Why Dial-Only Collection No Longer Works

If you are using a dial-only collections strategy, then the method you are using is becoming less effective to collect payment from today’s typical consumer.  There are several reasons for this, and they all boil down to one fact: today’s consumer uses technology in different ways and all of that technology allows for more advanced ways of ensuring privacy.  

Not only do over 20% of people not even have landlines, an increasing number of people are using their mobile phones as their only means of telephone communication.  Federal and state regulations governing cell phone use is presenting itself to be a major barrier from the collections industry point of view.  What’s more is that cell phones offer caller ID and call blocking, with some new apps that completely block any calls from even registering on the phone.  These privacy options play a significant role in hampering access to debtors for the purposes of discussing debt resolution.

Additionally, both the Fair Debt Collection Practices Act and the Telephone Consumer Protection Act have placed severe limitations on the use of automatic telephone dialing systems (or robocalling) and pre-recorded calls.  These restrictions have made it even more difficult for collection agencies to reach consumers by phone to discuss an outstanding debt.  

What this means for the collection industry is that new, multi-channeled ways of reaching consumers about their debt are necessary if successful negotiations are to be made.  Since technology is changing, the collections industry must change as well, and learn to use technological advances like online payment gateways allowing debtors 24/7 access to an account.  Giving debtors more ways to pay their debt, and alleviating the intrusion of phone calls, often has a greater impact on the actual repayment of that debt.  

In increasingly difficult economic times, more people are going to stop paying their debts.  It’s simply the harsh truth that the industry is facing.  However, adjusting debt collection practices to fit the needs and lifestyles of the consumers is a way to assure that debt collection takes place, rather than just a stream of unanswered, unreturned phone calls that wastes time and money. 

When Do You Need A Collection Agency?

Business owners are often faced with the enormous task of settling accounts and collecting on late payment or nonpayment. In times of economic struggle, this can be the most difficult part of running a business, but a necessary part if that business is to be a success.

 

Deciding whether or not to place your accounts with a collection agency is a likewise daunting task.  However, many analysts agree that financial problems show themselves in patterns, and there are particular signs you can look for to determine whether or not the timing is right to place an account with a collection agency.

1)      If a customer is fairly new, has had an account with your company for less than a year, and fails to respond to any invoices or statements that you send out, that customer should be sent to a collections agency as soon as possible.

 

2)      Your payment terms don’t work, regardless of how fair they are. If you offer reasonable payment terms (even for someone facing economic hardship) but your offers still fail to meet the customer’s ability to pay, then that customer might be playing games and might be determined to simply not pay.  If so, you should get rid of that account as soon as possible by handing it over to a collections agency.

 

3)      The customer starts denying responsibility for the debt.  When a customer begins denying that he or she is responsible for the debt, it is time to hand the account over to a professional. Without professional debt collection help in cases like these, the collection will be too time consuming and costly for your business to handle.

 

4)      The customer is getting separated, divorced, or has marital difficulties.  Debt problems almost always follow marital problems.  If you are aware that a customer has marital problems, it is best to send that account to a professional that will be able to handle the address changes, phone number changes, and financial instability that will likely follow for that account.

Are We Headed To A Student Loan Debt Bubble?

The economic struggles of the past five years have seen a housing bubble that might be followed by a student loan debt bubble, according to Standard & Poor's. “Student-loan debt has ballooned and may turn into a bubble,” S&P stated.  “There are more defaults and downgrades for some student loan asset-backed securities."

Mark Kantrowitz, publisher of FinAid.org, an educational loan and grant website, states that Federal and private student loan debt has surpassed credit card debt.  At just under $1 trillion, student loan debt presents a different angle in the asset backed loans problem of the recent few years.  The angle is the government has a large amount of money at stake, making it nearly impossible for creditors to have their student loan debt discharged through bankruptcy.

As an increasing number of people have suffered in some way through the economic downturn – either through job loss or life circumstances – the Obama administration is seeking ways to fix the growing problem that could, indeed, be as significant as the housing bubble that burst.  The same factors that caused the housing bubble are present in the student loan crisis.  With state aid being taken away from many colleges, funding has decreased, causing rising tuition costs.

