Elsewhere in the same blog, we have discussed the strategy for debt-collection. We have classified accounts based on delinquency and risk as below.
I
High Delinquent – High Risk
( DPD > 89 & Delinquency rate > 66% )
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II
Low Delinquent – High Risk
( DPD < 90 & Delinquency rate > 66% )
|
III
High Delinquent – Low Risk
( DPD > 89 & Delinquency rate < 67%)
|
IV
Low Delinquent – Low Risk
( DPD < 90 & Delinquency rate < 67% )
|
We strongly recommend Quadrant III for Debt Collection Agency. Most likely, many accounts here will be high on intention and low on ability. Economics of these customers may have started deteriorating in the recent past. Collection should be possible and seeking the surrender of asset may be considered as next option. The interface with this customer will have to still be customer centric and communication both ways need to be managed better.
Most finance companies and banks realize that hiring a collection agency is always a good decision, but they may not realize that if you have delinquent accounts 90 days past due, hiring a collection agency becomes a must-do.
Debt collection agencies of any type have proven success rates that far succeed first party collection attempts unless you’re a large company with a collection agency as a subsidiary.
A collection agency will be even more suited to solve your collection problems because they will have familiarity with thorny issues such as local laws, customs and language barriers.
Collections are complicated and should be handled by professionals due to the strict laws. For example, collection by MFI is highly regulated in the state of Andhra Pradesh in India.
This is a job that should be turned over to a collection agency immediately so it can be handled skillfully and promptly. Your return will be much greater, your cash flow will improve because you don’t have to pay for their services until they collect, and your time will be freed up rather than trying to navigate different cultures, legal systems without a compass.
A collection agency will employ more people who speak the local languages and understand local customs. They will also operate during the best hours for collections calls. In addition, they’ll be cognizant of local laws and law makers in a way you just can’t do.
The final and crucial advantage a collection agency has is the option of using local sources as informers and investigators, at the least cost.
