Want Success Collecting Debt? Understand Your Audience

Have you ever watched a comedian bomb?  It’s painful to watch, right?  You squirm around in your seat counting the seconds (which seem like minutes) until their routine and the misery ends.  But here’s the thing, sometimes the reason they aren’t getting any laughs isn’t because their jokes aren’t funny. It’s because they are delivering them to the wrong audience. The right group of people could find the same comedian hilarious.

Same goes with debt collection. If you have a one-size-fits-all collection strategy you might find yourself bombing more often than not. If you want to be more successful, try to tailor your tactics and techniques to your debtor audience. Many factors need to be taken into consideration before deciding which collection practices should be used. For example, considering the age of a consumer can really make a difference. A particular collection tactic that works well for one age group may not for another.

I recently read an article by David R Glezerman in the Collector magazine that did a nice job describing why varying your approach works so well. The article’s opening line grabbed me immediately. “Understanding the unique characteristics of each consumer group can help you make stronger and more productive connections.”

Who doesn’t want that, right?

As mentioned earlier, the age (think generation) of the consumer owing the debt is a key characteristic you should consider when deciding which communication strategy will be most successful.   Over the years, we’ve written several blogs you might find useful that discuss the strengths (or weaknesses) of a particular age group such as The Lost Art of Conversation. Help is on the Way! 

Glezerman’s article presented in the ACA International publication did a nice job of compiling a lot of data in order to list the strengths and weaknesses of each generation. It explained that when you understand the characteristics of each generation you gain insight into the how and why the debt exists. And that can make a big difference on how you go about getting it paid.

Here are the highlights of the article:

Baby Boomer generation:  Their strengths include a good work ethic and strong communication skills.  Their challenges?  Poor financial literacy skills (they aren’t alone. Read why here.) and many, 59 percent of those who have kids, are still financially supporting adult children. This group still responds well to traditional communication methods like telephone calls and letters although many also use current technologies when buying and more importantly paying bills.

Average nonmortgage debt for this generation: $27,500

Generation X:  Even though this is the first generation not expected to do as well financially as their parents they are highly educated and tech savvy. But they are also cynical when it comes to creditors and exhibit a strong sense of entitlement.  Preferred communication for this generation?  Cell phones.

Average nonmortgage debt: $30,300

Millennials:  Are considered the most educated generation. They are extremely tech-savvy and well-versed in digital tools. Unfortunately, they don’t respond well to authority and want what they want now. Consequently, they spend their money as fast as they make it. Even though riddled with compliance issues their preferred communications tools are texts, emails and voicemails.

Average nonmortgage debt: $22,800

As you can see, utilizing traditional collection strategies on Gen-Xers or millennials oftentimes will not be as successful as when used on baby boomers. These tech-savvy consumers want to communicate through more up-to-date technologies.

Armed with insight into these generational differences, we, here at A. Alliance, recommend you modify your “consent to call” agreement and upgrade it to a “consent to contact” agreement. This can help mitigate compliance issues while improving your collection efforts by giving the younger generations what they want. Win-win!

Here is sample language for your “Consent to Contact” agreement

You agree, in order for us to service our account or to collect any amounts you may owe, we may contact you by telephone at any telephone number associated with your account, including wireless telephone numbers, which could result in charges to you. We may also contact you by sending text messages or e-mails, using any e-mail address you provide to us. Methods of contact may include using pre-recorded/artificial voice messages and/or use of an automatic dialing device, as applicable.

I/We have read this disclosure and agree that the Lender/Creditor may contact me/us as described above.

_____________________                     ______________

Borrower/Customer:                            Signature date:

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 13 years.

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What’s Your One Thing?

If you’re like me you’ve probably heard the buzz around the catch-phrase: What’s your one thing? Wondering how it all got started I did a little research. Turns out it’s from a self-help business book, The One Thing: The Surprisingly Simple Truth behind Extraordinary Results by Gary Keller and Jay Papasan.

When I first heard the question I knew our one thing right away.  Since we are a collection agency you might think the answer is a no-brainer: to collect money.  And yes, you’d be right, we certainly collect a lot of money. But honestly that’s not our one thing.

Is it compliance?  Another good guess. The debt collection industry is highly regulated at both state and federal levels. Compliance is extremely important to us here at A. Alliance. We spend a lot of resources and work hard to stay abreast of all regulations and what’s happening with court rulings and proceedings. But that’s not our one thing either.

I could go on and on, but will cut to the chase.  Our one thing is caring! Everyone here at A. Alliance cares about our clients, consumers, patients, communities and each other.

