For the last two or three years, delinquencies rates have been comparatively stable, thanks in part to higher credit standards coming out of the credit crisis. Consumer credit has trended slightly positive for more than two years. 

Over the same period, delinquencies fell in 11 of 13 consumer credit categories, including personal, auto, property improvement, and home equity loans.

This era of stability let collections focus on two critical areas.  The customer experience improved when tighter lending standards and a smaller pool of credit-eligible customers heightened competition and made collections loathe to offend a customer in arrears.  Today, by our observation, bank collections executives are conversant, even passionate, about customer retention and lifecycle value, protecting the brand, and mitigating reputational risk.

As for compliance, banks continue searching for effective systems and processes to comply with the myriad of federal, state and local laws that constrain operational practices and strategies in order to prevent harassment and protect the consumer.

But today change is on the horizon. The Federal Reserve may soon lift its heavy hand off interest rates, ending a half decade of quantitative easing. 

Mortgage rates are at their highest point in two years and rising. Student loan rates are up and expected to rise significantly, and defaults are rising on these loans and other debt held by these borrowers. Rising medical costs are now the leading reason for personal bankruptcies. Unemployment remains high and more of those employed are underemployed.

If that’s what is visible on the straightaway, around the next curve we can expect to an inability-to-pay challenge. And around the curve after that? Rising delinquencies.  

Before that squeeze, collections management can press forward with new uses of data analytics that will lessen the pain and cost, without jeopardizing the customer and compliance gains already in place.

Proactive Outreach - What is one of the most useful preventive tools for collections? Contacting at-risk customers before they are under water and understanding their situation while they still have financial options. Analytics can help predict who among your current customers should get that early outreach. Before a mortgage goes delinquent, for example, there are payment, balance and behavioral changes associated with that mortgage. There are often purchasing patterns that can point to an impending credit card or revolving loan delinquency.

Contact Optimization – Leveraging analytics can make you much better at reaching the right customers at the right time and through channels that actually engage them. You avoid contacting customers at inopportune times or through channels they don’t respond to.  That means fewer calls (more efficiency) and better results (more promises to pay and dollars collected). Collections’ ecent efforts to improve the customer experience showed that those preferences easily learnable and they matter.

Workforce Productivity – One of collections’ highest expense categories is its workforce.  Without analytics, it’s easy to squander agent productivity by, for example, contacting to the wrong people (customers who would have paid without the call, those that no longer have the capacity to pay, or a person in the household not responsible for the debt). 

The data you need to avoid wasting their time is available and can be operationalized through analytics. As a recent study confirmed, banks have the necessary data, but “more than 70% feel like they're not leveraging the data to the best of their ability.” It can also let you quickly reallocate resources as circumstances change so that precious resources don’t sit idle.

Executive Reporting – When your executives start seeing worrisome headlines about defaults and higher interest rates, we typically see collections asked to substantiate the rationale for contact strategies, justify the expense and productivity of the collections workforce and technology, and demonstrate the impact and business results. 

Analytics, along with champion/challenger testing (where you make small, configurable changes in your contact strategies to continually improve results) and the right set of executive MIS can easily answer these questions and demonstrate the consistent benefit of information-based decision-making. Proactively addressing questions sure to arise later will save you time and deter second-guessing.

Tom Miller is vice president of Analytics Solutions for Atlanta-based Noble Systems. He can be reached at

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