Digital Themes

Debt collection process

What is Digital Debt collection?

When consumers or businesses purchase a product or service, they are entered into a legal agreement to pay or repay the money they owe. Debt collection is when creditors and collectors try to get payment from consumers or businesses. 

The debt collection process is a calculated effort made by a business to collect an obligation that has become past due. In typical transactions between two companies, an invoice gets generated, and payment is due within 30 days—unless, by special arrangement, a more generous schedule of fees has been agreed upon.   

The debt collection process varies depending on your creditor, but in general, the process is as follows:  

  • Once you miss the payment window, you receive a notice that your account is past due, usually from your creditor's in-house collection department. 
  • After 180 days of no payment, the creditor moves your account to a "charge off" status. For a credit card account, your account gets locked, and you can no longer use your card. This negative mark gets recorded and stays on your credit report for seven years.  
  • Your debt is then sent to a collector that your creditor has hired to help collect the payment. Sometimes your debt gets sold to the agency, which means your creditor is no longer involved in the process. You work solely with the collection agency and the schedule they set to pay back the debt.  
  • The collector will contact you to verify your identity and make phone calls to your friends, family, or employer. However, they can only verify your identity with other parties and are legally not allowed to discuss your debt with anyone else.  
  • For verification of the debt, you'll receive a written debt validation notice from the collector within five days of identity verification that states the original creditor, amount you owe, and next steps.
  • Until you agree with the collector to pay off the debt, you will continue to receive phone calls and letters.
  • Once you talk to the collector and agree to pay back the debt, you can negotiate to pay less than the original amount owed. 
  • After the amount is confirmed and you pay off the debt, the collector closes your account.

Integrating a digital debt collecting solution instead of using a collection agency helps businesses collect payments faster in a secure, cost-effective manner. It also sends automated payment reminders to scale the debt collection process. An effective debt collection communication strategy can reduce operational costs by decreasing the number of inbound calls received by contact center agents related to collections. 

A fully compliant digital debt management solution connects all process areas in one complete ecosystem, including collections, recovery, and customer communications. By automating operations, extracting insights with advanced analytics, and offering personalized experiences, debt collecting solutions improve efficiency while increasing revenue and customer satisfaction. 

Business benefits of digital debt collection processing

  • Maximize the recovery of debt collection by making smarter choices on when and how to contact borrowers. 
  • Seamlessly scalable operations. Integrate across customer channels to create an end-to-end automated and intelligent collection lifecycle. 
  • Proactive default risk mitigation. The probability of delinquency is arrived at by analyzing the borrower’s financial data and inputs concerning occurrences of manmade and economic catastrophes/events. 
  • Deploy fast and adapt at the speed of your business. Customer information collected can be leveraged for the full spectrum of banking activities across other products. 
  • Forecast month-end yields. Leverages adaptive analytics and historical data to automatically apply the best fit strategy during subsequent interactions, complete with a detailed time-stamped audit trail. 
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