Debt collection: instilling a customer-centric mindset

In our latest coffee break blog, Echo’s Lloyd Birkhead looks at UK collections practices, consumer views and attitudes and the evolving role of collections teams.

Consumer debt is a pressing issue, and one that isn’t going away. Research we conducted earlier this year highlighted that more than one in three consumers (35%) have fallen into arrears due to their outgoings rising above their income; a 7% increases since we carried out the same research in 2016.

And, as more consumers fall into arrears, collections procedures have become an increasingly frequent part of the customer journey; with 70% of consumers having experienced debt collection procedures, again a rise of 7% vs. 2016.

Of course, businesses will place a focus on the immediate concern of recovering arrears, but what about the ongoing customer relationship? A mind-set that simply focuses in on monies owed could actually cause more long term damage than just the arrears in question.

Worryingly 51% of consumers told us they felt more negative about their service provider following poorly handled debt collection procedures – an increase of 12% since 2016! So, how can businesses ensure customer service remains front of mind in all customer interactions, including the management of arrears?

1. Breaking the stigma

Encouraging customers to open up about their circumstances should be a key goal of any collections activity, to support a balanced resolution that doesn’t stretch a customer beyond their means. Worrying then that customers may be put off from asking for help due to a perceived negative stigma.

52% of consumers in our research believe there is a negative stigma attached to asking for help when in debt. And, over 1/3 of these (36%) felt the negative stigma was caused by practice deployed by companies including aggressiveness, detachment, promotion of fear and guilt, and lifestyle judgements.

Companies must invest in advisor training and empowerment that covers more than core collection skills, supporting employees to keep an open mind and emphasise with customer circumstances. An understanding approach can help customers to open up, instead of being put off before engagement really begins.

2. Consumer, not procedure led

The current economic backdrop is leaving more and more consumers feeling the pinch. Collection teams must factor this into how they approach procedures; prioritising flexibility over rigid, internal processes.

Of course, this flexibility needs a joined-up approach between in-house teams and their chosen external debt collection agencies; with shared accurate customer data that facilitates the right solution for the right customer at the right time.

Early referrals to customer support schemes should be a must. Unfortunately, customer awareness of these schemes is worrying low as it stands. Just 32% of consumers were aware of the possibility of flexible payment plans, 28% knew of signposting to debt charities and 10% were aware of priority service registers.

3. Balancing customer service and collections

Today’s collections agents need more than top-tier debt collection skills. Often required to deal with challenging and difficult circumstances, they need to be sensitive to individual customer needs; using customer service skills to take an empathetic and understanding approach to customer interactions.

Sadly, 60% of consumers in our research didn’t feel valued as a customer throughout the debt collection process, up from 48% in 2016. This simply highlights once again the need for a customer-centric approach, infused with practices and procedures that enable, not block, meaningful change.

Choosing not to take this on-board can lead to further damage and arrears. For example, 8% of consumers we surveyed said they would simply withhold payment longer should they experience poor collections practice; leading to a rise in ‘protest debt’.

4. Let’s focus on our customers

The collections industry has without doubt made big strides towards becoming more customer-centric. However, our recent research indicates that consumers feel there is still so much more to do. Given that trust in brands is waning, the lifetime value of the consumer needs to be front of mind during all stages of the customer journey – from acquisitions right through to collections.

Our research shows there is a clear link between how organisations treat customers in arrears, and the impact this has upon brand loyalty, advocacy and reputation. Reflecting on current practice and committing to placing customers at the heart of debt collection operations, can really help minimise the impact of arrears on the business and its customer relationships.

Lloyd.