Working with a collection contact center allows making efficient outgoing calls to customers or answering incoming calls from customers or a combined use of both methods.
We will review the work processes in each of the types of calls and list the advantages and disadvantages of using different types of contact strategies.
Inbound calls
Working with inbound calls means setting a one-way channel with the customers. Various messages are sent to customers whose purpose is to trigger the customer and make him call the hotline. If the client does not respond to the trigger, he is moved to the next stage, where each stage constitutes an escalation (increasing effort) towards the customer. To increase the differentiation between the letters and the stages, you can change the colour of the letter accordingly to emphasize the change of situation.
Colors or numbers?
First letter – green: request for debt settlement
Second letter – orange: warning before disconnection
Third letter – red: warning before taking legal proceedings
That said, it is strongly recommended to differentiate between business customers (B2B) and private consumers (B2C). When dealing with business, the rules are much looser since you are acting in a business environment, for private consumers we need to take into consideration existing regulations that aim at protecting customers.
Depending on the country you are in, some regulations come to protect customers against aggressive collection techniques. As a collection manager, these rules of engagement must be known and need to define your practice. In any case, there is no proof that a threatening letter returns better results than a well-designed request for payment letters that encourages the customer to make contact and reach an arrangement.
Here are the UK regulations that prevent the use of threatening collection letters:
1. Consumer Credit Act 1974 (CCA):
- Section 170(1): Prohibits creditors from using “oppressive” or “unfair” collection practices. This includes making threats of violence, using deceptive tactics, or harassing debtors.
- Section 160: Requires creditors to provide debtors with a “default notice” before taking any legal action. The notice must clearly state the amount owed, the consequences of non-payment, and the debtor’s right to seek advice.
3. Financial Conduct Authority (FCA) Consumer Credit Sourcebook (CONC):
- Applies to FCA-authorized lenders and debt-collection firms.
- Sets out specific rules on debt collection practices, including:
- Prohibiting the use of misleading or deceptive statements
- Requiring collectors to identify themselves clearly
- Restricting the times and frequency of contact with debtors
Specific Restrictions on Threatening Language:
- Collectors cannot threaten legal action that they are not entitled to take.
- They cannot threaten to seize property that is not legally subject to seizure.
- They cannot threaten to contact the debtor’s employer or family members if the debt is not repaid.
- They cannot use language that is abusive, insulting, or threatening.
Additional Protections:
- Equality Act 2010: Protects debtors from discrimination based on protected characteristics, such as age, disability, race, or religion.
- Protection from Harassment Act 1997: Can be used to take action against creditors who engage in harassment or stalking.
In the United States, several regulations prevent the use of threatening collection letters:
1. Fair Debt Collection Practices Act (FDCPA):
- The primary federal law governing debt collection.
- Prohibits a wide range of deceptive and unfair practices, including:
- Making false or misleading statements: This includes misrepresenting the amount owed, the consequences of non-payment, or the collector’s authority.
- Using threats of violence or harm: This encompasses any explicit or implied threats of physical harm, property damage, or arrest.
- Harassing or intimidating debtors: This includes repeated or unwanted calls, using obscene or profane language, or contacting the debtor’s employer or family without permission.
- Falsely claiming to be a lawyer or government official.
2. Federal Trade Commission (FTC) Debt Collection Rules:
- Provide further details and interpretations of the FDCPA’s provisions.
- Specifically, mention examples of prohibited language like “We will come to your house and take your stuff” or “If you don’t pay, we’ll arrest you.”
3. State Laws:
- Many states have their own debt collection laws that offer additional protections for consumers.
- These laws may cover areas not addressed by the FDCPA, such as limitations on communication frequency or times of day.
Calls initiating methods
There are different methods to contact a customer and motivate him to return a call to the organization’s call center:
Letters and emails: The most common method is of course email. You can influence the customer’s response by sending several letters in a row, in different colours. You can also send a letter with a voucher if indeed our main goal is the payment of the debt by the customer. A letter without a voucher will be appropriate if the main purpose is to encourage the customer to talk (for example, to get a new payment method from him).
The parallel of a voucher for emails will be a link to make a payment. If your website has payment facilities, you can offer the customer to set up a repayment plan online, or to update her payment method online.
Automatic dialer (Outbound IVR): Calls can be made using automatic dialers that direct the customer to an incoming call center. For example: “Click 1 to settle your debt, 2 to provide a new payment method, 3 to inquire about the service, etc…”.
Text messages (SMS): same method as in request letters, only directly to the customer’s cell phone.
E-mail: same method, only directly to the customer’s e-mail.
