A proposed rule by the Federal Communications Commission to restrict debt collectors’ ability to autodial cell phones could lead to the unintended impact of making credit costlier and harder to get for younger and more mobile customers.
Banks realize the problem of over-calling customers. It wastes bank resources and it does not serve the ultimate purpose of retaining paying customers. For banks, collections already is a costly business.
When collectors call a customer who has missed one or two payments, the job is not just to inform the customer of the obligation and negotiate payment, but to do so in a way that retains that relationship.
In today’s economy, collectors are dealing with formerly good customers who may become good customers again. Keeping customers is much less expensive than attracting new ones. Collectors must be skilled in providing a positive collection experience, with the idea of building loyalty.
In an ideal world, banks would know their customers well enough that when a payment is missed, they would know exactly when that customer can be reached, which form of contact is preferred and which phone number is best to call.
Industry leading banks are investing in technology and analytics for that very reason – to be as targeted as possible in their collection outreach. They strive to be efficient in making contact without harassing the customer and without wasting either party’s time.
But in the real world, people are mobile – often changing jobs and phone numbers. It often takes a while for collections to find the right number and the best time to reach the customer. Autodialing is a sensible way of determining that information without squandering skilled, costly resources.
A regulation that makes it harder and more expensive for collections to perform its critical role in the credit supply chain does not serve anybody’s interest.
As for calling a cell phone, it is not hard to see why customers who miss a payment or two would rather receive a call on their cell phones.
A call to the home phone interrupts their personal time and potentially exposes the customer’s situation to others in the home. A call to a work number has a high risk of being answered by a person other than the customer, creating an exposure risk when collectors identify themselves as they are required to do by law.
A call to the cell phone has the best chance of reaching the right party and offers the customer the best chance to have the necessary discussion in a private setting.
As for the bank’s interests, it is becoming more common for young or highly mobile consumers to have no landline – and only a cell phone. According to the federal government’s National Health Interview Survey, 26.6% of U.S. homes had only cell phones in the first half of 2010.
If banks are restricted in contacting customers through their primary contact medium, that segment of customers - when they apply for credit - automatically takes on a higher level of risk. They will receive less credit and it will cost them more.
In this fragile economy, when banks are trying hard to find good customers, and people are trying hard to become creditworthy, a regulation that automatically makes certain segments riskier is ill advised.
Protecting consumers from unwanted and repeated calls is a worthy objective. A proactive outreach to newly delinquent customers to help them get back on solid financial footing is too.
It is critical that emerging regulations serve both these goals without unintended consequences that harm everyone involved.
Tom Miller is president and CEO at ALI Solutions Inc., and Bill Andrews is director of Collections Solutions.
