How to Improve Bank Collections
Bank collections efforts are only as effective as the banking platform institutions use to control them. Today’s bankers need access to collections and recovery tools that ensure compliance and minimize risk.
This article is a resource guide for banks and credit unions. It lists methods and tips to improve payment of debts, improve customer relationships, and comply with regulations.
Checks and cash bank deposit transactions by depositors are only a small percentage of bank goals.
Bankers need account data collection and action platforms with features to service all loan accounts. For example, automated banking collection tools with steps that improve collection of funds and fees.
Information for Depositor & Lending Institutions
Depositor and lending institutions need timely information in order to best service their borrowers. Debtors are obligated to remit payments according to the agreement terms of their repayment plan.
Bank Collector Goals and Obligations
The primary goal of a bank debt collections representative is to recover all money owed to the bank within loan terms. Other goals include maintaining accurate records and complying with banking rules and regulations.
Beyond seeking funds repayment of borrower accounts, debt collectors are also obligated to:
- Help customers explore payment plan options
- Maintain consistent interactions with loan account customers
- Uphold the institution’s reputation by promoting trust and goodwill
Modern Debt Collection Strategies for Banks and Credit Unions
Modern debt collection strategies include software that helps institutions reach their goals. For example, more than 1,200 banks and credit unions license CARM-Pro™ Collections and Recovery Manager – Professional by IBS as their trusted collections platform.
User-friendly CARM-Pro™ technology efficiently enforces bank strategies and industry regulations to ensure comprehensive and compliant debt collection management.
Flexible, scalable CARM-Pro™ software allows users to consider the general economic climate and value of each customer to the institution. CARM-Pro™ can analyze the effects of various combinations of dollars and number of delinquent loans on the entire portfolio of receivables.
CARM-Pro™ improves as often as regulations or technology change. Users can leverage all contemporary communication channels (phone, USPS, SMS, email) and choose the most effective channel(s) to maximize communication with each debtor.
The comprehensive analysis, coupled with CARM-Pro’s ability to enforce defined bank policies, enables financial institutions to proactively handle challenges according to bank objectives.
Benefits of Automated Banking Collection Transactions
Automated debt collection software improves banking collection transactions and processes.
For example, proven CARM-Pro™ automated software provides the advantage of consistent compliance with government regulations such as FDCPA and TCPA, investors (Freddie Mac, Fannie Mae), guarantors (FmHA, VA) and internal bank policies.
Ways Creditors Can Gain Faster Deposit of Cash and Checks
CARM-Pro™ robust bank loan collection and recovery software helps banking industry creditors to increase revenues and reduce costs by:
- Enhancing bank staff/resource productivity
- Ensuring consistent compliance
- Providing superior reporting capabilities
- Accepting debtor phone payments / supporting a debtor self-pay portal to produce same-day ACH payments
Lenders can leverage CARM-Pro™ debt collection automation software to:
- Perform (or prevent) key recovery actions (such as payment demand calls or letters) based on defined timelines and the status of each borrower’s account
- Maintain reports and documentation of all required steps of the collection process
- Ensure that debt collectors only communicate through the legal representative of a borrower that filed for bankruptcy, and not directly with the delinquent borrower
- Pre-notify debtors about forthcoming invoice payment due dates
- Communicate with debtors according to their preferences (Phone, email, letter, SMS, etc.)
- Provide positive automatic reminders that effectively train people to pay on time, and “aggressively” respond when debtors fail a to make a promised payment
- Recognize consistent payment, and reinforce the bank’s intention to recover debt
Account Collections Strategy for Faster Funds Payment Access
The same investigative approach and analytical process that lenders use to approve credit is applicable to bank collection transactions. CARM-Pro™ debt collection management software can proactively curb payment delinquency with early identification of potential collection issues.
CARM-Pro™ maintains clear, compliant, organized records of all relevant debtor information, for bankers’ use in identifying customer payment patterns. CARM-Pro™ analysis tools enable bankers to develop and enforce effective debt collection strategies.
