The Covid-19 pandemic has brought widespread uncertainty, confusion and hardship for many industries. Shelter-in-place orders and fear of contracting the virus have shifted both corporate and consumer behaviors, and business closures and job losses have generated significant financial insecurity.
As the uncertainty continues into the second half of the year, businesses and consumers are bracing for an economic recession. Though no one can predict with any precision the severity or duration of the recession, financial institutions and collections organizations should take steps now to review the completeness and accuracy of their consumer data to better understand how prepared the firm would be for what may come.
Conventional Collections In Unprecedented Times
As the economic situation worsens and consumers’ financial hardship deepens, more individuals will miss payments on their credit cards, mortgages and other lending products. Some banks have begun to recognize this danger and are preparing for a surge in defaults. While some defaults will be inevitable, institutions can help mitigate the situation by reaching out promptly to financially troubled customers and adjusting their payment terms.
Organizations that are slow to make contact as a customer’s debt lapses into delinquency are at the greatest risk of receiving partial payment or none at all. However, the effectiveness of debt recovery efforts is hampered by the fact that collection teams (both first- and third-party) rely on out-of-date customer databases and traditional skip tracing tactics to support customer outreach. As a result, the contact information (phone numbers, email, physical addresses) on file for customers may no longer be valid or is rarely used. A one-size-fits-all approach to contacting customers means that individuals are often contacted at nonideal times or using channels they are unlikely to respond to.
Article By Rich Greene