Improving Deceased Account Collections Performance Without Sacrificing Client Brands

The percentage of deceased debt within the total debt recovery market is quickly growing. This significant trend is being driven by a number of key factors:

• Americans are getting older. By 2050, the number of people over the age of 65 will more than double to 84 million. The number of people over 85 will grow four times to more than 21 million.
• People over the age of 65 account for 75 percent of all deaths. 
• America’s debt levels are rapidly escalating. In just the past 10 years, revolving consumer debt has nearly doubled to almost $1 trillion. 
• Debt levels are especially high among those ages 65-69.Their credit card debt grew 217 percent in the past 10 years — more than four times the rate of the entire population.
  

Yet despite the size of the total market — currently estimated at $21.7 billion, including both revolving and non-revolving debt — most collection companies ignore deceased debt because it’s a complex, sensitive asset class. And they’re right. Deceased debt collection is distinctly different than delinquent debt collection, and it requires a distinctly different approach. To be effective, deceased debt collection needs to balance and meet three objectives: protecting brand value, enhancing survivor relationships and increasing recoveries.

When attempting to collect deceased debt, creditors’ billion-dollar brands are subject to unique risks. The threat of permanently damaging brand perception and equity among survivors is especially high, because collectors are pursuing people who are grieving, who may feel vulnerable and mistrustful, and who are protective of the memory of the deceased.

If survivors are feeling threatened or harassed, any opportunity to maintain goodwill is damaged and can impact creditors’ brand long after the collection process is complete.

Given the survivors’ vulnerable state, traditional live-debtor collection methods that increase pressure on the debtor are ill-suited for deceased debt collections. Furthermore, traditional collection tactics fail to build goodwill and can destroy any opportunity to enhance or build new customer relationships with survivors. Most importantly, such tactics ignore the most effective, customer-centric approach for collecting on deceased accounts: the probate process.

While the effectiveness of the probate process in recovering deceased debt and the value of probate claims has long been recognized, the retail credit industry has mostly pursued probate recoveries on a case-by-case basis. Thus, the many benefits of financial recovery afforded by the probate process have not been fully realized nor effectively mined by the retail credit industry.

The primary reasons for this? Until recently, the industry lacked efficient processes to locate and file claims against probate estates nationwide. Using the available manual processes, creditors and their agencies have struggled to:

• Find estates due to the lack of a central database of probate estates
• Justify the expense of searching for estates and  
• Manage the complexities of probate law, which is administered through more than 3,300 courts nationwide.
  

But the landscape is changing. Several leading credit grantors have begun to couple their voluntary collection efforts with an ambitious probate recovery strategy. They are being aided in this effort by harnessing new technologies that aim to solve the probate challenge. Solutions, such as Probate Finder from Forte, LLC, offer a potential remedy to the complexities of the probate process, and can:

• Protect the creditor by focusing on the most effective legal avenue for deceased collections.
• Successfully pinpoint and isolate time-sensitive estates. 
• Comprehensively manage county-based filing regulations.
• Minimize brand risk by eliminating unnecessary contact with the survivors.
  

The result? Collections on estate accounts are generally between two-and-a-half and three times greater than collections on non-estate accounts.

With the graying of America, deceased debt will inevitably become a larger part of the total debt recovery market. Our industry has a choice: we can focus on estates and pursue the most survivor-sensitive approach to collections, or we can continue to rely solely on delinquent debt collection strategies and place our clients’ valuable brands at risk.

Ron Michalak is the vice president of marketing at DCM Services, the nation’s largest collection company focused exclusively on deceased debt. More information can be found at www.dcmservices.com.