With new Regulation F rules on consumer preference, the CFPB has given even more power to consumers to determine how creditors and agencies can communicate with them. But this trend towards customer-centric collections is not new. Many of us in accounts receivable saw this coming for at least a decade. It started with the internet and was greatly accelerated by the smartphone. Now we are asking ourselves where does it all end?
The good news is there is an end in sight. The bad news? Many of you aren't going to like it.
Best practices in collections strategy and consumer communication will not be determined by what creditors want collection agencies to do, or even what agencies want to do. It will be driven by consumers. Design and communications-obsessed tech companies have radically changed what consumers consider reasonable standards for and means of communication. And we as consumers, really customers, have used technology to change the way we do everything. Why would we think it would be different with debt collection?
The CFPB Put the Customer in Charge
The future of debt collection strategy is customer-driven collections.
As if the writing on the wall was not clear enough, the Consumer Financial Protection Bureau codified this change when they published section 1006.14 of Regulation F. Section 1006.14 is mentioned 594 times in the new rule. While most may have been focused on section 14(b)(2) Telephone call frequencies; presumptions of compliance and violation, also known as the 7/7/7 rule, section 14(h) Prohibited communication media is what puts the power squarely in the customers’ hands when it comes to the way debt will be collected going forward.
In connection with the collection of any debt, a debt collector must not communicate or attempt to communicate with a person through a medium of communication if the person has requested that the debt collector not use that medium to communicate with the person.
What does this mean? It means, like it or not, creditors and agencies need to adopt a customer-centric collections practice. The customer now has the right to tell you how they want you to communicate with them, whether it is via phone, email, text, letter, or any other channel. And they can even tell you when they want to be contacted by telling you specifically when not to contact them. See section 1006.6(b)(i).
The Customer Wants Convenience and You Should Give It to Them
What do we need to do? Besides making our systems and operations compliant with the new rule, we need to change the way we think about collecting debt from CUSTOMERS. We need to figure out how we can provide as many communication channels, or the ones customers really want like email and text, so that we can contact them and they can contact us in ways they consider convenient. We need to look at our hours of operations so we can respond when customers want to communicate with us (which can be done with a live person or in some cases a digital solution). We need to give customers clear information and options, the ability to calendar time with us, frictionless online solutions, especially payment portals, and their channel of choice.
Customer-Centric Collections Strategy Can Be Good for You and the Industry
The benefits for the customer are clear: control over how and when we communicate with them. They can demand - and get - the communication they want when they want it. Are there benefits for us, too? There are and they're considerable.
Companies that can meet this new standard for customer-determined, customer-driven communications will get lower customer complaints and lawsuits. This will lead to a reduction in internal work, reduced regulatory oversight, and lower litigation costs. We will get to see dramatically higher accounts per agent ratios as customers self-serve vs having to talk with a person. This means higher gross margins.
Finally, we have the chance of changing the way debt collection is done and reducing the shame of being in debt. This means for the first time in our history, we may even be able to change the perception of debt collection itself.
The race has already begun, and the companies that can meet their customer needs, dare I say delight their customers in helping them resolve their accounts, will be the ones successful in the decades to come.
Tim Collins, Chief Customer Officer at InDebted, Le'nore Caldwell, Manager of Audit at Spring Oaks Capital, and Carrie Coker-Aivaliotis, Director of Market Planning at LexisNexis will discuss the future of consumer preference at iA Strategy & Tech, a digital briefing and networking event for creditor and agency executives in collections strategy - July 13-15. Learn more.