There is considerable evidence that 2009 and beyond will see record demand for payday loans, car title loans, rapid tax refunds, pawn and other consumer loans of all types. We are experiencing this in our stores and our online businesses. Our clients are reporting record loan volume as well. Volume is up!
Of course, that means collections will become more of an issue as the economy continues to sputter along. So, will your business prosper during the coming year with this increased demand for your products or will you go down in flames because you can’t get your customers to pay you?
Online Resources Corporation (Nasdaq: ORCC), a provider of online financial services, released results of a survey on the bill payment patterns of U.S. households. Results show which bills Americans consider highest priority and are most likely to pay on time.
Their press release highlighting their key findings show how different bills rank in consumers’ stacks, in order of priority:
* Mortgage – Though the number of households with delinquent mortgage payments are up 67 percent over last year, this bill remains at the top of the stack;
* Insurance – Of all major bills, insurance premiums have the lowest delinquency rate at 2 percent;
* Loans – In just one year, households with overdue loan payments have increased 58 percent;
* Utilities – Delinquent utility payments are up 18 percent since last year;
* Healthcare – Emergency medical care bills are most delinquent with 34 percent of respondents late;
* Phone – More Americans say they can do without phone service, and 26 percent of households put this bill on the bottom of the stack; and
* Credit Card – 1 in 3 of the households that are late paying their credit card bill continue to use their card, thereby increasing their outstanding balance.
Across multiple industries, their survey results indicated that one in three households was contacted by a collector in the past year. Consumer preference for resolving delinquencies online has increased by 18 percent over the past year, but only one percent of delinquent households were contacted via the Internet.
Households that set up recurring payments had a significantly lower likelihood of becoming delinquent in the first place. (Do you have an EFT preauthorization from your customer? If not, implement this approach!)
Bottom line, get proactive! Tighten up your underwriting if necessary. Consider modifying the number of NSF’s you allow on a previous checking account statement. Call all references. Verify time on the job and consider increasing the minimum from 3 months to 6 months or longer. Call, email and text your customer BEFORE the loan payment is due. Use SCAN for collections help. Integrate with a minimum of 1 or 2 ID Validation services like TeleTrack, Accurint, Lexus Nexus, etc.
If you are faced with significant collection challenges check out
The Collections Manual for insight, tactics and strategies to improve your operation.
In the coming months and years record profits are possible for those of us who know how to get paid! Evaluate your performance and make adjustments NOW if warranted.
On Line Resources has a free white paper with additional collection and consumer bill payment insight available here:
What do you say? Are your collection efforts becoming more of an issue?