Client Types
In collections, there are typically four different types of clients. Identifying them as early as possible can help your agents determine which collection strategy will work best.
Type 1
They are the easiest to collect from and should comprise a huge portion of Frontend’s worklist. If not, I advise your team to assess your credit policies and client acquisition strategies immediately.
The following are just a few typical reasons for default or RFD for these clients:
- They overlooked the deadline.
- They were out of town or out of the country.
- They did not receive their statement of account. If these clients opted for electronic statements or e-SOA, you should consult your IT Department to prevent your company emails from being tagged as SPAM.
- Their assistant or a family member failed to make the payment.
Type 2
Type 2 clients are those whose financial situations have changed. There are numerous possible causes for this. The cardholder may no longer be working, or their business may be going through a rough patch. It can have something to do with health if the client or a family member is sick and the client is paying the hospital bill. Whatever the cause, the majority of these customers often have a solid payment record and have only defaulted when their financial condition deteriorated.
Type 2 clients will not completely avoid your agents’ calls even when they are experiencing financial difficulties. The challenge is getting these clients to fully settle their arrears, even though contacting them can be a little more challenging than contacting Frontend clients.
Type 3
Type 3 clients are those who evade contact and have no intention of paying. While they may share certain traits with fraudsters, the key difference is that they did not illegally obtain access to your credit facility. They applied using their real names and addresses. They applied for their credit cards in the same manner as everyone else. It’s just that most of these clients have fully utilized their credit limits in a short time and are non-starters. Non-starters are cardholders who never made a single payment to their credit cards.
Type 4
Fraudsters who illegally gained access to your credit facility are Type 4 cardholders. They might have obtained their credit cards in a number of ways, including identity theft or stealing the actual credit card. The chance of collecting from fraudulent accounts is close to nil. Therefore, anytime collection agents come upon these accounts, they should immediately report them to your fraud team. More often than not, the latter will coordinate with local authorities since fraudsters are considered criminals. Please note that we will not discuss collection from fraudulent accounts since it is beyond the scope of this course.
Conclusion
Knowing the different kinds of debtors in collections is essential in formulating collection strategies. However, early identification is the key to the successful implementation of these strategies. Helping your team identify the different client types earlier in the collection cycle will allow them to execute the right collection strategies for each kind of client and not just use a blanket approach.
Eager to elevate your debt collection management strategies? Dive deeper into this subject by enrolling in our comprehensive Debt Collection Management Masterclass. Click the link and let’s transform the way you handle debt recovery.
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