In 1958, Bank of America successfully launched the first recognizable credit card that could be accepted at multiple merchants called BankAmericard. Over the next decade, credit cards were mass-produced and mass mailed unsolicited to bank customers who were thought to be good credit risks. In 1970, these mass mailings were known as “drops” in banking terminology and were outlawed the same year due to the financial chaos that ensued. However, by the time this practice was banned there were over 100 million credit cards out in the country. This series of events could be seen as one of the founding reasons our economy became so reliant on consumer credit.
While the credit card market faced regulation to curb their business practices over 35 years ago, those within the industry could have never envisioned the intense scrutiny and regulation the credit card market would face during the last five years. Since the Great Recession in the late 2000s and the subsequent enactment of Dodd-Frank in 2010, the issuing of credit cards and the handling of defaulted credit cards was forever changed. Creditors must ensure they are taking the necessary and appropriate measures to provide credit only to those who are deemed creditworthy, while monitoring their cardholders on a regular basis to try and limit losses when the cardholder charges amounts they are unable to repay. There will always be those who are unable to repay, so it is important creditors partner with the right collection agency to assist them in recovering their delinquent accounts. Here we will discuss three things creditors should look for when partnering with a debt collection agency.
Experience with References
When it comes to working different types of portfolios, most collection agencies have an area of specialization. Areas of specialty generally include one or maybe a couple; financial services, medical, utilities, or government are the main areas. Because all debt is not created equal, it is important for a debt collection agency to have appropriate experience working credit card collections. As it relates to credit card collections, it is important for the debt collector to uniquely approach each consumer contact to develop an understanding for their reason for delinquency and current hardship. In addition, debt collectors must understand the breakdown of all charges such as principal, interest, and other charges so they can speak knowledgeably about the balance owed. During the decision making process ask for references about handling credit card debt. Those who are able to provide references that attest to their successful partnership is where the rubber meets the road.
Evidence of Compliance
The current landscape requires collection agencies confirm compliance by providing evidence. Agencies can attest their debt collectors should be remaining professional and respectful on collection calls, but creditors should be listening to call recordings to confirm. Collection agencies should have the appropriate certifications to attest to their data security, but they should also be willing, prepared, and able to show you examples of the measures taken to protect client data. When it comes to systemic controls to assist with the numerous federal and state laws that must be complied with, screenshots are a good measure but seeing the systemic control in action should be mandatory. Evidence of compliance can be related back to inspecting what you expect so collection agencies are ultimately doing what they say they are doing.
The Client Experience
Performance results speak for themselves when there are measurable metrics involved and it can be determined who is or isn’t performing. Once you get past the performance, right up there is the overall experience the creditor is getting from the collection agency. Communication is the most vital aspect of all relationships and communication from the agency to the creditor should be taken as such. Accuracy is another example of providing a great client experience; inaccurate information is detrimental and costly and it can’t be tolerated. Another important element of a relationship is the personal interaction. Creditors should feel comfortable picking up the phone and contacting any member of the agency team at any time for any reason. In addition, an organization is only as good as how its brands are perceived. Does the collection agency embody the creditors brand and are they comfortable knowing the collection agency will do everything they can to protect it?
At the end of the day, creditors need collection agencies with whom they can build lasting partnerships. Partnerships work both ways and in today’s regulatory, legislative, and litigious collection industry landscape, the right partnerships are more important than ever before.
Nick Jarman is COO at Delta Outsource Group, Inc. He also serves on the Board of Directors for ACA International.