ACA Seeks Email Solutions, Urges Debtor Empathy

The first half of 2008 marked the continuation of the credit crunch, increasing delinquencies and chargeoffs and a weakening economy. How does the second half of the year look? InsideARM spoke with several industry executives to get their take on the economy and the receivables business. This is one of a series of articles looking at the next six months.

“I think the second half of the year will see a continued increase in the accounts [collection agencies handle], but only limited success in the recovery rates because consumers are feeling the effects of the [weak] economy,” said Rozanne Andersen, executive vice president and general counsel for ACA International, the association of credit and collection professionals. “A lot of the popular press thinks this [economy] should be a boon for the collections industry, but people only have the money to pay for the necessities.”

That means debtors have been slower to start to repay debts and to make smaller payments on outstanding debts, rather than paying off the entire balance, Andersen explained. Therefore, collectors have to use more human and technical resources – and that drives expenses higher – to recover delinquent debts.

“We’re taking this opportunity to see how we can build efficiencies into the collection agency business itself,” Andersen said. “We’re looking into how the collection industry can legally and ethically use e-mail and other electronic communications.”

These technologies tend to be less expensive while providing another channel for collectors to use to contact debtors.

“We’re seeing a need from collection agencies for us to work on an e-mail solution,” Andersen added. “We’re also working hard on providing better tools for collection agencies to hire the best people for the jobs. We’re looking to benchmark [attributes] of what makes a successful collector.”

One attribute that will help collectors and collection agencies be more successful in the second six months of the year, according to Andersen, is pursuing a philosophy of convincing debtors to accept payment plans rather than trying to collect everything at once.

“The name of the game today is payment plan,” Andersen said, recommending that the collectors who are the most successful are the ones who are best able to empathize with the debtor.

Another change Andersen noted in the first half of the year that she expected to continue for the next six months is an increase from chambers of commerce and other small business groups seeking information on how to improve their collections.

“Businesses large and small are seeing an increasing amount of receivables,” Andersen said. So these firms are seeking advice on how to best recover these funds, she noted.