There are many financial products agencies collect on and each one of them requires an acquired niche. One of the most unique products in the collection industry is public and municipal utilities. Both public and municipal utilities offer a range of essentials including electric, natural gas, water, environment waste, telecommunications and cable TV/internet. If your agency is able to get into this sector it can be very rewarding and could lead to more clients within the same arena.
One of the biggest challenges for an agency is gaining the opportunity to represent one of these companies. Most utility companies have outsourced to agencies they are comfortable with and don’t want to risk their public image on an unfamiliar servicer, especially if the agency has limited to no experience working their line of business. Your reputation in the ARM industry could be the biggest selling point to one of the many utility companies interested in giving you a chance. Offering a champion challenger competition may help your agency get a foot in the door. Once you’ve been given the opportunity you must make the most of it with compliant and productive recoveries.
In order to be compliant you must do more than follow state and federal rules and regulations. You must also understand and meet your clients’ requirements in order to successfully earn their business. In order to understand client requirements it’s important to review their agency manual or, at a minimum, coordinate a meeting to discuss expectations. Next you must communicate their expectations to your team and properly train all departments including accounting, client support, compliance and collections. Timely remits, accurate balance reconciliations, proper treatment of special handling accounts and a professional collection approach are essential to customer satisfaction. In some instances, creditors lack knowledge of regulation in debt collection so they rely on us as the experts to guide them through the process.
Understanding the product you are collecting can be essential to your agency’s success. Below I have listed a few questions I ask when onboarding a utility client:
1. What are their disconnect/reconnect policies?
2. Are late fees assessed, and if so, when and how much?
3. Is there a fee charged when disconnect or reconnect occurs?
4. Was a security deposit collected?
5. Would repayment result in reconnection?
During the collection process there are a few common situations your agents should consider: the customer you are calling may have a current account at their new address, the customer you are calling may reside with a current customer or the spouse of a current customer may owe from a previous address.
The average size balance on utility debt is relatively small so it’s critical to implement a strategy that yields results while mitigating expenses. For example: if the client does not require an initial dunning letter at placement you may want to letter upon contact as the law requires. If the client expects letters upon placement, I suggest skip tracing to ensure you have the most current consumer address prior to sending the letter.
Now let’s talk about scoring for the highest propensity to pay accounts. Whether you use a credit score or recovery score, the numerical value assigned to each account allows you to segment the business in tiers. The accounts with a higher propensity to pay should receive a comprehensive dialing strategy while the accounts with a lower propensity to pay receive a lighter approach. A few other metrics to use when segmenting the business is payment history, last payment date, recent charge-off, balance size and how long the consumer had their account. Another strategy could include credit reporting. While most utility companies don’t report positive or negative data to consumer reporting agencies, some of them encourage the outsourced agency to report the unpaid debt.
Analyzing key performance indicators allows you to determine whether your approach is providing the results needed to outperform your competitors. Contacts, payments and dollars collected are a few of the most important metrics. You can divide total contacts by total payments taken to give you a closing percentage and divide total fee by total payments taken to provide an average size payment. In order to calculate goals that challenge your competitors’ performance, take the net amount placed with your agency and multiply it by the liquidation rate your competition has or projects to have. This will give you the dollar amount needed to collect in order to take over first place.
Sam Eidson is the Director of Compliance for Delta Outsource Group, Inc. He also serves on the Board of Directors for the Missouri Collectors Association.