Collection Agencies Experimenting with Technology to Deliver Results in Tough Times

Collection placements are continuing to grow, but recovery rates continue to lag as more Americans lose their job and no longer have access to assets such as home equity to pay down debt. Additionally, with many people using caller IDs to screen calls, or with no landlines at all, debtors are much more difficult to reach.

As such, accounts receivable management firms are increasingly relying on technology to maintain profit margins in the recession.

In insideARM’s most recent Credit & Debt Collection Industry Quarterly Confidence Survey, many participants said in open-ended comments that they are using various contact technologies to guide them to elusive debtors (“In Your Words: Comments from the ARM Industry Confidence Survey,” June 1).

Collection companies should follow some survival strategy guidelines in order to make the best out of the current economic environment, says Matt Edmunds, general manager for collections, for SoundBite Communications in Bedford, Mass.

“It’s much more difficult to reach people now than ever before,” Edmunds says.

Automation helps manage this issue. Edmunds recommends carefully defining a company’s automated voice messaging strategy to increase agent productivity and revenue-per-agent-hour.

“Agentless solutions (automated calls) are growing more effective and accepted and provide options for debtors to pay at their convenience,” Edmunds says, adding that it is critical to test different strategies on different segments of accounts, even within the same portfolio. “This works best for balances of under $500 and for fresher debt.”

Though the tight margins mean that most firms don’t have additional revenue to invest in automation and other equipment that could take time to produce a positive return on investment, collection firms can use hosted solutions in which the provider owns and maintains the equipment and the collection firm pays fees based on its usage.

Hosted dialer provider LiveVox echoed the benefits of outsourced communication technology recently when they noted that a recent internal study showed that a hosted solution could provide dozens of lines per collection agent compared to premise-based dialers that average around three lines per agent (“LiveVox Data Reveals Dialer Line Starvation Reduces Collection Agent Talk Time up to 50%,” June 10).

The next strategy is to use a local caller identification when calling a debtor, Edmunds says. If a debtor sees a toll-free number on the caller ID he is much less likely to pick up the call. If, instead, the caller ID reflects a local area code, the debtor is more likely to answer, meaning the collection firm is more likely to be able to initiate the collection process. According to Edmunds, use of a caller ID increases live answer rates by as much as 40 percent to 200 percent when contacting debtors.

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As communication shifts to cell phones, and as cell phone users continue to increase their use of texting, Edmunds recommends collection agencies adopt a texting strategy. Some companies have seen more than a 50 percent increase in right-party connections using texting.

“We’ve run a couple of pilots and have had some tremendous results,” Edmunds says.

For texting to be an effective strategy, Edmunds recommends using a solution that won’t charge the debtor’s account for receipt of the text message.

Debtors are also more sensitive than ever to the size of payments they may have to make. Many can’t pay their outstanding balances in the one to three months that was expected only a few years ago, according to Edmunds. He recommends that agencies introduce more flexible payment arrangements, including long-term payment plans, and then using automated reminders to alert debtors of upcoming payments.

^pullquote’Increase IVC technology.’ ‘More calls via technology, less FTE.’ – Responses from Q1 Confidence Surveypullquote^

Consumers also are more accepting of automated voice messaging solutions that offer the payment plans. Using such solutions saves on the cost of live collectors.

Edmunds recommends more flexibility in other areas as well.

“Collection [agencies] need to move away from the ‘one size fits all’ approach,” Edmunds explains, recommending experimentation with multiple scripts, multiple voices and leveraging other contact numbers. “You need to make your company stand out more. You need to use a more tailored contact strategy.”