Nick Cherry looks
at how to get the best returns from subprime debt collection
activities
A dearth of funding in the subprime market has meant that
maximising collections performance has become of paramount
importance to the remaining players in the industry.
For many, the cessation of new business has seen
the level of scrutiny on collections performance increase to
previously unparalleled levels, and this is set to continue.
Several long-established and successful subprime motor lenders have
been reduced to little more than collections operations, or have
been housed within servicing operations to cut costs until the
lending climate improves. Some of these brands are too strong, and
the profit opportunity too significant, for the hiatus to last much
beyond 2010.
Yet, while collections managers may not always
welcome this increased scrutiny, this should be seen in a positive
light. For too long, the area of collections has been seen as the
poor relation in many businesses and as a field where innovation
and investment have always been behind sales in the pecking
order.
Now, the topic of collections is very much at the
front of the queue and performance can and does determine the
future success and profitability of the overall business. Leaving
no stone unturned in our efforts to recover cash has become of
paramount importance – and this should include several basic
concepts.
Call centre and payment
technologies
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By GlobalDataExcellent contact centre technologies are
of paramount importance to any collections operation. Ideally this
should comprise of a predictive dialler, best time to call
software, SMS capability, interactive voice technology, and payment
technologies providing the customer with varying forms of
interaction and opportunities to pay.
If possible this should include a web-based payment
gateway and automated payment hotline, to help maximise efficiency,
and to ensure that your well-trained negotiators spend their time
talking to more problematic customers and not those which will
self-cure.
Accurate customer
segmentation
There is now a wealth of data available
from credit reference agencies (CRAs) and other companies which can
significantly enhance our collections methodologies, particularly
when combined with common-sense data from our own databases.
Monitoring and actively pursuing customers who
display changes in behaviours, such as moving off direct debit, or
changing their address, is important. These can be key triggers for
delinquency since they are often a symptom of major life events
taking place in the background.
Sticking close to these customers and pro-actively
counselling them on the importance of maintaining their repayments
on their car ahead of other unsecured debts can ensure efficiency
savings further through the process.
Data from CRAs can also help segment the lazy
payers from those who simply cannot pay and for whom a different
treatment may be required. By accelerating the process, time and
money can be saved.
Reconnection solutions
Too often this aspect of subprime motor
finance is overlooked. By their very nature, subprime debtors can
often exhibit more unpredictable payment patterns and this makes
the importance of having a field reconnection facility absolutely
paramount. Field services fulfil many purposes such as trace, trace
validation and cash collection but, most importantly and simply,
can help put you back in instant touch with your debtors.
The scarcity of accurate debt advice available to
consumers makes it inevitable that some will simply try to dodge
all contact in the hope that things will get better quickly and
they can thereby avoid the repossession of the car. For many,
simply being reconnected with a lender’s call centre via a field
agent’s mobile while on their doorstep can provide a much-needed
opportunity for conversation and last-minute payment arrangements.
For a lender this service is invaluable where normal contact centre
methods have failed.
Effective recovery
options
Inevitably, some customers will not pay,
and for those customers, effective asset recovery options are
fundamental to the success of any subprime collections operation. A
full panel of cost-effective agents should be retained, capable of
servicing cases of differing difficulty across the UK.
The ability to respond quickly and efficiently and
to provide a professional service is essential in subprime, as is
the ability to escalate cases rapidly for return of goods work
where required. With the proliferation of consumer websites, word
soon gets around if a particular lender is seen as a soft touch,
and it is important to make every commercial effort to get your car
back wherever possible.
While by no means an exhaustive guide to subprime
collections, these four basic pillars will form an effective
foundation for your operation. When combined with a well-managed,
well-motivated and highly-trained collections team, these basic
concepts should ensure that success in subprime motor collections
is achievable.
Final thought
My last point is perhaps the most
important reason why you should succeed in subprime motor
collections in this current climate – for the first time in 15
years, there genuinely is no alternative for customers if they have
their car repossessed.
The halcyon growth days of subprime, where credit
was readily available, even to those who had just suffered
repossession, are gone. It is our job in collections to ensure that
those customers, who need a car for their livelihood, know that it
needs to be paid for on time and in full. By doing our job, being
transparent, treating the customer fairly and highlighting this
fact, our collections results should improve accordingly.
The author is director and general
manager, Red2Black Collections Ltd