Screen messages: In cable and satellite TV companies, a message appears on the screen and encourages the customer to pay or change his payment method.
Advantages:
- The method is suitable for large amounts of debtor customers.
- It is much cheaper to send letters and answer incoming calls than to make calls (ratio from 1 to 4 to 1 to 6).
- The process can be automated and carried out without human contact. something that saves mistakes and increases efficiency.
- Repeated letters are suitable for “reluctant” customers who need some “stimulation” before they decide to pay.
- The method provides evidence (letters sent) and we can use it against the client if and when we reach legal proceedings against him;
- Sometimes there is no economic viability in issuing calls.
Disadvantages:
- The method does not identify customer characteristics and treats all customers uniformly (although different procedures can be defined for different types of customers);
- The effectiveness of the method is also its biggest drawback: it indiscriminately harms customers. For example: a customer is abroad for an extended stay and loses his credit card. Cancelling the card will result in the cancellation of services when the customer is completely unaware that he has received demand letters. In other words, an “overly efficient” method may cause a systematic loss of customers.
- If the customer’s address is not updated, he will not receive notification letters. If he continues to consume a service and his mobile phone number is valid in the system, he will not understand why he is being disconnected.
Outbound calls
This method is much more expensive. Therefore, we must perform the correct economic viability calculation here. The required comparison is not between the cost of the call and the amount of the debt, but between the cost of the outgoing call and the cost of acquiring the customer (if we have to recruit another customer in place of the one that was abandoned) or the loss (calculation) of the future revenue stream of the customer who disconnected or who will be disconnected following the automated collection process.
The most important issue in collecting through outgoing calls is managing the collection strategy. Outbound calls are a valuable resource and it’s a shame to waste it on the wrong customers. But who do we call first – the customer with the highest debt? The oldest debt holder? For the customer with the highest level of risk? To the customer with the highest customer lifetime value (CLTV)? We expanded on the subject in the collection strategy section.
Most of all, outgoing calls make it possible to provide adequate customer care for all cases in which the customer is not “at fault” for entering into debt, such as in cases of card cancellation due to loss or theft, non-receipt of a standing order due to an error by the bank or the order promotion department of the organization, a technical error in receiving details of the customer’s payment method, etc. In all these cases, a simple, short, and relatively cheap outgoing call with the customer can solves most problems.
Combination of outgoing and incoming calls
In our opinion, this is the king’s way, which allows us to treat all customers while adjusting the method that provides the maximum cost/benefit ratio according to the circumstances, each case individually.
This requires the management of two teams, as it is very difficult to efficiently make outgoing calls at the call center that is supposed to receive calls. But justifies the trouble and investment when it comes to large numbers of debtor customers. In such a case, an intelligent combination of the two methods usually provides the best and most adequate results both for the organization and the customers.
In this method, the main administrative attention will be in regulating between incoming calls and outgoing calls while allocating resources optimally. It is prohibited to allow a situation of unreasonable waiting times for incoming calls when there are available employees busy with outgoing calls (since inbound calls are cheaper to the organization than outbound calls). However, the consideration of the economic value of calls is important. The average debt of incoming calls may be, for example, about $100 on average, while the debt handled by outgoing calls is about $1,000. Therefore, it might be preferable for the organization to answer with longer waiting times to customers with small debts to allow increased collection on outgoing calls. Of course, the collection manager should keep in mind to treat his customers fairly in this type of choice.
Since a collection center does not operate alone in an isolated environment cut off from the other centers, one must always consider the effect of waiting times at the collection’s incoming call center on other centers in the organization. Once the waiting times at the collection point are too long, the customers will naturally flow to the other centers of the organization and harm the level of service of the entire organization. Therefore, all the above decisions must be taken in full coordination between the customer service department and the finance department, while coordinating expectations, checking feasibility, and maintaining the highest possible level of service.
Reducing the contact center overhead cost with self-service options
In the digital era, there is a new incentive for organizations to reduce their collection costs by providing self-service options to their customers. It is not only in the organization’s interest, it often provides the customer with a quick solution to achieve her payment needs. There is no hassle in waiting for the next available agent and it can be often easier for the customer to use ad-hoc payment methods like Google Pay, Apple Pay or PayPal to make a payment without having to read a credit card long number to an agent that can’t understand what you are saying over the phone while driving and eating your breakfast.
It is recommended to monitor over time the distribution over time of collections contact with customers. How many are inbound calls vs online payments? While the target is to reduce human interactions to a minimum. Agents should be available to answer special customer needs, like for elderly people or customers with disabilities or under stress. The main flow of payments should be automated.
NEXT: Various issues in the management of collection centers