Credit & Collections Best Practices

Proven Collections Leading Practices to Adopt

  • Best Practices (#126) / Collections / Collections Account Maintenance

    Best Practice (Good)
    Enforce the enactment of a follow-up process for account managers, which dictates the follow-up frequency based on the customer's outstanding balance and number of days outstanding. They will be required to follow up on all accounts based on these procedures to find opportunities for information collections/validation and potential debt collection.
    Typical Practice (Bad)
    Allow account managers to follow up on their accounts at their own leisure.
    Benefits: Account managers will have a standard process in relation to follow-up calls and should be able to keep more correct/up to date information on customer accounts.
  • Best Practices (#127) / Collections / Collections Account Maintenance

    Best Practice (Good)
    Ensure that skip tracers act as if they understand the customer's point of view (empathy) and suggest actions to remediate the debt owed, such as setting up a payment plan or getting credit counseling.
    Typical Practice (Bad)
    Once contact is made with a customer, strong arm them into paying under fear that there will be extreme consequences if they do not pay. The customer will, often times, hang up so be prepared to find them again.
    Benefits: Customers will stop avoiding the Collections Department and will work toward paying off their debt through payments plans or one lump sum payment.
  • Best Practices (#128) / Collections / Collections Compliance

    Best Practice (Good)
    Assign and train a single employee on collections compliance activities (typically, the collections compliance officer) and make them solely responsible for all compliance training and audit activities. Allow them to implement compliance measures in the firm’s collections operations.
    Typical Practice (Bad)
    Perform periodic compliance training and rely on individual employees to adhere to the guidelines and regulations outlined in the compliance training programs.
    Benefits: Drastically reduces instances of non-compliance and ensures that all collections processes have compliance activities built into them.
  • Best Practices (#129) / Collections / Collections Operations

    Best Practice (Good)
    Segment call lists based on account risk (higher account balance = higher risk) and configure automatic dialers accordingly. Target these high-risk customers more frequently and through different contact methods (phone, email, physical mail).
    Typical Practice (Bad)
    Segment call lists based on the number of days that the account has been past due (30, 60, 90, 120, 150 days, typically). Configure all automatic dialers in this manner.
    Benefits: Improves the likelihood of collecting on high-risk accounts and eliminates wasted time calling low-risk (lower account balance), low-value accounts repeatedly.
  • Best Practices (#130) / Collections / Debt Sales

    Best Practice (Good)
    Create standardized contract language for all debt sales and purchases (i.e., boilerplate) as appropriate. Ensure that all debt buyers use the boilerplate language for all debt transactions.
    Typical Practice (Bad)
    Configure debt buying and selling contracts individually, and require buyers to have the contract language approved by a manager or a legal subject matter expert (SME).
    Benefits: Ensures that all debt buyers are armed with boilerplate contract language, reducing cycle time of debt buying agreements. Also frees up managers and legal SMEs for more valuable activities.
  • Best Practices (#131) / Collections / Deferments & Forbearance

    Best Practice (Good)
    Create a summary for all forbearances for customers to explain the rationale and reasoning for forbearance approval.
    Typical Practice (Bad)
    Use your own judgement in deciding why each customer was approved or denied forbearance.
    Benefits: Documented rationales combined with regular case reviews will improve data quality and allow the team to see if forbearance remains the best approach for future cases.

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