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Experian Whitepaper Details Impact of Overly Aggressive Collection Efforts

Being overly aggressive in collection efforts can turn individuals off and cause them to cancel accounts, according to a whitepaper released this week by Experian.

While the number is not incredibly big — 3% of individuals with a credit card that was at least 30 days past due canceled their account after bringing the account current — those are lost customers, Experian contends. Three-quarters of those who closed their accounts did so immediately upon bringing the account up-to-date, while the remaining 25% closed their accounts within two months of bringing the account current.

From Experian:

Our analysis also showed that people with the lowest balances and the lowest amount past-due had the highest incidence of paying off their debt and closing their accounts. That means that by being too aggressive over a fairly low dollar amount, you can damage the relationship with a customer who could bring a lifetime of more business.

The most likely individuals to cancel their accounts are millennials, which means that potentially a long relationship is being burned.

Consider this, the customer on that long vacation receives an email that says, “Hey we noticed you forgot to make your last payment. Can you email us back the reason why and when we should expect it?” This creates an opportunity to build the relationship with that customer and get a commitment to settle the payment by a particular date. Ten days later when he gets back from vacation, he receives a reminder to make the payment and takes care of it. Instead of feeling frustrated, annoyed or undervalued, the customer has a positive experience and continues doing business with a company who is focused on building relationships vs. simply collecting money.

While there is a direct relationship for first-party collectors, even third-party collectors can learn something from this data as well. More and more collection agencies are increasing their emphasis on providing the best customer service possible. An agency never knows when it will have to collect from the same individual again, and a burnt bridge makes it very difficult to try and collect.

 

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