5 Ways to Optimize Your Debt Recovery Strategy

With higher consumer debt and growing default rates, efficient debt recovery will be essential to financial organizations in 2024. But as legacy processes fail to produce strong enough results, leaders will have to find new strategies to deliver profit in the new year.

What can they do to increase their revenue and ensure their organization benefits from the future of debt collection? Read on to discover our experts’ 5 key recommendations.

5 Ways to Optimize your Debt Recovery Strategy

1. Improve consumer experience

The problem

Cooperation between consumers and collectors is key to efficient recoveries. However, many recovery teams still focus on traditional methods like phone calls and direct mail, whereas research from McKinsey has shown that most consumers want to be contacted through digital channels – and are more likely to cooperate and repay their debt if approached this way.

The solution

Introduce digital tools such as AI chatbots and self-service systems to empower consumers to repay their debt in ways that suit them. Not only does this reduce friction and increase the likelihood of seamless collection, but it also helps you reduce your reliance on third-party vendors.

2. Consolidate your vendor network

The problem

Most organizations rely on large third-party vendor networks to aid their recovery efforts. However, managing 50+ vendors makes life difficult for your internal teams, especially when many vendors don’t provide the transparency into their processes and results that you need. As a result, many organizations lose visibility of their accounts and overspend on fees without producing great returns.

The solution

Cut ties with as many unnecessary or underperforming vendors as possible. Instead, find a partner that will reduce complexity by managing vendor relations for you. The goal should be to minimize the number of vendors your team has to manage, maximize account visibility, and ensure you only work with vendors that provide measurable ROI.

3. Recover dormant judgments

The problem

Many debt portfolios include a large number of dormant judgments. These accounts are a key source of potential revenue, but they are often left stagnant by third-party legal firms that believe there is no chance of recovery.

The solution

Either bring dormant judgments back in-house or move them between legal firms to keep them alive. A partner like RDS is valuable here, as our nationwide legal network enables us to continually send dormant judgments to new firms – while you only have to manage a single vendor.

4. Leverage data collection

The problem

Manually searching and verifying assets is extremely time-consuming and inefficient. However, few firms have the means to automate these practices, which makes them harder to scale and ultimately limits the volume of reliable data your team can access to support recoveries.

The solution

Introduce tools to enable faster, more efficient processes. RDS’s Paymetrix AI is the perfect example: using a sophisticated asset waterfall along with recursive searching, multi-step verification and a range of unique data sources, the tool enables debt collectors to locate previously undiscovered assets from both pre-suit and post-judgment accounts.

5. Generate profitability indexes

The problem

As the volume of delinquent accounts increases, debt collectors need a way to maximize their revenue without incurring large legal fees. The best way to do this is by pinpointing accounts that are both able to pay and likely to produce a higher profit., However, doing this requires a level of insight into their accounts that most organizations lack.

The solution

Use data analytics to build profitability indexes. These take into account both the likelihood a given consumer is able to repay their debt and the predicted profitability of legal action to rank accounts in order of overall profitability. This helps you prioritize the most valuable accounts and minimize the volume of legal action required to produce strong revenue.

Transform Your Recovery Strategy with RDS

Changing how you collect debt is a complex, time-consuming process, but RDS offers a comprehensive service that provides everything you need to produce more reliable recoveries and higher ROI.

From our proprietary data analytics solutions to a nationwide network of pre-legal and legal firms, we help our partners produce 2-3x higher liquidation than our competitors.