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Your Guide To Digital Debt Collection And Collection Tools

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Published: Nov 26, 2021

Digital debt collection is an emerging necessity today because household debt in the US is at an all-time high

Auto loans, mortgages, medical debts, and more are common financial issues faced by a majority of Americans. With multiple generations in debt, it has become increasingly important to introduce alternative payment methods for debt collection that cater to everyone’s needs. This is where digital debt collection enters the picture. 

Digital debt collection refers to the process of collecting debts through online payment methods. These payment methods could range from emails and text messaging to other online tools. It also involves updating traditional methods to match the standards of online tools thereby delivering a better user experience.  Digital debt collection aims to overcome the challenges posed by traditional debt collection methods and bring about digital transformation to this age-old industry.

Why is digital debt collection the future?

Digital debt collection overcomes the traditional debt collection model, which includes calling and visiting customers to recover the debt. This is especially so because while debt collection went unregulated for a long time, there are stricter vigilances now around how an agency can collect a debt.  

The consumer forum gets the second-largest volume of complaints from debt collection agencies, and the most common complaints include:

  • Collectors attempting to collect invalid debts.
  • Lack of communication concerning debt validation.
  • Incessant calls.

It goes without saying that when customers get annoyed, they are less likely to settle their debts. It is also against FDCPA rules to reach out to them beyond a certain number of times per week. Alternative means of collecting debts have become the need of the hour. Digital debt collection provides a solution to debt collection agencies by helping them stay within regulations while also optimizing their outreach.

Let’s find out why this method of debt collection online works.

Why does digital debt collection work?

The success of digital debt collection lies in the fact that customer experience has undergone a drastic change over the past few years. Customers today know how they want to be treated and have their preferred modes of communication. 

Traditional debt collection methods may not give you the same results today as they did a few years ago. The power of social media also puts organizations at risk of developing a bad reputation because customers can simply leave bad reviews and discourage potential customers if they feel inconvenienced. Therefore, it is time that debt collection agencies upped their game and shifted to a more strategic digital debt collection approach.

Here are some reasons why digital debt collection is an excellent alternative to traditional debt collection methods.

It is the future of collections

The Consumer Financial Protection Bureau has taken note of the increasing need to bring forth more consumer protection laws that keep the customer’s needs foremost. It has proposed new regulations such as:

  • Limiting the number of calls a customer receives per week from a collection agency.
  • Mandating disclosures about the debt, such as the amount owed, to increase consumer awareness.
  • Defining how consumers can be contacted and providing consumers the option to opt out of debt collection communications.
  • Defining “time-barred” debt and protecting the consumer from being pursued if the statute of limitations has expired.

Digital debt collection is the only platform through which debt collection agencies can overcome the challenges posed by the new regulations. For example, debt collection agencies cannot report a customer for a debt they were unaware of under the “time-barred debt” rules. This challenge can be overcome by regularly updating a customer through SMS about the amount owed and their payment schedules. 

Modern texting software such as CallHub’s allows you to schedule your messages in advance to a contact list of your choosing so that no contact is missed. An additional reason to opt for SMS is that they have a 98% open rate. You can rest assured that your SMS is not being overlooked. You can use SMS to make consumers aware of:

  • Amount owed
  • Payment due date
  • Disclosures about the debt
  • Ways in which they will be communicated
  • Rules regarding debt collection
  • Consequences of non-payment

Leads to positive customer experience

Digital debt collection allows debt collection agencies to foster healthier and more positive connections between them and their customers. 

For example, younger crowds such as the millennials, which form the largest indebted population in the US, prefer to communicate through social media, emails, and text messages. Older generations opt for more traditional methods of communication such as direct mail or calls. Digital debt collections help you customize your outreach accordingly by personalizing calls or text messages for different generations, helping you segment lists according to different criteria, including age and more.

An added incentive to provide a better customer experience is online reviews which can make or break your debt collection business. The happier your current customers are, the more the chances are that you will find more business. Leverage the benefits of debt collection online to build your business.

