How many collections executives have been frustrated in the past by their top management’s assessment that a further investment in collections efficiency or effectiveness is “unwarranted at this time, given other more pressing priorities” (a recently heard description of a series of past decisions by a major bank in choosing to defer maintenance and investment in new collections and dialer technologies over several years)? Judging from conversations we have had across the industry for years, this is by no means an isolated example.
Why is this? For one, overall loss rates tend to cycle up and down more as a function of the overall economy, as well as specific lending risk decisions made by each bank, than by the specific actions and investments of the collections operation – or at least, that is the perception. Another perception is that “we can always throw bodies at it if the problem gets acute”.
The advent of zero-tolerance compliance expectation from our regulators changes all that. No longer can we live with a manual surge – the “compliance tax” of extra people needed to manually manage the letters, individualized consent capture, non-automated contact and other reporting requirements now makes a cover-it-with-people strategy unaffordable (and, by the way, these manual approaches actually fail to reduce the risk of an enforcement action anyway).
Another factor is that borrowers don’t want to talk to agents to the extent they used to, making it so much more expensive to chase them with more callers as to be questionably cost-justified; but having the coordination and control over self-service and digital strategies needed to really affect the collections unit’s performance requires an investment in technology and organization and operational strategy.
What used to be good enough simply no longer is – it’s time to re-think the “old dependable” strategy for dealing with an expected upsurge in delinquencies…