SEATTLE — Varolii Corp., an automated collections communications provider, recently surveyed more than 400 collections and financial services executives nationwide and found nearly half make no distinction between chronically late payers and consumers who have fallen behind for the first time. 

The survey revealed that despite an economy that's in a slow-recovery mode, these executives still are challenged by changing consumer behavior and increasing costs as they try to collect on past-due accounts. 

The 2010 Collections Trends and Challenges Study also determined these sentiments regarding the current collections environment:

—Varolii found "Consumers aren't opening their wallets as much as they used to." Inability to pay is a top challenge to collections operations, according to 81 percent of respondents.

—Even when consumers can afford to pay, the survey determined they often don't as 39 percent of executives noted consumers' unwillingness to pay as one of their top challenges.

—Increased costs are contributing to poor collections performance as the survey indicated 25 percent of respondents consider increasing collections costs to be a major barrier.

When asked what strategies they were using to deal with larger volumes of delinquent accounts, the survey findings determined virtually all respondents report using multiple methods to reach past-due borrowers.  

—Direct mail still rules. Varolii said more than 70 percent of companies still use mail to contact delinquent account holders. While some types of lending require mail letters for past-due notices, the survey revealed other lenders simply haven't considered whether to stop using it.

—Ramping up collections staff continues to be a favored — and expensive — tactic. The survey found one-third of companies revealed they are hiring more collections agents. Varolii mentioned staffing is the largest component of contact center costs with agent salaries comprising nearly 54 percent of overall operating expenses.

—No distinction made between landline and mobile numbers. The survey also mentioned on average 38 percent of phone numbers on respondents' target lists are mobile numbers. Meanwhile respondents shared that 73 percent of them have their agents make manual calls just as if they were calling a land line. Only 8 percent used text messaging while just 12 percent are leaving automated voice messages on mobile phones.

—Some companies focusing their efforts on a subset of accounts. Varolii found 60 percent of survey respondents are using account prioritization to determine which accounts to treat because they don't have the resources to effectively contact all past-due accounts. However, by primarily focusing on high-value or high-risk accounts and ignoring others, the company thinks collection agencies might be potentially leaving money on the table.

In another segment of the survey, Varolii asked the participants about making first-time delinquent borrowers a stated priority

"These are borrowers who have never fallen behind before and will likely never fall behind again once they are back on their feet," Varolii reasoned.

"Eventually, these borrowers will be profitable again for the companies who lend to them," the company continued. "However, few companies make any distinction between chronically late payers and first-time defaulters when attempting to collect a debt."

The survey reinforced Varolii's assessment:

—A total of 25 percent of respondents do not segment their lists at all to send more personalized communications, and 30 percent only segment according to large pre-determined groups.

—While 57 percent of respondents state their organizations place a great deal of importance on retaining first-time defaulters, nearly 50 percent report no difference in how they treat them. Instead, Varolii learned first-time defaulters progress through the same early-, mid- and late-stage collection buckets as those borrowers who habitually pay late.

—Only 16 percent of respondents have created an entirely different collections experience for first-time defaulters.

—And the survey determined 36 percent can't identify who among their delinquent borrowers have fallen behind for the first time.

In wrapping up the survey, Varolii learned automated communications are starting to emerge as a lower-cost and more effective alternative for collections companies.

"As part of their effort to combat the sheer number of delinquent accounts and contain costs, many organizations are shifting collection methods toward those that can more easily scale to match the increasing volume," survey orchestrators pointed out.

To be specific, 42 percent of respondents said they are increasing their use of automated communications to reach past-due accounts and offer the option to make payments directly or speak to a collections agent.

Officials explained the 2010 Collections Trends and Challenges Study was conducted online within the United States by Lodestar Research on behalf of Varolii between May 4 and May 19. They explained the results are based on responses from more than 400 qualified collections executives, representing auto lenders, credit unions, mortgage servicers, utilities, credit card companies and commercial and retail banks. 

Brian Moore, executive director of collections solutions at Varolii, shared his overall assessment of the study.

"Collections organizations have been whipsawed over the last few years by skyrocketing consumer debt delinquency and plummeting resources. It's incredibly difficult to collect on past-due balances," Moore conceded.

"While it's good that companies are increasing their collection budgets, they still struggle with outmoded techniques," he added.

"Varolii clients have learned they can be more effective by judicially applying appropriate technology rather than throw more people at the problem," Moore concluded.