Read Also: Your Handy TCPA Compliance Guide For Debt Collection Calls 

Automates outreach processes

It is possible to automate most of your outreach and make debt collection easier on your agents with an excellent communication and outreach platform. Here’s how a communication platform for digital debt collection can help you:

  • Automatically comply with regulations by scheduling your outreach campaigns within the mandated hours.
  • Give customers the option to opt-in and opt-out of your communication channels through features such as SMS opt-in, subscribe and unsubscribe features on emails, etc.
  • Use merge tags to personalize your outreach to each contact – add their personal details, the amount owed, payment due date, etc.
  • Comply with outreach volume regulations by setting up campaigns within the mandated number.
  • Provide links for online payment to improve speed and accessibility for payments.
  • Provide a doorway to two-way personalized communication via text messages. Send messages to thousands of people at one go and personally reply to each when they reply.

Data-driven outreach

Digital debt collection allows you to generate reports and predict patterns of consumer behavior. It helps debt collection agencies prevent defaults by detecting changes in repayment early on. 

Through advanced behavioral modeling techniques, digital debt collection takes the route of prevention and avoids the hassle of follow-ups to a certain degree. 

What are some digital channels to explore, and how can you use them?

1. Text messaging

Text messaging allows for quick and immediate contact with your customers that ultimately leads to faster payment for your business. Once you get it right, text messaging can be a powerful tool to connect with customers and increase your business, gain great reviews, and, most importantly, collect money back quickly.

SMS has many benefits when used correctly as a form of digital debt collection. You can:

  • Save time
  • Reduce stress
  • Guarantee your message is read
  • Comply with TCPA regulations
  • Create a sense of urgency
  • Save on cost

Here are some texts that you can send to your customers:

  1. Outstanding payment reminder.
  2. Missed payment reminder.
  3. Payment confirmation message.
  4. Information relevant to debt repayment.
  5. Texts encouraging two-way communication.

Read Also: Debt Collection SMS Text Messages 

2. Emails

When it comes to debt collection, emails serve as legal documents and must comply with certain regulations. All the FDCPA requirements for a written document must also apply to an email that you send out for debt collection.

Therefore, before you start sharing emails as a part of your digital debt collection strategy, you must receive the recipient’s consent. 

Best practices for email debt collection include:

  • Receive consent from the recipient before sharing the email.
  • Make the unsubscribe button readily available in case they do not wish to receive further correspondence.
  • Introduce yourself and your company.
  • Add information relevant to their debt.
  • Provide a range of payment options.
  • Provide a payment link or button within the email.
  • Provide your contact information so they can easily reach you.

3. Chat

Online chatting is a non-threatening and relatively less intimidating form of communication for many people. One would rather chat online with an AI bot than confront another individual. Especially when it comes to speaking about an uncomfortable topic such as debt repayment. 

Providing a chat option on your agency’s website is a great way to improve customer communication. You can add automated responses and offer the possibility to call or text you in case their query is still unresolved.

You can explore more options for reaching out to your customers for online debt collection. However, the three above are primary ways in which digital debt collection is carried out. 

Digital debt collection sounds like a great alternative to traditional methods. But should you already consider switching to digital completely? Let’s know more.

Should you go digital-only?

There are many factors to consider before you move entirely to digital-only debt collection. Since outreach methods are informed by demographic details such as age, different people want to reach out in different ways. Therefore, it may not be time to ditch the traditional phone call yet.

Here are some factors to consider before you go digital-only:

  • Age: While younger people would love the variety of communication methods available to them through digital debt collection, the older generations may not appreciate trying to figure out how to reply to your text. Consider who your primary customers are and make the switch accordingly. 
  • Financial situation: It is difficult to determine when one can repay a debt at certain times. A sudden change in life circumstances can lead people to miss payments. It might be better to connect via calls and figure out how to move forward.
  • Questions about debt: While digital makes everything easy, it may not completely cover the knowledge gap when it comes to questions that customers want to be addressed. There are two ways to go about this. You could either facilitate two-way text messaging communication, or you could also allow customers to give you a call when required. 
  • Disputed debt: When it comes to disputes, a face-to-face or telephone conversation might be the preferred method of communication. 
  • Embarrassment: This is a key positive when it comes to digital debt collection. By removing the fear of confronting a collection agent or the pain of returning calls, digital communication methods encourage conversation in a more conducive manner. It reduces embarrassment and encourages people to stay connected.

Conclusion

Digital debt collection is a new step ahead for the debt collection industry. The right tools on your side can make your transition to digital smooth. CallHub’s texting and calling software facilitates two-way communication, helps with compliance, and is easy to set up and use.

Try CallHub for free for 14 days.

Feature Image Credit: Monstera

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