Debt collection strategies are vital for helping banks to conduct efficient and compliant collections efforts.
Information such as the debt collection strategies for banks outlined below will help guide your bank or credit union toward conducting a significantly more efficient collection process.
Effective business strategies that financial institutions can use for efficient debt collection and risk management include establishing detailed policies and procedures for consistent debt collection practices, and using efficient debt recovery software.
Money is often needlessly wasted as banks and credit unions increase their costs of debt recovery by spending too much time on debt recovery, installation and maintenance of IT infrastructure and systems, compliance with legal and regulatory requirements, and debt specifications and write-offs.
Payments on debts would be more efficiently recovered using these 10 debt strategies for banks:
10 Debt Collection Strategies for Banks
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Debt Collection Strategies for Banks PDF
- Update your bank collection and recovery software. Review the technology your financial institution utilizes to interact with customers. Use tools that will help foster positive relationships with those from whom you are trying to recover debt. Ineffective systems slow the process down and fail to provide the intelligence required to improve results.
- Develop a more intuitive debt recovery strategy. An advanced scoring and segmentation system combined with portfolio intelligence helps to increase recovery of debt. Prioritize the financial institution’s strategy using amounts owed, days late, and repayment potential. Remember reduced turnaround time provides more time for agents to field to resolve other cases.
- Review debt collection policy regarding billing dates and procedures. Make sure to send and process invoices on a regularly scheduled basis. In addition, make it easy for customers to pay. Offer all standard payment options. Ensure that your invoices have the correct contact information for remittance and keep a record of the invoice and payment.
- Make certain customers remain satisfied with services and do not switch to competitors. Debt recovery is a key process where a friendlier approach could result in improved customer satisfaction and loyalty.
- Track your experience with the late paying customer. Comprehending how clients respond and what gets them into payment mode can provide an advantage in keeping accounts up to date. Assess what problem is at the root of the current delinquency. What type of client is the financial institution dealing with? Provide alternative payment plans for customers going through financial difficulties.
- Choosing the appropriate customer-approach channel for each case. One important step in the debt-gathering process is creating the best communications channels for each customer to discuss their issues openly. By proactively reaching customers early, you can prevent larger problems later.
- Set reasonable expectations. Agents should be able to create realistic expectations understood by the consumer throughout the call. Some financial institutions offer programs designed to restore negative accounts and retain banking customers before the closing or charging off the account. Some research suggests customer retention of 70% or better, as well as the restoration of negative account balances when contacted pre-charge off.
- Create specialists. If everybody has multiple responsibilities, collections may suffer. Improve work force utilization by optimizing allocation better. Automated and centralized allocation helps achieve more efficient staff use.
- Help representatives discover the conflict quickly to resolve consumer issues. Identify factors that enable a debtor’s repayment potential. Financial institution representatives must sometimes act as financial advisor, and negotiator. This new level of complexity calls for a new model to not only frame an agent’s thinking but also tap into already acquired skills.
- Debt-collection performance improvement results in credit loss savings. Centralized allocation linked to team performance could result in more reduction.
CARM-Pro™ Collection and Asset Recovery Manager – Professional not only consolidates all collection account types into one but track all stages and debt issues including Past due and delinquencies, charged-off debts, bankruptcies, foreclosures, repossessions and OREOs.
In addition, CARM Pro’s Online Self-Guided User Training Modules provides interactive training to ensure consistent and compliant representation approaches at no additional cost, to support Intelligent Banking Solutions clients and allow platform users to take online classes at their convenience based on availability.