Agency Focus is Automation, Debtor Data, and Analysis: LexisNexis

The tough economic times and a different mood among debtors are forcing collectors to be smarter in their use of resources.

Sure, volume is up but there is less liquidity, meaning consumers have less money to pay their bills, said Rob Fite, vice president, collections solutions, at consumer data analytics vendor LexisNexis.

In broad terms, the agency that collected $5 and received 10 percent of that a year ago is now collecting $2.50 and still getting that 10 percent cut, said Fite. He discussed the current collections environment with insideARM and is appearing on a panel today at the National Collections & Credit Risk Conference in New Orleans.

In response, “there’s a scramble (by collection agencies) to come up with more efficient management tools,” said Fite. “Agencies had a tough time in the fourth quarter. They came to us and said ‘I’ve got to change my approach in the New Year.’”

Collectors are seeking automation, greater data on the debtor, and are embracing analytics, said Fite.

More agencies are opting for batch processing of requests for debtor information, and conducting deeper research on the debtor once the data is in hand, he said. Under the typical fee per transaction model that vendors use that means search costs are rising. The plus side is that the debtor is more likely to be found, said Fite.

LexisNexis and other providers will provide the batch file with appended information on debtors, scrub out files of debtors that are bankrupt or in jail, and add analytics, such as scoring that helps to find those debtors ‘most likely to pay.’

Clients also are using “trigger” programs that monitor select debtors on an ongoing basis. LexisNexis sends an update to the client if the debtor’s behavior changes, indicating a greater likelihood of payment.

“We offered (triggers) previously but clients didn’t embrace it. If there was ‘no pain’ they weren’t interested. Now there is pain,” said Fite. “The current market conditions means collectors are investing in new approaches.”

Additionally, debtors have a different mindset than just a few years ago, said Fite. For instance, they more likely to know their rights under the FDCPA and other regulations, and the stigma of bankruptcy and bad credit have faded.

The mood change is impacting what bills a debtor pays. It used to be the mortgage was always paid so the consumer had a roof over his head. Now, debtors are willing to walk away from the mortgage and get into an apartment. Instead, debtors in 2008 are making sure to pay their phone bill, Fite said. “They always pay the cell phone.”