Transforming Bank Collections

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