As tough as your industry is, there are plenty of ways to make debt collection easier. Within the past few years, the economic atmosphere of the US has made finances complex for most families. Thankfully, with technology, it is easier to keep track of finances and create strategic plans for debt recovery. As a debt collector, you’ll want to make use of all the tools and strategies available to you to keep your business sustainable. Here are a few methods you can apply to improve the debt collection process for yourself and your debtors.
Mastering Debt Collection: Your Comprehensive Guide
Ready to level up your payment collection game and boost those success rates? Let’s dive into some effective strategies together.
Assess Debtor Information and Know Your Customers
Before you make your move, arm yourself with comprehensive debtor information. Understand your customer’s background, outstanding balances, and payment history. Be equipped with any supporting documents like contracts or invoices. Understanding your debtor’s financial situation is key to crafting tailored collection strategies.
Leverage Negotiation Techniques and Find Common Ground
Approach debtors with an open mind and a willingness to find common ground. Listen actively to their circumstances and propose win-win solutions. This could mean extended payment plans or settlements, as well as other flexible solutions. Negotiation isn’t just about getting paid—it’s about preserving relationships and dodging unnecessary legal intervention.
Offer Additional Payment Options
Debt collectors can also offer ACH payment processing for more accessibility. These payment options enhance convenience for most debtors because they prefer drafting payments directly from their bank accounts. Providing ACH payments is fast, efficient, and secure. ACH payment options are also far more affordable than credit card processing, which charges expensive processing fees.
Use Payment Incentives to Sweeten the Pot
Sometimes a little motivation can work wonders. Encourage debtors to prioritize their payments by incorporating incentives for early payments. For example, you can offer an early settlement discount or waive interest fees for prompt payment. Give your debtors a reason to take action and watch those payments roll in faster than ever.
Establish Clear Communication and Keep the Lines Open
Open those lines of communication and keep it consistent. Clearly state the purpose of your contact, the outstanding debt amount, and the available payment options. Remember, transparency and respect are non-negotiable. Keep it compliant with regulations like the Fair Debt Collection Practices Act (FDCPA) and address any questions or concerns pronto to keep that positive relationship intact. Resorting to abusive or harassing tactics will push debtors away. For example, you could get fined for breaking Telephone Consumer Protection Act (TCPA) laws. Stay compliant with CFPB, TCPA, and FDCPA laws.
Implement Structured Follow-Ups – Persistence Pays Off
Consistency is key in maintaining communication with debtors. Develop a structured follow-up process that includes reminders for calls, emails, and scheduled payment reminders. Always have thorough documentation of the debt to show that it is legitimate. This will set you apart from fraudulent companies and get a more immediate response. Stay organized and persistent to increase your chances of receiving those payments without stepping on any toes.
Use Advanced Collection Tools for Recurring Payments and Reporting
You can take advantage of incredible software that will make debt collection much simpler. eDebit Direct’s rapidACH provides robust ad-hoc reporting and invoicing. You can also offer debtors to set up recurring payments through our platform to make it easier for everyone. Also, eDebit Direct’s calculation tools help you to automatically calculate and collect debts easily while offering a variety of payment options.
Monitor Payment Progress to Stay on Top of Things
Keep a close eye on payment arrangements and follow-up reminders. Maintain records of payment receipts, communication logs, and any changes to payment agreements. Make sure that you analyze payment trends to fine-tune your collection strategies and maximize your results.
Escalate When Necessary
If your diplomatic efforts hit a dead end, it might be time to be more rigid. Don’t hesitate to escalate the matter through legal channels. This could include sending demand letters, initiating legal proceedings, or enlisting the help of an attorney. Just remember to stay squeaky clean on the legal front to protect your company’s reputation. Crossing boundaries and not respecting your customer’s privacy can result in fines and lawsuits.
Use Debt Consolidation to Streamline Your Repayments
For debtors that have the most difficulty repaying you, consider offering them debt consolidation from a third-party company. They can combine multiple debts into a single, more manageable loan through methods like a personal loan, transferring balances to a low-interest credit card, or other debt consolidation programs. Doing this can simplify the repayment process for debtors and potentially lower their interest rates. The debtor will also have reduced monthly payments once this process is complete. This will also allow a larger company to buy their debt off of you, taking them off your hands.
Debt Settlement Negotiations
Work with debtors to settle their debts for less than the total amount owed. Through direct negotiation, this approach can save you time, and effort, and help you get a debt paid off sooner. You can negotiate directly with debtors to reach a mutually acceptable settlement amount. Once an agreement is reached, debtors make a lump sum payment or structured payments to satisfy the settled debt. Just let your debtors know that this may have a negative impact on their credit scores. This can also involve tax implications for forgiven debt amounts. However, debt settlement can provide significant savings on the total amount owed. For difficult-to-collect debts, you can bid farewell to those accounts.
Create Debt Management Plans (DMPs) to Offer Structured Support
You can pair up with counseling agencies for help creating a customized repayment plan. With lower interest rates, waived fees, and a structured schedule, DMPs offer relief from the financial strain for debtors. Through a DMP, individuals work with a credit counselor to create a customized repayment plan. The counselor negotiates with you to lower interest rates, waive fees, and establish a structured repayment schedule. Debtors make monthly payments to the credit counseling agency, which then distributes the funds to you. This can help create a structured approach to debt repayment for difficult debtors.
Teach The Debt Snowball or Avalanche Method to Tackle Debt Strategically
Send out helpful information to non-responsive debtors regarding the power of the debt snowball or avalanche method. The snowball method involves paying off debts starting with the smallest balance first, and then moving on to larger balances, regardless of interest rates. The avalanche method prioritizes debts with the highest interest rates first, then moves on to lower-interest debts. Both methods focus on accelerating debt repayment by targeting specific debts strategically. For debtors who are struggling to make payments and are inconsistently meeting deadlines, these strategies can help them regain momentum.
Get the best edge on collecting payments with our help. We offer alternative high-risk payment processing tailored for debt collectors who need additional payment options. Our services provide high-risk alternative merchant accounts to business owners who can’t get merchant account approval or low credit card rates. Speak to our industry experts today to learn more about eDebit Direct’s rapidACH payment processing. Schedule a free consultation now.