Collections: Determine Readiness in COVID-19

April 27, 2020

2020: A Game-Changer for the Debt Collections Industry

No matter where you fell in predicting when the next economic downturn would occur, NO ONE forecasted a global pandemic creating economic disruption on a scale never before seen.

While we can’t accurately predict how this negative macroeconomic event will play out, we do know that more consumers will need assistance to prevent default on their loans. Given the scale of customers impacted financially by the pandemic, and the impact to resourcing in collections operations (hopefully short term), we know that more lenders will be collecting—for the first time—through digital channels. 

All Collections Operations Will Need to Change

Debt Collections info about CFPB Proposed Rule

While this blog focuses on being “digitally enabled” to address the current state (of the economy and society), all facets of debt collections operations will need to change.

The pandemic will economically impact all customer segments, not one or two singular segments.  So, your collections strategy will need a tune-up and perhaps a complete overhaul.

Standard risk segmentation will not have the same outcomes as it did during the 2008 Financial Crisis as the pandemic has affected multiple asset classes across all risk profiles.

As you move into digital, or even if you are fully digitally enabled in collections, you will need to adjust your strategy.

A New Path Forward: 3 Steps to Shoring up your Digital Collections in 2020 

What can you do to prepare for 2020’s regulatory uncertainty, economic unknown and increased volumes in debt collections? Take these steps now to determine your readiness for weathering both the economy and changes to how you conduct collections:

1. Assess how well your digital banking capabilities meet your customers’ needs in today’s digital world.

  • Understand which functionality you already have in place for current customers
  • Determine the gaps—how that functionality falls short—that prevent you from effectively serving consumers in financial hardship

2. Prioritize your gaps.

  • If you have limited digital capabilities, identify which digital channel to open or improve first and execute on that plan flawlessly
  • Build your plan around delivering user-friendly, efficient functionality and superior customer experience, whether via email, SMS, mobile or self-service online portal

3. Make your customers’ journey through the different channels smooth. The success of your digital engagement hinges on it.

  • Your channel should be fully functional (able to handle all customer actions and requests) when you open it
  • Practice holistic communication—use both digital and conventional channels. Digital-only communications (e.g. text notifications, emails or pop-ups) won’t be successful

Simply Opening Digital Channels Won’t be Enough

The steps above will position you to help customers during a period of deep uncertainty and rapid change. But the impact of these changes on the industry is more complex than simply engaging a digital channel.

As efficiently and quickly as possible, financial institutions must first identify—and address—all the regulatory and operational gaps that prevent you from being effective and compliant in a digital landscape.

You must also help customers navigate the influx of information about changes to debt collections rules (e.g. payment holidays), stimulus packages and forecasts on getting back to normal (e.g. states opening). Additionally, your overarching collections strategy will need to change to address the broad impact to consumers of the coronavirus pandemic.

When we launched a  Joint Initiative for Digital Collections  with  Ballard Spahr last year, we had no idea how quickly this would become a burning platform for our clients. Together, we’re helping financial institutions be efficient, effective and successful in third-party and first-party digital collections for customers experiencing financial hardship as well as navigate the complexities of a rapidly changing collections environment.

For information on similar topics to help determine your readiness, select from below:

Using Mobile Banking to Boost Collections

COVID-19 Resources: Updates and Guidance

DIGITAL COLLECTIONS:  It’s No Longer a Concept. It’s Reality and It’s NOW. 

Collections & Recovery Assessment: Case Study

Webinar: Challenges Under the Proposed CFPB Rules