The US Consumer Financial Protection Bureau (CFPB) announced the final rules on July 30 explaining the Fair Debt Collection Practices Act (FDCPA), which went into effect on November 30, 2021. Regulation F has clarified restrictions on harassment or abuse, false or misleading. representation and unfair treatment. These rules require debt collectors and recovery staff — if non-complainers — to make significant changes to how and when they can communicate with debtors. Here are some highlights:
7-in-7 Rule: Regulation F stipulates that no more than seven calls can be made by a debt collector to a consumer in a seven-day period. Debt collectors are considered to be in breach of the law if they make a telephone call to a customer about a particular debt: more than seven times within a seven-day period, or a telephone conversation with the customer about a particular debt. loan within seven days of repayment. A debt collector is considered to comply with the law if the debt collector does not call on any of the above limits. Digital Contact: Debt collectors can contact borrowers through voicemail, email and/or text messages. Borrowers must provide a “reasonable and simple way” for consumers to opt out of communications sent to a specific phone number or email address. If the debt collector uses electronic communications, the consumer can use the same method of contact to send a “Cease Communications” request or notify the collector that they refuse to pay.
Some say that these new contact guidelines from Regulation F put customers in the driver’s seat. But the reality is that he has never left that seat. Banks and financial institutions have always tried to achieve genuine awareness of the wants, needs, likes and dislikes of their customers. By knowing these preferences, they can shape personal financial products and services to suit the emerging reality of consumer needs.
Statista research states that Millennials were the largest generation group in the US in 2019, with an estimated population of 72.1 million. Millennials born between 1981 and 1996 have recently overtaken Baby Boomers as the largest group, and they will remain a substantial part of the population for many years to come.
Millennials are the biggest driver of net new loan demand, says Morgan Stanley research. Gen Z is set to follow suit and up to 80% of Gen Z members carrying smartphones are already using mobile banking.
In 2022, it is prudent to approach debt collection and recovery keeping in mind the emerging data that Millennials are now the prime spending base among customers.
As we emerge from the COVID-19 pandemic, we are seeing the growth in digital banking products and services normalizing to what was prevalent in the last two years. It is clear that digital transformation will be at the heart of improved customer experience in the banking and financial services industry.
Given the pace at which the market is moving and emerging, collections and recovery will have to be rapidly optimized. Following the CFPB’s decision, the challenge is to evolve the traditional contact center model of intensive efforts to approach and resolve debt leverage through phone calls. Another change the industry is learning to deal with is that as contact priorities change, contact center right-wing contact rates tend to decrease. It is becoming increasingly difficult for borrowers to reach customers by phone. Scaling down contact center operations to the detriment of efficiency is a heavy and operationally intensive expense. The delicate balance of improving contact rates, successfully connecting with a segment that is telephone call-averse and maintaining consistent regulatory compliance, is becoming increasingly uncertain.
Millennials and Gen Zs are inspiring banks and financial services companies to consider redefining and transforming and enhancing the way they engage and engage with their customers. It is now widely apparent that digital connectivity can prove to be a catalyst for effective and efficient customer engagement that can be used to achieve the portfolio goals of short- and long-term collection agencies while enhancing alignment to customer preferences and service delivery. can be done for.
The following information graphic by Barclays clearly outlines the changes in communication media adoption and communication preferences in emerging generations.
With the introduction of FDCPA Regulation F, has the Consumer Financial Protection Bureau prompted the industry to look beyond traditional contact methods, calling devices, engagement building scenarios? Are these regulations forcing us to enhance conventionally devised debt collection practices and treatment paths?
The key to engaging the emerging customer base will be to personalize the debt collector’s approach by leveraging traditional core themes. It may be more attractive and effective to augment the traditional approach of segmenting clients into standard risk bands with a personalized approach. What we learn from behavioral patterns can teach us that Generation X and Generation Y/Z with equal chances of paying will react very differently to similar debt collection approaches. It is prudent to act now to find out the optimal engagement model for these customer segments. And to do this we characterize their attitudes towards technology, communication media, communication preference and preference when making financial decisions, based on the insights we have on different behavior patterns and importantly their generation.
Does everything need to change for effective debt collection management? Not really, the main questions we’re looking to address are consistent for successful archive and retrieval management, as outlined below:
A well-defined and balanced approach featuring compliance with CFPB Regulation F requirements, strategies that deliver customized, customer centric and positive engagement to customers that enable contextual solutions is the need of the hour. Such a redefined collection and recovery approach would go a long way in categorizing customers appropriately and in developing a contextual understanding of customer needs and solving key questions specific to them.
Time to Action / Call to Action
With inflation in the US at around 8.6%, one of the highest rates in the world, businesses and consumers are bracing for a potential economic downturn. While not attempting to predict with any accuracy the talked severity or duration of a potential slowdown, Collection and Recovery operations should now take steps to review their Collections customer engagement operating model. With rising crime levels over the past few months seemingly at risk of an upward move, collection and recovery groups are best positioned to allay the apprehensions around six or seven contacts, explore and understand the elements of compliance , and have a contemporary communication engine in their arsenal. which can facilitate convenient one-way and two-way omni-channel interactions that are in line with CFPB Reg F requirements. It is also important to ensure that deployment strategies achieve higher customer satisfaction ratings from more convenient digital experiences and balance engagement with improved efficiency by solving more situations digitally through the preferred medium. As we go through this transformation, it is important to focus on providing value with superior and engaging experiences for our customers, not just more digital options. Consumers’ wallet-share is not guaranteed, everyone competing for it. It is important that you capture every moment of a potential opportunity to engage your customers without losing sight of the excitement.
FICO provides the software and experience that helps facilitate our clients’ compliance with the CFPB’s Reg F requirements, deploys omnichannel communications to communicate with clients the way they prefer, and empowers clients to be successful. Most likely. Through targeted mobile contacts that provide seamless digital and omnichannel communication including voice, text, email, mobile apps, interactive voice response (IVR) and self-serve portals – FICO® Customer Communication Services Customers report 80% of right party contacts Increase, 79% payment or contact results in promised, 75% of collection dialogue handled digitally, and importantly, 93% improvement in promised rates.
Collections are part of the wider Lifecycle Services where we support our clients, and many processes overlap across multiple products (including FICO® Customer Communication Services, FICO TRIAD™ Customer Manager, FICO Strategy Director and C&R Software Loan Manager).
My team, FICO® consultants, provide product-agnostic, practitioner-level domain expertise, and change support in the cross-product orchestration of processes that enable seamless and optimal execution against our clients’ goals and objectives. We help our customers meet the increased expectations from bank customers with scalable, intelligent omnichannel communications that not only determine when accounts enter collections, but also how to access them most effectively. Improves collection effectiveness and customer engagement by leveraging predictive analytics to determine how to behave.
FICO® Customer Communication Services for Collections: