The financial services industry is continuously evolving, and it is essential to optimize collections strategies to maintain liquidity and minimize risk. One of the most critical choices for credit un...
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3 min read
In season four of Stranger Things, Eleven and the crew battle an ambiguously undead supervillain and his cadre of squelching vines and vampiric bats in the Upside Down to save the world.
With a possible recession looming across the American skyline like the Mind Flayer towering over Hawkins, financial institutions may be feeling the backs of their metaphorical necks tingling. It’s an uneasy feeling that something not quite right might be coming.
As delinquencies begin to rise, here are some tips from Stanger Things your institution can use to step up your collections efforts and weather the coming storm.
Running Up That Bill: Delinquencies Are Rising
In addition to introducing a whole new generation to Metallica, Stranger Things shot Kate Bush’s 1985 song Running Up That Hill to the top of the billboard charts 37 years after it was originally released.
Around the same time we were all jamming to the song, consumer credit card usage jumped by a startling 13%. With pandemic stimulus checks long spent and inflation at historic highs, consumers are running up that debt bill.
Much like Max shooting up into the air at her brother’s gravesite, delinquencies are also on the rise.
According to SWBC’s Chief Economist, Blake Hastings, “Delinquencies are beginning to pick up on just about every form of consumer credit. While these rates may not reach levels seen in 2008 and 2009, they will represent a material event financial institutions will need to manage.
Robust collections operations and proactive communication with borrowers will be at a premium. Even though we don’t expect the level of layoffs seen during many recessions, consumers’ incomes are being negatively impacted and will continue to be for the rest of this year and well into the next.”
What To Do When Your Borrowers Are Stuck in the Upside Down
The Upside Down is a scary place. It’s harder to move through than the normal world, monsters and traps are everywhere, and it can feel impossible to escape from.
Unfortunately, this dystopian landscape feels all too familiar for borrowers who are upside down on their car or mortgage payments.
Empathy is key when it comes to having a productive conversation with borrowers who are in arrears. "I just lost my job and can't possibly pay you now," is a tough sentence to hear, but there are some empathetic responses that produce favorable results:
- Express that you're sorry to hear of the borrower's troubles and let them know you’re there to help provide a solution.
- Tell the borrower that since your institution understands this issue well, you work with borrowers to find a good compromise.
- Depending on the outstanding balance, ask if there is a reasonable amount for the borrower to pay today and a payment plan to pay off the rest.
- Once you have an agreement on some payment today and a plan for the future, tell the borrower you will call again in 90 days to review the plan, with the hope that the borrower will be established in a new job by then.
Step Your Collections Game Up to the Max with Help from Superhero Friends
As season four reaches a crescendo, Max bravely steps up to battle Vecna (or at least resist him as long as possible while the crew destroys his body). Discarding her safe-talisman headphones and Kate Bush, she is transported to the Upside Down and brutally ensnared in the villain’s dark and twisted realm.
Just when it seems Max can’t hold on any longer, Eleven busts through the astral plane from a pizza dough freezer and kicks some telekinetic butt to save her friend.
If, like Max fighting Vecna, your institution is struggling to keep up with rising delinquencies, reaching out to a trusted partner to improve your collections efforts may just save your life (and your limbs should come out better than Max’s did, too).
According to Blake Hastings, “Like almost every business playbook for recessions, financial institutions need to look for ways to drive efficiencies (cost savings) and productivity (doing more with less). Utilizing technology and process improvements to drive greater productivity are core priorities for businesses in times of economic slowdown. Partnering with vendors to help manage operational and labor costs are additional common steps to keep the expense side of the ledger well maintained.
Employing outsourced collection services through SWBC’s Financial Institution Group is an efficient, cost-effective option to help your financial institution weather recession while reducing delinquencies, operational costs, and the time employees dedicate to the collections process.”
Like Eddie of Hellfire and guitar-slaying fame (may he rest in peace), we’d be honored to play the role of the unsung hero who rocks behind the scenes for your borrowers.
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