The current economy has affected every generation, but rising inflation and interest rates are having an outsized impact on millennial and Gen Z cohorts as they face a surge in delinquencies.
Economic factors have forced many younger consumers to take on additional debt, increasing their reliance on credit card loans and buy now, pay later services out of necessity. Combine this mounting debt with student loan repayments and limited cash reserves, and it’s easy to see how these borrowers are finding themselves in the red.
So how can financial institutions (FIs) handle increasing delinquencies among younger generations while maintaining procedural compliance and positive client relationships? A collections software with omnichannel communications and regulatory features, such as MeridianLink® Collect, can help.
Build Positive Debtor/Creditor Relationships
Delinquency has a negative connotation for everyone—it’s viewed as transactional at best and stressful at worst. But with delinquency comes an opportunity to lay the groundwork for lasting borrower relationships, especially among millennials and Gen Zers who, according to a recent survey by Capco, value a personalized relationship with their FIs.
The experience a debtor has in collections can determine whether they choose to take out loans with an FI in the future. Maintaining a positive, supportive relationship during collections is crucial to building trust and loyalty.
One way creditors can nurture these types of relationships is with a communication strategy that aligns with each generation’s preferred methods of contact. Research shows millennials and Gen Zers prefer communication via text, while older generations tend to prefer phone calls.
To support these preferences, many platforms, including MeridianLink Collect, provide integrations for omnichannel communications—SMS texts, phone calls, emails, live agents—to help FIs reach their multigenerational debtors and resolve delinquencies. Additionally, self-service options for debt management can help ease the strain on borrowers and the collections team, quickly delivering solutions for debtors and reducing the need for staff resources to solve common issues.
Compliance Is Key
As FIs works to strike a balance between recouping delinquent payments and building positive debtor/creditor relationships, it can be challenging to keep up with ongoing changes in debt collection rules. MeridianLink Collect helps FIs more easily manage collections by maintaining regulatory compliance with practices such as:
- Communication opt-outs. Capture opt-outs for all forms of borrower communication.
- Contact frequency. Adhere to the “7-in-7” provision in FDCPA guidelines that prevents FIs from contacting borrowers more than seven times within a seven-day period about an individual debt.
- Consent for non-marketing-related calls. Capture consent for non-marketing-related calls to cell phones, per TCPA guidelines.
- No contact with active-duty servicemembers. Flag the accounts of active-duty servicemembers to prevent collector contact, per SCRA guidelines.
The MeridianLink® Solutions by Text (SBT) integration enables FIs to comply with many of these rules. It provides a way to validate phone numbers, stop texts to phone numbers of borrowers who’ve opted out, check for reassigned cell phone numbers, allow borrowers to control the content they receive, identify who (within the FI) has permission to send the borrower content, and preserve text content within the system for auditing.
Additionally, the software allows collections teams to create queues to segment cases that may pose compliance risks, such as active bankruptcy or pending litigation. This helps staff avoid working on these cases and easily identify those that can or can't be addressed.
A Transparent Process
Beyond delivering messages using the best method for individual borrowers—and in compliance with debt collection rules—another factor in effective collections communication is transparency. A collections team that goes the extra mile, sharing all options with debtors and working with them on a personal level to move their finances from red to black, will create a more memorable and trusting borrower experience than if borrowers simply receive delinquency notifications with a self-service link.
FIs can also implement early communication to notify borrowers of other loans that may be in jeopardy if action isn’t taken soon, adding a preventative element that could reduce the severity of or prevent future delinquencies.
When a collections team incorporates all these elements in their processes, they set themselves and their multigenerational borrowers up for easier repayment plans and fewer clashes due to misunderstandings or missing information.
Explore MeridianLink Collect
MeridianLink Collect is a cloud-based software designed to streamline the debt collection process. Download our ebook—Maximize Your Collections Process—or request a demo to learn more about automating manual tasks to free up valuable staff resources, creating custom queues and reports, setting up regulation-compliant borrower communications, and more.