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Text messaging can be an effective method of reaching delinquent account holders - especially when used with other communication strategies, concludes a report released this week by the Mercator Advisory Group Inc., a Maynard, Mass.-based consultancy.
"There is something about text messages that we still respond to," George Peabody, director of emerging technologies advisory service at Mercator, tells Collections & Credit Risk. "We ignore e-mail. We can use caller ID to screen our calls. But texts seem to be a pretty direct channel. Consumers haven't learned to tune them out."
Text messaging traffic in U.S. financial services applications exceeds 12 million messages per day and is growing more than 100% per year, according to the study.
Sending text messages to indebted consumers can save companies money by referring them to a less-expensive self-service payment system versus talking to an operator at a call center, says Peabody.
According to the study, Verizon Wireless was able to increase its self-service payment utilization to nearly 18% from 5% over a seven-month period by "texting" delinquent accountholders.
"The accelerating effect on consumers of text messaging when used in combination with automated voice messaging and interactive voice response units, never mind traditional media, affirms this new channel's unique value," Peabody says.
But there are challenges with the technology, he adds. "You can't spam anybody, it's still opt in all the way, but it still seems to be effective and used in combination with calls or IVR, there's a lot to be gained there."
Current federal and state laws also can hinder collectors' ability to fully use texting technology, David D. Cherner, legal counsel at ACA International, tells Collections & Credit Risk. Texting offers a limited number of characters to provide information to consumers but laws require extensive disclosures that can exceed those limits.
Also, there is a greater chance that a text could be inadvertently disclosed to a third-party, such as if two people share a cell phone, and that is a violation of the Fair Debt Collection Practices Act.
ACA International, the trade association representing collection agencies, is working with the Federal Trade Commission to better understand the challenges behind texting and other new technologies. For example, if an original creditor obtains a prior express permission to contact the consumer via mobile devices, that consent now flows through to any third-party collector working for the issuer. Third-party collectors working with charged-off debt also can obtain permission directly from the consumer, or give the consumer the opportunity to contact the collector via cell phone or text messaging.
