As the marketing person who supports our Accounts Receivable Management (aka, collections) vertical, I’ve been working recently with several industry experts on our latest white paper, The Future of Compliance for the Debt Collection Industry. One of the topics we’re covering is "Collecting from the New Unemployed," and it strikes me as an especially poignant topic that, for the most part, has flown under the radar during the Great Recession we’re collectively recovering from — or that we’re hopefully recovering from – your mileage may vary as to how “recovered” you feel.
The most recent report from the Bureau of Labor Statistics shows that unemployment dropped to 8.6% for November 2011, down from 9.0% in October and 9.8% November of last year. Though unemployment numbers seem to have finally started trending downward, there remains a significant number of long-term unemployed as it’s apparent that it will take more time for everyone to get back to work at this pace.
The result? A new class of debtors finding themselves unable to pay what they owe – the New Unemployed. Who are they? An excerpt from the white paper defines them as hard-working, educated and professional people, who three years ago were gainfully employed, making a respectable living and never missed a payment to their creditors. They now find themselves a part of the long-term unemployed and falling further behind on their debt obligations after having used up their savings and dipping into their retirement accounts.
Looking at it from a collector’s perspective, you would think that business would be booming right now – as every economy has its winners and losers. The fact is, however, that even though there’s more debt to collect on, collectability rates have fallen, in part because this class of debtor is unable to pay even though they desire to do so. Walter Steele, Chief Operating Office of FH Cann & Associates, suggests these tips from collecting from the new unemployed:
- Recognize that you’re dealing with unaccustomed debtors – that is to say: folks who, up until this economic crisis, had jobs and an income. Patience is a virtue; so is compassion.
- The fact is, these new unemployed are more than likely going to repay their debts once they find employment and get back on their feet. And they’re more likely to work first with those agencies who treated them with decency and respected their intelligence and work ethic. This is going to be a marathon, not a dash.
- Reassess your internal goals and deadlines. A too-aggressive approach could easily result in broken communication between your agency and this consumer, and will very likely lead to dissatisfaction and official complaints – to say nothing of the potential lawsuits.
Is it worthwhile to undertake different collection methods and approaches for the New Unemployed? In the upcoming years, will this group fuel a boom in the ARM industry as unemployment continues to decline and the New Unemployed find jobs again? (Steele sees a positive light at the end of the tunnel, and suggests that patience and compassion could be the strategy that benefits everyone involved.)
I invite your comments and predictions on how this demographic will impact our industry during 2012.