Collections Strategy Review
How our recommendations improved a lender’s debt collection strategy
A financial institution was experiencing higher than expected losses on their loan portfolio, particularly to delinquent loans. They had a collection strategy in place, but it wasn’t performing as well as it should be. We worked with them to review their collection strategy and make recommendations for improvement.
The financial institution implemented our recommendations and saw significant improvements in their collection strategy. They were able to more effectively target their collections efforts and recover more delinquent loans. They also saw improvements in borrower satisfaction as a result of the more proactive and transparent approach to collections.
Targeted collections efforts
More delinquent loans recovered
Greater borrower satisfaction
We began by analysing the financial institution’s delinquent loan data to identify patterns and trends. We found the financial institution wasn’t effectively targeting their collection efforts, and that many delinquent loans were being ignored or mishandled.
To improve their collection strategy, our team recommended several changes.
First, we recommended that the financial institution prioritise their collection efforts based on the likelihood of recovery. By using predictive modelling, they could identify the loans that were most likely to be recovered and focus their resources on those loans.
Second, we recommended that they implement a more proactive approach to collections by using automated systems to send reminders to borrowers when payments were due. If payments were missed, collections efforts should escalate.
Finally, we recommended they improve their communion with borrowers and develop clear and consistent messaging around the consequences of delinquency, along with options for repayment.
Ongoing monitoring and refinement
We continued to work with the financial institution to monitor and refine their collection strategy over time, ensuring that it remained effective in the face of changing market conditions and borrower behaviour.
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Our work demonstrated the value of engaging a third-party consultancy to conduct stress tests on credit loss models. Our expertise and guidance helped the bank to identify weaknesses in its existing models and develop new models that were more robust and accurate.
Whether you’re migrating, implementing or enhancing your models, we can support you by developing tools and strategies to provide insights and controls.