This article appears in the May issue of Collections & Credit Risk.
While many of the largest U.S. credit grantors have developed sophisticated strategies around a customer's major life events – the birth of a child, marriage, the purchase of a home or retirement – few such companies have developed a strategy for dealing with a customer's death.
Deceased account recovery is a comparatively small piece of the total debt-recovery market, but the landscape is changing.
The trend is being driven by several key economic and demographic factors: Consumer debt is at record levels, nearly doubling in the past decade to almost $1 trillion; aging Americans hold a substantial portion of this debt – with credit card debt for individuals 65 to 69 years old growing 217% in the past decade, more than four times the rate of the entire population; the number of individuals who are older than 65 is expected to double to 84 million by 2050.
Finally, the death of a parent or spouse is a significant life event and warrants attention from credit grantors.
Add the effects of a difficult economy to the aging population and rising debt levels, and it is increasingly clear that having an effective strategy to deal with the death of a customer and the debt they leave behind is – and certainly will be – critical for organizations that issue credit.
Despite these shifting demographics and the inevitable growth in deceased debt, most organizations still are unprepared to deal with the deaths of their customers. Credit grantors as a result can experience the loss of years of brand investment and a lifetime of customer relationship development and goodwill.
Many organizations struggle with deceased debt because it is a complex and sensitive asset class. While most recognize that deceased debt collection is different than delinquent debt collection, many lack a formal deceased recovery strategy. Worse yet, credit grantors can invoke the wrong strategy, such as sending the accounts of loyal, deceased customers to standard collection agencies whose singular focus is recoveries, not relationships.
The risks of not having the right deceased customer strategy are twofold. While traditional collection agencies are accustomed to collecting deceased debt, their narrow focus on that recovery effort ignores the multiple other relationships the deceased may have had with the credit grantor – such as a mortgage, trust or auto loan.
Failure to consider the deceased's relationships holistically puts all of the deceased's credit relationships – and the opportunity to build those relationships with the survivor – in jeopardy.
Furthermore, if survivors feel threatened or harassed during the recovery process, the opportunity for the organization to maintain goodwill and enhance its brand can be damaged or destroyed.
When this happens, the death of a customer truly represents the end of a relationship.
Organizations and survivors alike can benefit from deceased customer relationship management (DCRM). Just as customer relationship management (CRM) comprises the technologies and processes a company uses to track, organize and manage the relationships an organization can have with a customer, DCRM includes the technologies and processes companies can use to resolve deceased customer accounts and to manage relationships with survivors.
DCRM is an integrated approach that helps organizations respectfully handle the death of a customer while building relationships with survivors of a deceased customer. It focuses deceased customer account resolution on the probate process, which eases or eliminates survivor contact with the collection agency and results in high customer satisfaction.
While the probate process is effective in reducing survivor stress and generating higher recoveries than voluntary collection efforts, historically it has been seen as a complex way to recover deceased debt.
Without access to a central probated estate database, creditors and their agencies have struggled to justify the expense of searching for estates on a case-by-case basis. What's more, the lack of a uniform probate system for the nation's 3,450 probate courts can confound recovery shops that lack the resources and expertise to effectively manage the complexities of probate law.
Critical to the success of a DCRM initiative is the technology upon which it is built
New technologies aimed at helping credit grantors find probated estates, simplifying the probated estate collections process and establishing respectful, consistent communications with survivors of deceased customers are taking shape and gaining traction with credit grantors.
There is technology available to help handle deceased accounts including options designed to isolate time-sensitive estates, manage county-based filing regulations and minimize brand risk by eliminating unnecessary contact with the survivors. There also is technology to help deal with for survivors. \
In general, the credit and collection industries can reshape the way they deal with the death of customers by leveraging the estate process and adopting innovative technology to benefit both companies and survivors. CCR
Ron Michalak is the vice president of marketing at Forte LLC.