Consumer Collections

Consumer Debt Collection Process

While the exact consumer debt collection process will vary based on the consumer and your needs as a creditor, our consumer debt recovery process involves the following:

• Our clients do not pay any upfront fees and only complete payment after we successfully recover their money.
• Our team will report any eligible account to the correct consumer credit reporting agencies if needed.
• We have extensive knowledge of local, state and federal laws to maximize our expertise and provide greater client benefits.
• Our team can take legal action and manage the process through the appropriate courts.
• All clients have access to our client portal, allowing them to see their account status at any time.

Challenges

Every company that extends credit at some point will experience slow-pay and non-pay accounts. Some challenges to collecting range from the consumer getting over-extended and not having enough money to pay all their obligations to being unable to locate the customer.

In recent years, it has become increasingly easy for consumers to borrow and finance things they may not have been able to do in the past. Because of this, many people have accumulated a lot of personal debt and cannot pay. The laws and rules that apply to consumer credit have also made things more favorable for the consumer and less favorable for the creditor.

In-house collection processes are necessary for most companies as they can recover most of the money they owe, but there is likely a 2%-6% net charge-off left. These small percentages can represent millions of dollars if a business is large and doing hundreds of millions to several billion in sales revenue.

Commercial Vs. Consumer Collections

While commercial and consumer collections both involve debt collection, there are some significant differences between the two:

Target Audience

Commercial collections focus on recovering debt from businesses or other corporate entities such as partnerships. The debt involved in commercial collections largely stems from unpaid invoices or loans. Consumer collections, however, consist of recovering debt from individual customers. With consumer debt collection, the cause of debt stems from personal loans, credit card payments and other consumer debts.

Collection Methodologies

Commercial collections involve higher debt amounts, resulting in more complex negotiations. At Southwest Recovery Services, our methodologies include speaking directly with business owners, and if needed, we can escalate it to legal action.

The consumer collection process involves smaller debt amounts but more accounts. At Southwest Recovery Services, our primary focus is maintaining compliance with consumer protection laws like the FDCPA, and we often use common strategies like customized payment plans. While a creditor can escalate the debt collection process to take legal action, it is less common.

Negotiation Tactics

Since commercial collections involve speaking with multiple stakeholders, they require a more intricate negotiation process. For example, the Southwest Recovery Services team will interact with various departments and may have to navigate complex organizational structures to reach a resolution. 

In commercial collections, we would only deal with the individual borrower, which makes it easier to find a solution, like a payment plan or settlement.