We are blessed with excellent, caring leadership which binds us together as a team and keeps us focused on our goals while providing a terrific work environment marked by intelligence, compassion and kindness. Our Mission Statement includes values of honesty, balance, integrity and fair play. Our leadership team lives these values every day.

By caring about what we do, who we do it for and each other together we are committed each and every day to doing our best to collect each and every dollar owed to our clients, professionally and in a timely manner.

This is a tough industry, oftentimes it is difficult working with situations that are inherently negative. By always focusing on being helpful we all maintain a positive outlook which translates to better experiences for patients and consumers as well as outcomes for our valued clients.

One of the passages in the book that spoke to me was, “Passion for something leads to disproportionate time practicing or working at it. That time spent eventually translates to skill, and when skill improves, results improve. Better results generally lead to more enjoyment, and more passion and more time is invested. It can be a virtuous cycle all the way to extraordinary results.”

Don’t get me wrong, A. Alliance knows we must never stop trying to find creative solutions, advanced technologies, or services that create value for the Company or our clients. But if extraordinary results are what you are after first and foremost you gotta care!

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded innorthern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years.

DMI (Debt Mass Index): Have You Checked Yours Lately?

Not long ago I went in to see my doctor for my annual medical checkup.  As usual, the intake nurse took my vitals including blood pressure, pulse, oxygen level, height and weight.  All good; a little high here, a little low there.  But good results nonetheless.

One thing that has thrown me the last couple years is that rather than discussing my weight, the doctor now refers more often than not to my BMI:  Body Mass Index.  BMI is not new, of course, but yet another way to asses whether or not our health is as good as it should be.

In the interests of candor, mine was a bit higher than optimal.  Yet I have come to find out that a lot goes into consideration of whether or not a particular BMI is good or bad for a particular person. If you exercise regularly, have blood pressure in the acceptable range, have cholesterol readings that are good and don’t smoke, a slightly high BMI is not much of a worry. 

At all events, it occurred to me that in the debt collection world there should probably be a corresponding measurement which our clients should use to ensure their debt waistlines don’t get out of control.

So, what is your DMI?  That is, your Debt Mass Index?

No, there is really not such a thing (at least until now!), but in this business, when debt gets out of control, belt tightening often comes too late.   So, it is important to stay on top of receivables, especially when the economy may be showing signs of critical levels of unsustainable debt.

So how tight is the belt of national household debt these days?

The Federal Reserve Bank of New York has recently released its final report for 2018, the fourth quarter, and once again debt has hit record levels. More importantly some types of debts are showing signs of reaching critical tipping points (read the press release here).

No doubt there is a need to put another notch in our debt belt.

  • For the 18th consecutive quarter, total household debt reached record levels. 
  • At the end of 2018, total household debt reached a massive $13.54 trillion.
  • That was an increase of $32 billion from the third quarter of 2018.
  • It is also $869 billion higher than the previous peak reached in the third quarter of 2008.

Some of the other highlights of the report include:

  • Warning signs about auto loan delinquencies:  Joelle Scally, Administrator of the Center for Microeconomic Data at the New York Federal Reserve said “Auto loan originations for 2018 reached an all-time high in our dataset…Despite auto debt’s increasing quality, its performance has been slowly worsening…Growing delinquencies among subprime borrowers are responsible for this deteriorating performance, and younger borrowers are struggling most acutely to afford their auto loans.”
  • Student loan debt continue to grow, now a whopping $41.46 trillion.
  • Credit card balances rose by $26 billion to $870 billion.  While the Fed notes this is in line with seasonal patterns, nonetheless this is the first time since 2008 that it has hit this peak.

Do we need to go on a ‘debt diet’?  So, it would seem. This level of debt is certainly not sustainable as the economy cools, as it eventually will. 

To some, the increasing delinquency in auto loans is the real warning sign.  Writing in the Washington Post (“Experts:  Late car loans a red flag for the economy”), Heather Long says that “Economists warn [auto loan delinquencies are] a red flag.  Despite the strong economy and low unemployment rate, many Americans are struggling to pay their bills.”  She points out that “A car loan is typically the first payment people make because a vehicle is critical to getting to work, and someone can live in a car if all else fails.  When car-loan delinquencies rise, it is a sign of significant duress among low-income and working-class Americans.”

This is not a good sign and may be a significant warning of things to come.

Given all this, how does your own debt belt feel these days?  Do you have a feel for your DMI and is it where you want it to be?

Figuratively speaking, we suggest our clients do a DMI check regularly.  That is, has your volume of receivables increased as of late?  How about dollar amount, and is your aging gradually creeping up?  Have you taken steps to turn over your past due accounts to us so that we can help keep that DMI in check? 

Stay debt fit and be sure to keep a close watch on your DMI!

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years.

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