Common Debt Account Collections Issues
Bankers should ask debtors questions to identify their reasons for payment delinquency.
Types of debtor account collection issues that lead to delinquency include:
- A customer’s dispute of loan terms or bank policy
- A debtor’s temporary shortage of funds (such as extenuating circumstances like unforeseen medical expenses, divorce, and loss or change of employment)
- A customer’s intent to withhold payment for any reason
- A repayment plan that is unclear to a borrower
Customer Relationship Strategies for Creditors
Inevitably, some debtors will find it difficult to maintain their loan payment schedule.
Wise creditors maintain customer relationships and mutually-seek debt repayment solutions with their borrowers. This preserves goodwill that increases the lifetime customer value to financial institutions.
Relationship strategies that accelerate funds payment to creditors include:
- Know each customer’s prior payment behaviors and current needs
- Consider the customers previous payment patterns
- Does the debtor respond to creditor communications? If so, which communication methods have worked best?
- Has the customer lived up to his or her past commitments?
- Have there been previous delinquencies?
- Have there been any previous attempts to settle the debt?
- Has the client’s account ever been closed and reopened?
- Demonstrate curiosity, empathy and discretion regarding each borrower’s situation
- Is there a problem with the loan product or service?
- Are your letter, SMS text, call and email communications clear and respectful?
- Has the customer made any sincere effort to fulfill their obligation?
- Be aware of economic and industry challenges that can affect borrowers
- How has the COVID-19 pandemic affected your area’s economy?
- For NEW borrower-customers:
- Clearly communicate the institution’s policy and expectations from the start
- Communication tone should begin as helpful and tolerant, then respectfully intensify and accelerate as needed to ensure regular debtor payment
These strategies often lead to prompt settlement of invoices and retention of customers.
Systematic Lender Follow Up and Payment Provisions
Following initial contact with borrowers, it is vital to follow up regularly to avoid delinquency. Bank debt collectors must also record notes in debtor files regarding expected payments.
Regular follow-up with borrower accounts, especially ones that cannot immediately pay, underscores the serious status a creditor attaches to outstanding debt. Neglect of early account delinquency invites future challenges with receiving on-time payments.
It is essential to quickly address failed payment promises and expired demands. Swift action can prevent worsening of the debtor financial problem, and ensure that the debtor understands his or her responsibility to honor future promises and resolve future demands.
CARM-Pro™ Collection and Recovery Management – Professional software maintains vital consumer information that can help bank lending agencies to improve client relationships in line with their goals.
IBS maintains a library of interactive online CARM-Pro™ video training modules for on-demand, self-paced training of banking staff at no added cost to licensees of CARM-Pro™ software.
Banking Collections Frequently Asked Questions
Automated Collection Software such as CARM-Pro™ by IBS is proven to enforce the rules, regulations and laws that govern bank and credit union debt collection and recovery efforts. An automated and user-configurable debt collection process management tool such as CARM-Pro™ is the best way to maintain compliance with strict and frequently conflicting state and federal regulations. To ensure compliance, CARM-Pro™ performs or prevents key recovery efforts and communications based on account status and due dates; and maintains comprehensive documentation and reporting of every collection action. Automated work flows can complete required steps with no collector intervention, or alert collectors to human required steps or actions.
Automated bank collections management software helps bankers overcome many limitations to increase collector productivity, efficiency, documentation, communication, and compliance.
For example, CARM-Pro™ Collection and Recovery Manager – Professional by IBS is comprehensive automated software that enhances bank debt collection efforts. It ensures collector productivity as it properly assigns the order and manner of every required collection-step; streamlines all debt collector communications and interactions; records all steps of the collection process; and alerts other debt management professionals if any step is missed. Maximized work flow and automation serve to boost productivity and performance, reduce collection compliance failure risk, and simplify legal processes.