3 Critical Factors in Credit Card Collections

As with most debt collection, credit card collections has been under increased scrutiny by the Consumer Financial Protection Bureau as of late. High interest rates, fees, and penalties have led to this scrutiny. As the CFPB’s focus continues to be on debt collection, it is imperative that debt collectors have a well-drawn out plan that is encompassing of both the compliance requirements along with the performance goals that must be attained during the collection of defaulted credit card accounts. This article will focus on tips to achieve those performance goals.

The collection of delinquent credit card debt isn’t extremely unique in comparison to other types of debt such as bank accounts, auto deficiency, or medical debts. Dependent upon the age of the credit card and how long it was in use, the odds of whether or not the consumer remembers or still has possession of the tangible items does come into play as they debate whether or not to pay. There are three critical factors that come into play when attempting to achieve performance goals in credit card collections: personnel, strategy, and execution.

Personel
When it comes to personnel, there are certain collector characteristics that assist in determining the probability of their success. A major characteristic is being detail-oriented. When working credit card accounts there are many variables that make each account situation unique. It is imperative the collector is well versed on all aspects of the credit card collection process in order to provide optimal service to both the consumer and the bank client. The other critical component in personnel is an old-fashioned strong work effort. Credit card collections consist of both manual work effort and dialer work. The last thing that can be permitted is laziness or mistakes that could result in harm to the consumer.

Strategy
The next key to success in credit card collections is the strategy. A common trend in debt collection over the years has been to employ a “churn and burn” strategy that consists heavily of auto dialing with minimal manual effort. With consumer contact rates at the lowest point we have ever seen, there should be a strategic blend of both auto dialing and manual work effort in order to optimize portfolio performance. When it comes to the collection of credit card accounts, trying to employ a “churn and burn” only strategy will likely lead you to an end result that is not favorable from a performance standpoint in comparison to the competition.

When it comes to effective strategies for working credit card accounts; the words meticulous, disciplined, and effective come to mind. A strategy that is meticulous is one that consists of being well thought out with an extremely detailed plan that takes into account all the variables of the collection of the account from cradle to grave. The disciplined part comes in by ensuring that all the thought, effort, and energy put into the meticulous planning phase are carried through. Strategies also take time to develop so it’s important to remain disciplined enough to give the strategy time to mature. Lastly and most important is to ensure the strategy is effective by producing the desired results as set forth by the goals.

Execution
The reality is we are always judged by our results. Having the right personnel and strategy is simply not enough without the proper execution. It is important that there is an appropriate blend of the right people with the right strategy in order to garner the right results. Execution is just as much about expectations as it is accountability. Success dictates you must have both. Another element in execution is the tracking of key performance indicators in order to tell if you are on pace to your desired results. Remember the old adage, “you can’t manage what you can’t measure.” So placing an emphasis on providing clear and consistent expectations, but more importantly holding those accountable to the expectations will help yield the desired results.

Ultimately, as many are already aware, credit card collections can be very attractive and lucrative for debt collectors and their respective collection agencies. Having an understanding that credit card debt is unique and knowing the intricacies of the entire process from appropriate personnel, an effective strategy, and proper execution will help ensure success.

Nick Jarman is COO at Delta Outsource Group, Inc. He also serves on the Board of Directors for ACA International.