CNN Business Report which cites data from a Bureau of Economic Analysis.
Debt collection interest rates for borrowers are also on the rise, due in part to inflation, more money being loaned, and falling consumer credit scores. This addition of costs is leading people to seek loans to pay for all types things for business or personal use. Loan option comparison raises a number of questions about ways to access optimal interest rates, fees, service and overall experience for customers.
More business people and private consumers received more money, with the help of federal bailouts, in the years leading up to and throughout the pandemic. This access to free money initially protected many people’s credit score from financial damage. However, with national debt mounting and inflation soaring, a recession may be next, and bankers must prepare now for sharp increases in debt collection processing.