 

Also, in previous years, practically anyone could get a student loan as part of government-backed encouragement for everyone to pursue higher education.  Not only were applicants given easy loan money – they were given money through the loan for living expenses, books, and whatever they wanted to spend the money on.  Applicants with un-established credit histories, or even poor credit histories, were given student loans at low rates, and now many of these applicants find themselves $50,000 - $200,000 in debt, despite increasing competition for jobs, especially among professionals.

Can Debt Collectors Contact You via Social Media?

The Fair Debt Collections Practices Act (FDCPA) was designed in 1978 to protect consumers in debt collection practices.  Although the Act was written before Facebook and social media became the powerhouse it is today, it is still applicable to collection practices conducted through these methods.

 

According to Michelle Dunn, an author and 24-year veteran of the debt-collection industry, many collectors do try to set up a fake profile and ‘friend’ someone in order to find out more information that is relevant to their debt collection, such as employment, cell phone number, etc.  However, this practice is illegal in many states and Dunn discourages it because it involves impersonation.

 

The FDCPA doesn't explicitly forbid collectors from posting on your Facebook wall or Tweeting your relatives and friends to ask about where you are. However, when your privacy is violated, there are federal statutes that are broken, and the FDCPA does explicitly protect you from breech of privacy.

 

If you don’t want your social media information to be used by creditors, experts suggest the following steps to take:

1. Don’t avoid creditors.  If you don’t want to be contacted via mail or phone about the debt, simply return a letter to your creditor stating that you no longer wish to be contacted via a certain method.  They will be forced to comply, although they will be more inclined to sue at that point to recover the debt.

 

2. Use your privacy settings. Some people have their Facebook profiles set to completely public, allowing anyone who wants to access your profile full ability to do so.  If you are concerned about privacy and about creditors finding out information, then set your profile to completely private.

 

3. Avoid posting disclosing information about your job or cell phone number.  If you owe money and don’t want to be called by collectors, don’t allow this information to be public on your Facebook profile.  

How to Lower your Costs While Maintaining Company Support

In a slow economy, businesses are forced to find ways to consolidate in order to decrease spending.  Often, this means reducing their payroll dollars by consolidating work responsibilities to select individuals, or streamlining several processes into one. While business owners hate to lose employees, profit is essential if you are running a successful business.  If it means the difference of keeping your business afloat in a tough economy or sinking under the weight of that economy, the smart move is to cut costs and consolidate work. 

One way to do this is with technology, such as products that help you make complicated payroll and accounting jobs virtually obsolete.   With these products, businesses can receive payment online, helping you to streamline your business operations and cut out unnecessary spending.  These products are able to reduce error, facilitate credit card transactions, maintain records, organize your client database and contact system, and help you with data-driven checks and balances.   They are also able to streamline the payment process, allowing transactions to be approved over the Internet – which has been proven to be a more successful medium for collecting debt than calling by phone. 

It just makes good financial sense to spend less when the economy is slow.  Keeping your costs low while increasing your business’ overall level of support is possible if you take advantage of the many benefits that technology offers.  Support means that you will have more time to spend working with your clients.  You will find that level of support cheaply and easily with software that can give you the additional time and manpower you need so that you can be done with the job of running a business and get down to actual business!  

Communication Timing is Key in Collecting Debt

Imagine this scene….Sarah M. just lost her job.  She is actively looking for a job and has several prospects, and she’s waiting to hear back from multiple companies who are considering her resume.  Understandably, she waits anxiously by the phone for good news and this is certainly not the time she wants to be tying up the line talking to debt collectors.  As soon as she gets a job, she will start paying her bills. However, right now, the stress of looking for a job and the uncertainty of knowing when her next paycheck will be in is not something she feels comfortable talking about with a perfect stranger on the phone. 

When a professional bill collector initiates a phone call to a debtor or customer, it is always a toss-up as to whether the debtor will even answer.  If the call is answered, the professional bill collector is completely unaware of what kind of a day that person is having.  A lot of the times, this results in a negative collection.  When you owe money, that debt can be a stressful thing – particularly if you are under the weight of a lost job or divorce situation. 

The easiest way to make sure the debtor responds positively is to wait until the timing is best for them.  Old practices of harassment no longer work when people are so stressed that they have given up, or when their job (the very source of their payment to you) is put at risk from excessive phone calls.  Meeting them where they are – at a time and date that best suits their needs – is always a better tactic if you want to receive a payment.  Communication is essential if you want some kind of resolution; effective communication is essential if you want results that make everyone happy.