In the collection industry, collecting on installment loans requires a strategy and structure. This article outlines a multi-agency approach to collecting installment loans, focusing on deep due diligence, technology and personalized communication.

Step 1: Initial Data Gathering and Skip Tracing

Agency A - Deep Due Diligence

We start by placing the installment loan debts with Agency A for 45-60 days. This agency is deep due diligence and uses credit bureaus to skip trace debtors. The credit bureaus provide us with the data, grade the debtor on their likelihood to pay and recommend the best communication method.

During this phase, Agency A updates the debtor’s contact information and assesses their financial situation. This allows us to customize our approach to each debtor and increase our chances of collection.

Step 2: Legal Compliance and First Contact

Before we make any direct contact, we must comply with the Fair Debt Collection Practices Act (FDCPA) and other FTC regulations. As part of these regulations, debtors must be informed of the debt collection activity. We do this by sending a pre-collection letter via mail or email with tracking so the debtor receives it.

Step 3: AI Technology in Collections

Agency B - AI Collection

After the initial due diligence, the portfolio is sent to Agency B which uses an AI collection approach. This phase is 60 days and uses algorithms to analyze debtor behavior, optimize contact times and methods such as call, text, email or drive the debtors to a payment plan website to increase engagement and payment likelihood.

Step 4: Manual Collections

Agency C - Direct Contact

After the AI collection, the portfolio goes to Agency C where traditional collection methods are used. This agency makes manual calls and texts (to debtors who have opted in for text) for 60 days. Manual contact often resolves issues that the automated systems can’t, such as negotiating payment plans or discussing the specific situation of the debtor.

Step 5: Long-Term Management and Repeat Process

After the initial collection cycles with Agencies A, B and C, the debts that are not collected are put on hold. We then repeat the process with two other agencies that collect installment loans. This rotation keeps the pressure and presence on the debtor, reminding them of their obligation and the attention to their debt.

No Resale Clause

When buying debts directly from creditors, there is often a no resale clause in the agreement. This clause prevents the debt buyer from selling the debt after purchase and requires them to hold the debt until it’s collected or deemed uncollectable. This highlights the importance of selecting the right debt portfolios and managing them through the right agencies.

Summary

Collecting installment loans requires data analysis, compliance, technology and personal debtor contact. By using a multi-agency approach debt buyers and collection agencies can get the highest recovery rates while being ethical and consumer friendly. This structured approach ensures each step of the collection process is optimized for maximum recovery and the business model and industry’s fair debt collection practices.

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