Best practice guide on managing your debt recovery partner(s)

Best practice guide on managing your debt recovery partner(s)

By Sian Ineson • LinkedIn

May 10, 2022

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Whether you are a growing fintech looking at outsourcing collections for the first time, or you’ve got one or more agencies onboard and are looking to refine your recovery strategy, this guide will help you get there.

Collections Performance

To ensure economical and effective collections you want to be using data to assess the health of the portfolio and your return on investment.

In general, the basic insights and associated metrics you want to be looking at are:

  1. How much is the agency able to recover as a % of total referred (dollars collected, insights from your spin down and inventory spin reports)
  2. How long does it take them to recover it (roll rates, insights from your spin down report)
  3. How effective they are in their recovery strategy (promise to pay rate, promise kept rate, digital engagement metrics such as payments received through SMS and email campaigns, % and number of links clicked and conversion to payment rate)
  4. How much it costs you to resolve outstanding accounts, on average (commissions paid/total referred) Also remember that as a general rule of thumb, the longer a debt is outstanding the harder it is to recover, so you may choose to trial referring accounts earlier and assessing the data to see if the improved recovery rates improve net return.

Customer Experience

A focus on the CX of your recovery partner is essential to ensure customers are retained wherever possible and to protect the reputation of your brand by association. In today’s marketplace the expectation is that collections communications are friendly, genuinely helpful and make repayments super easy for your customers.

Three ways to assess this include:

  • Asking for a demonstration of the customer journey from the consumers perspective
  • Looking for an agency that measures CSAT (customer satisfaction scores) and/or NPS scores, which you can use as a guide to identify any negative trends early on and/or benchmark between agencies if you have a panel. For reference, our average CSAT is 4.55/5
  • Measuring the customer retention rate of rehabilitated accounts (those that have paid in full) and assessing how the agency performs against the company’s own historical data on accounts the same age and other agencies if you use multiple

Your ideal recovery partner has a customer experience that is on par with your own. Most agencies offer either a lower-cost digital only offering, traditional phone-based collections or a blended model. The model you select will depend on the nature and age of the accounts and your internal collections team capabilities.

Data Exchange

Consider how you will send data to and from the agency and the frequency, trying to automate this as much as possible depending on volumes/ROI. The most common options are:

  • Secure File Transfer Protocol (SFTP)
  • Via the agency’s online client portal
  • Via the agency’s API if they have one

The format needs to be accurate, secure and stable with any modifications going through a change management process than engages both parties.

Quality and Compliance

In a time of real time customer reviews, social media and an active regulatory landscape, your recoveries partner should have a demonstrated history of meeting community expectations (or at least the absence of the opposite), be certified to quality and information security standards and help you comply with regulatory obligations such as those associated with CCR, complaints disclosure and regulatory notices.

A solid partner will also help navigate regulatory changes, such as the mandatory changes to Hardship information reporting (CCR) for credit providers which comes into effect in July 2022.

The core processes we recommend are reviewed during onboarding and ideally annually thereafter are:

  • Change and risk management policies
  • Quality management, as it relates to the recovery process (notably call and file note quality)
  • Information security polices (ISO27001 certification being the gold standard)
  • Disaster Recovery and Business Continuity Plan (DRBCP)
  • Insurance coverage (public liability, cyber security)
  • Complaints handling
  • Mental Health First Aid Australia certified (or equivalent mental health standard)

If your volumes are on the medium to lower end, there may not be ROI in performing your own audits so you might instead ask for a quarterly compliance statement that covers:

  • Confirmation that insurances and certifications have been maintained
  • Internal audit summary specific to your portfolio including any findings and remediation
  • Complaints summary (if any)

Summary

Managed well, the strategic knowledge and technology of a like minded recovery partner helps your company collect debts economically, whilst reducing risk and increasing customer retention. Putting some structure around your engagement is an easy way to make sure you’re getting the most out of it.

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