Loan Modification and Delinquency Management Approaches that Build Loyalty

Financial services companies currently face the greatest increase in loan modification, and highest card and charge-off rates, in more than 20 years. With the recent announcement on March 4 of the Home Affordability and Stability Plan, many servicers are facing increased call volume as borrowers are seeking to understand requirements they need to meet to qualify for a loan modification. Couple this with the fact that these same businesses are operating with decreased resources, and you have the “perfect storm” that has left many companies in dire situations.

Loan modification and delinquency management can be sticky subjects for customer care operations. Ordinarily focused on creating positive customer experiences and retaining those customers, contact centers often struggle to find the right approach for asking delinquent customers to pay up. Traditionally, these companies have outsourced these functions to a service provider focused solely on collecting payments, which often damages the customer experience and relationship that the parent company has worked so hard to build and manage. In these trying times, many people who have never faced a difficult financial situation now find themselves in unfamiliar territory. Companies will benefit from getting creative to collect more — earlier in the process — from the contact center in order to maintain the all-important positive customer experience.

Here are four suggestions for improving your recovery efforts:

• Make softer calls. When making efforts to recover past due payments, it’s important to remember you are a customer care center, not a collections agency. The connotation of debt collector is more negative than that of a customer care representative; use that to your advantage. It’s imperative that you stay focused on improving customer relationships. A well-trained customer care representative should guide the discussion, keeping both the customer’s unique situation and the company’s interest in mind.

• Show empathy for your customers. Many of your customers are struggling with large debts that may seem insurmountable. Many feel hopeless and simply opt to not pay any part of their debt. The customer care operation’s job is to change the customer mindset on repaying these debts, recovering as much as possible in the process. By creating a manageable payment plan, rather than demanding payment in full, you are seen as a partner focused on helping the customer work through a tough situation. Also, by guiding the customer to a more manageable plan, the company will recover more than by simply demanding the full sum, which a customer will be unable to pay.

• Use channels preferred by your customers. According to Convergys research, 44 percent of bank customers have been online to do business in the past six months and 38 percent of card customers have been transacting online. Approximately 30 percent in both channels have used an automated system. Why not leverage a low-cost channel like web or e-mail for recovering past due payments where these contact avenues are legally permissible? By matching the experiences customers want with these cost-effective channels, you will be able to reduce delinquencies, using fewer company resources.

• Reach out earlier. Rather than waiting until an account is 30 days past due, engage with the customer as early as three days after a missed payment or even before customers are delinquent when it is observed that they may be in financial distress. Understand your customers’ needs and behaviors with the use of analytics and real-time dynamic decisioning, and then translate those into successful transactions, either through live agent or automated channels that motivate your customer to pay more, sooner.

Successful delinquency management and recovery processes will not only increase your company’s cash flow, reduce foreclosure rates and improve payment on customer accounts, but also improve relationships with your customers. Sometimes it’s helpful to remember that we’re all in the same boat. Your customer care agents can most likely relate to their customers’ situations; your customers most likely want to pay on their past due accounts, they just need some help to get started. It’s up to the company to change customer mindsets about the delinquency management process and make the most of a bad situation. Turn these uncomfortable conversations into mutually rewarding experiences for the business and the customer.

What’s the payoff? At one financial services firm, propensity modeling reduced costs 33 percent and grew collections 17 percent in 30 days, moving the bottom 30 percent of accounts into automated care. Another leading company deployed best practices that prioritized accounts using modeling and strategies that increased collections 23 percent and gross collections per agent by 12 percent in four months.
 
But the end game isn’t just getting customers to “show you the money.” Of equal importance: By tailoring treatment to each account, companies can increase payments on customer accounts and loan modification stickiness and elevate customer satisfaction — improving market position for the inevitable recovery to come. Especially during tough economic times, companies need to view collections as a part of their relationship management strategy.