The tighter lending climate in the post-recession world has created new challenges for debt collectors. But those challenges can come with opportunities as the way business is done evolves.
Debra Stabile, managing director and chief risk officer for Citi Retail Services, said there is more information available to collectors about consumers in 2014 compared with, for example, 2007 before the recession. There are also new tools that can help collectors be more effective.
"[Collectors] may say that we're giving them less business but of those we give them, can they collect more?" Stabile said. "They can get a bigger piece of the pie. They just have to figure out what else we need to know about consumers. We all have to step out of the traditional paradigm."
Stabile made the remarks while speaking at the National Collections & Operational Risk Conference in Miami Beach this week.
Stabile cited the increasing use of chat and text to communicate with customers. Young adults have grown up with text features and have shown a reluctance to have phone conversations or talk in-person. Older Americans, too, have adapted to the shift in technology.
"We [in the financial industry] need to reflect these changing dynamics in our business and figure out who needs what tools. All of this opens up a whole new way to staff our [contact] centers," she said.
Young adults don't view credit the same way as people often just a few years older, likely a result of seeing the credit bubble burst and the impact of the recession. Stabile cited a recent example of a talk she had with MBA students. Everyone in the group had debit cards but only about half had credit cards, often in the name of a parent.
"Their way is different but the challenge here is that they're not really building any credit history. That's changing how I have to think about them [from a credit-granting perspective]," she said. "Who is spending and how much is another challenge. The housing and home improvement sector is one of several sectors that has been coming back - eventually we will see other sectors return more fully but it remains slow as people continue to demonstrate very prudent spend behaviors."
Stabile discussed an "inflection point" for credit risk and, specifically, loss rates. Losses are currently at historic lows.
"We think over the next year that we'll see that inflection point and losses will begin to rise, reaching a steady state again but that will be lower than before [the economic downturn]. So, we're headed for a lower loss norm," she said. "The economy has clearly gotten better. We're cautiously optimistic that things will continue to get better. But while jobs are increasing, the quality of those jobs is not quite the same. So while you see consumer confidence up, the question of how sustainable the improvements are remains."