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Your strategy for communicating with the three types of debtors
by Ian Haddon

With disposable incomes becoming tighter for many, and recent changes to legislation restricting some collection tactics, it could feel like recovering debt is becoming a more challenging task for businesses.

But there are many factors on the sides of debt collectors, too. At ContactEngine we have myriad ways at our disposal to reach out to people and we have access to advanced, proactive AI communication methods. We believe it has never been easier!

We’ve recently helped a large business see a 15% increase in customers making a payment, a 22% uplift in money paid back and a 20% decrease in time taken to repay debts.

We’ve been able to do this because we understand how to speak to the three different types of debtors:

  • “I didn’t know I even had a debt I needed to pay.”
  • “I know I owe debt, I’m willing to pay, but I just can’t right now.”
  • “I know I owe debt, but I’m going to resist paying it back for as long as possible and hope it goes away.”

Here, we explain how to use proactive AI to handle debtors in these three scenarios.

“I didn’t know I even had a debt I needed to pay”

Let’s start with the simplest one first. Most people are honest and would be horrified to learn they’re in debt. Most people would want to pay it back as soon as they are made aware of it. Your first communication with a debtor must assume they are unaware of the debt they owe. This could be because they’ve moved house or have simply not kept track of their direct debits. After all, who has time to keep an eagle eye on their outgoings at all times?

Put yourself in that position. Would you rather receive an official letter written in legalese and threatening of ever-increasing punitive measures for inaction or would you rather receive a friendly text or WhatsApp message that explains the situation and presents simple solutions?

The uncomfortable truth is that people avoid bad news – some call it ‘ostrich syndrome’. As humans, our tendency is to roll the dice rather than know bad news for certain. It’s the same driving force that makes people afraid of opening letters they expect contain bad news.

It is far better to keep things as positive as possible. ContactEngine’s conversational AI can handle a proactive and carefully managed conversation and even provide payment details to recover debt that is down to a simple and honest mistake.

“I know I owe debt, I’m willing to pay, but I just can’t right now.”

Out of the three groups, this is the one you must treat the most sensitively. Your company might be just one of several they owe money to, and you might not even be their top priority. Recent changes to debt collection practice legislation means any tactic that causes stress must be taken carefully.

For example, in the UK, as part of the Debt Respite Scheme – launched in April 2021, there is an emphasis on companies to be more lenient and patient with debtors and give them ‘breathing space’. There are two types of breathing space: a standard breathing space and a mental health crisis breathing space. During the 30 to 60 day breathing space period the creditor or associated partner is not to communicate with the customer. 

The traditional ways of communicating with customers have also been curtailed in the UK and in the US. In the US, phone calls have been restricted so that if debt collectors successfully speak to a debtor, they are not allowed to speak to them again for at least seven days. Debtors can request that they stop receiving calls, which the company must respect.

In the US, the rules are even stronger. As part of the Debt Collection Rule, the Fair Debt Collection Practices Act prohibits debt collectors from causing a telephone to ring or from engaging a person in telephone conversations ‘repeatedly or continuously with the intent to annoy, abuse, or harass’. The rule does allow for the use of email and text messaging and sets procedures for doing so.

These rule changes mean that a delicate touch is needed when dealing with debtors who are unable to pay, but willing to make a plan.

Fortunately, ContactEngine’s AI can communicate with people on whichever channel they prefer, at a time of their choosing and even in a manner of speaking they engage best with. We can present debtors in this group with an option that is right for them to ensure that they pay as much as quickly as possible. We can also connect them seamlessly to a contact centre professional if they prefer. By starting the conversation in this way, we achieve 90% response rate from our messages. Rates of ostrich syndrome are slashed.

“I know I owe debt, but I’m going to resist paying it back for as long as possible and hope it goes away.”

This is the trickiest group. If our messages aren’t getting a response, or if they are prompting a rude or dismissive reply, then our AI language processing can detect this and – just as they can connect those in the previous group to someone with sensitivity training – we can connect this group to someone with conflict management skills.

By this point however, our processing will have identified that they are not in the first two groups. It will give this information – and everything else it’s managed to collect from the individual – over to the call handler, meaning they can prepare properly before the call and attempt to find a resolution.

Not all debt will be able to be repaid. It may be too little value to pursue through the courts and it may simply be better to sever ties with that individual. But, thanks to our programme, you can make that decision before sinking hefty costs in more expensive debt collection practices. You can then focus on the easier cases of those who have the previous two mindsets.

Dealing with the three types of debtors

Not all debts are created equally. Some are easy to get back, others will be lost forever. Only by combining intelligent data capture with intelligent communication can you hope of finding out which is which on a mass scale. With proactive conversational AI, you can quickly probe your debtors to find out which levers you need to pull to guide the issue to a favourable resolution.

Recent changes to legislation mean that debt collectors need to be more careful than ever about causing stress or communicating in a way that falls outside the law. Humans make mistakes, but our AI is governed by rules that guarantee total compliance. Taking a softer but engaging approach with AI is the best way to drive your debt collection rates in future.

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