Bank debt collection is a totally different animal than other kinds of collection for a variety of reasons. If you understand the basics of bank debt collection, you\’ll be armed with the knowledge necessary to find a collection agency that understands your unique needs.
What is bank debt collection, exactly? It can mean credit card debt, mortgage, HELOC, commercial loans, personal loans, or auto loans. The practices that are allowed by the government regarding debt collection, such as the times of day you can call, are the same no matter what type of debt you\’re talking about. However, depending upon the type of loan, laws regarding raised interest rates, late charges, and other financial issues are very different. Because of this you need to choose a bank debt collection firm that understands the types of loans you\’re collecting on.
Bank debt collection is comprised of several different types of debt, including mortgages and home equity lines, credit cards, and auto, commercial or personal loans. Rules governing debt collection are the same for all of these areas, but laws regarding the money that is charged as a penalty for late payment, such as fines and higher interest rates, are determined by laws specific to each of these areas of debt collection. Make sure your collection agency has experience in the type of bank debt you require assistance with.
One fact you need to know when it comes to bank debt collection is that if customers haven\’t paid by 60 days past the due date, they\’re most likely not going to pay without prompting. When you come up to that signpost it\’s time to hire a collection agency that understands this specific area of the collection business. This should be your first step in the process of collections, not your last, because most of these agencies don\’t charge until they recover money for you. They have a better recovery record than in-house collections, and if they don\’t collect there\’s no fee, so there\’s no risk.
Bank debt collection can get creative. For example, programs designed to help people dealing with financial difficulties are unique to this area of the collections industry. Such programs present the customer with a carrot rather than a stick. Instead of scaring them, they give the debtor incentive to try to make things better.
Another creative approach towards bank debt collection is the area of financial hardship programs. These are not usually offered in general debt collection, so it\’s an important way that collecting bank debt differs. Financial hardship programs give the customer an incentive to call in to the collections person in order to discuss possible ways to get their credit cards or secured debt back in good shape.
Financial hardship programs restructure the client\’s payments in one way or another. They can defer payments and tack on the missing money to the principal, lengthen the loan terms (from, say, 30 years for a mortgage to 40 years), or switch the payments to interest only for a period of time.
Financial hardship programs help out both the institution and the borrower when it comes to bank debt collection. For this reason, any bank debt collection program should consider such methods of turning bad debt into debt recovery.
David P. Montana has been a noted industry expert, commercial advisor and writer in collection agencies services for thirty years. He provides additional helpful tips and resources on bank debt collection.
