Recently, I read an article about a student loan taken over two decades back, and a debt collection company suing for the outstanding balance not long ago. Surprisingly, the consumer didn’t know about being sued — and the judge ruled in favor of the debt collections company. By the time anyone construed what was happening — the borrower’s bank account was frozen and realized it only when the debit card linked to the account stopped working.
Rarely does anyone plan to get into debt they can’t pay. So it can be a worrying and stressful experience for most people. That’s why, when a borrower falls behind with payments, getting your Customer Experience (CX) right is critical. Throughout every aspect of the debt collections’ legal process, I have been a long-time advocate for adopting a customer-centric approach.
Research from Experian shows total consumer debt balances in the US increased 5.4% from 2020 to 2021 to $15.31 trillion, a $772 billion increase. According to the Urban Institute, roughly one in three Americans with a credit history have had a debt in collections. The number of Americans dealing with debt collection lawsuits could increase due to recission possibilities.
| Total Consumer Debt | ||||
| 20019 | 2020 | 2021 | 2020-2021 change | |
| Total debt | $14.14T | $14.53T | $15.31T | +5.4% |
Source: Experian data from Q3 of each year
In my view, the debt tsunami we are facing today can be addressed by leveraging sophisticated collections practices such as selecting the right strategy, customized messaging, and channel. This approach gives institutions a better chance to steer customers towards the right payment outcomes. It also helps them stay compliant and maintain a reputation for first-class customer service. That means utilizing digital solutions where it is appropriate to do so to craft and optimize systems, processes, and experiences.
Legal side of debt collections is no different
I think the opportunity is there to reshape how technology is used to benefit the end consumer and creditor alike. But legal debt collections isn’t the easiest environment to bring change.
In my opinion, collections attorneys tend not to put their heads above the parapet and adopt a conservative approach to operations. I get it, I really do. Theirs is an industry built on due diligence, precedent, and the letter of the law as you’d always expect.
It doesn’t mean the industry cannot be disrupted for the better.
The use of new technologies in collections echoes what is happening in the wider business economy where the emergence of new technologies, processes and automation has brought exciting change and vast consumer and business benefits.
Today legal management platforms give unprecedented visibility into an automated litigation process with built-in federal, state, and local laws and procedures. You can better manage industry compliance and regulatory requirements with a constantly evolving compliance engine and reduce risks due to human errors.
Automating every repetitive step in the legal process, streamlines communication and provides the oversight you need to make decisions based on current information. An omnichannel debt collections platform ensures that everyone gets access to the most current data on outstanding balances/collections data and optimizes legal collections operations.
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In my view, focusing on the CX of legal collections not only benefits the end customers they engage with but also makes for a more efficient and effective approach for the creditor and their legal team.
Moreover, it can also help them recoup revenue earlier in the debt collections’ legal process, saving all parties stress, time and money. When you consider legal collection firms are working with debt numbers in tens or even hundreds of thousands of dollars, extrapolated across the millions of people who are sued each year in the US alone, the possible positive impact across the board is significant.
There is an opportunity to rethink the legal debt collection model with CX at its core, and that means meeting customers where they are and maximizing the flexibility to help them pay back what they owe. Essentially, digital channels and deploying automation tools would play a critical role here.
As with other aspects of the debt collections’ legal process, the expectation of consumers on quality interactions is increasing significantly. That means at some point the fundamentals of CX will become table stakes, and those differentiating themselves through the customer experience they provide will set the standard for others.
If you want to keep the conversation going on CX in legal collections or looking at ways to achieve better liquidation performance, please contact us here.
Firstsource's Legal Debt Collections Services
A nationwide network of legal specialists, coupled with an industry-leading compliance management system using advanced technologies has enabled enterprises navigate the more complex legal collections process and achieve stronger returns across the ARM lifecycle.
