Like most things, debt comes in many different forms, shapes, and sizes. For example, a college degree is often an investment with value that accrues over time, since it sets the student borrower on a lifelong course toward better jobs and better income. Then there are other debts – like auto loans – that may involve a product that loses value over time. To best help consumers and relate to their unique situation, organizations are wise to include similar variation in their consumer education strategy.

This is the second in a three-part blog series on the value of educating credit customers. In this series, we provide insights on customizing your approach to consumer education, making adjustments based on the type of loan, and the importance of a long-term commitment to consumer education.

 


…collections professionals should employ customer engagement strategies that suit different borrowing circumstances.


 

Consider a Proactive Approach

Different types of loans have different sets of conditions. So, it stands to reason that collections professionals should employ customer engagement strategies that suit different borrowing circumstances. Again, let’s use auto loans as the example. Here, collectors should place special emphasis on the consequences of skipping payments or counsel on the consumer’s responsibility for any difference between the loan balance and the trade-in value of the vehicle should the vehicle be repossessed.

With many loans, like auto, ARM operations can even engage consumers early and use a proactive strategy for enhanced guidance like finding the best financing terms and options. After all, research shows that people spend far less time shopping and negotiating for financing than for the vehicle itself.[i] Of course, this increased focus on proactive counseling shouldn’t come at the expense of education efforts that might follow later on — especially if customers start falling behind on payments.

Simplify and Modify 

Healthcare is another area of growing concern. Some 43 million Americans have overdue medical debt on their credit reports.[ii] Part of the problem is the tremendous complexity around the procedures and varied players involved in treatment. When speaking with patients about their options, rights, and responsibilities, a tailored approach adds value.

Since patients are receiving multiple bills from various sources — at the same time their energies are already taxed by their efforts to recuperate — the collections strategy could focus on simplification and increased consumer education. Industry research, in fact, shows patients make better health decisions when they receive one-to-one counseling and messages tailored to their personal needs and background.


When speaking with patients about their options, rights, and responsibilities, a tailored approach adds value.


Simply put, all types of debt recovery involve long-term engagement and a delicate balance of customer service, regulatory compliance, and efficacy in generating cash flow. But, a consultative approach to collections can deliver the best results through collaboration and customized problem-solving.

Once you’ve considered customizing your approach and adapting to varied loan types, make a long-term commitment to consumer education. For complex or long-term forms of debt, counseling customers about responsible borrowing and partnering with them to rehabilitate their loans through difficult situations can improve customer relationships and clear the way for increased contact success. In the next blog post, we’ll address the importance of a long-term commitment to consumer education.

[i] http://www.consumerfinance.gov/data-research/research-reports/consumer-voices-automobile-financing/

[ii] http://www.consumerfinance.gov/about-us/newsroom/cfpb-spotlights-concerns-with-medical-debt-collection-and-reporting/