Technology advancements can sometimes feel like they are occurring at lightning speed. Trying to keep up with the latest and greatest keeps us busy.
Not long ago, skip tracing was a highly manual process that included connecting with “nearbys,” sifting through catalogs and using dedicated skip representatives.
Today, it is more progressive, with automated batch-based skipping and comprehensive skip-trace waterfalls. Looking into the near future, skip tracing will continue to evolve and rely on new information sources and communications channels, as well as a scored and segmented approach.
The regulatory environment surrounding debt collection is constantly changing, and in some cases, it is unclear.
To remain competitive with your skip-tracing efforts, it is essential that you stay on top of these technology advances and understand the new methodologies for identifying and maintaining current addresses and phone numbers for contacts.
One of the most significant changes affecting skip tracing today is the way in which consumers prefer to communicate. Fewer and fewer consumers today are using traditional landlines and are instead opting for mobile phones. They are also communicating more and more via text messaging, e-mail and social media.
Consumers moving away from landlines and relying more on Web and mobile technologies to communicate has resulted in significant challenges for skip tracing and the debt-collection industry as a whole. Perhaps the biggest challenge is that there isn’t a definitive mobile phone directory, so contacting consumers is often difficult, if not impossible.
Another major challenge impacting the collection industry is that the new laws and regulations are sometimes unclear and not necessarily conducive to contacting consumers on their mobile phones.
The Telephone Consumer Protection Act of 1991 (TCPA), for instance, restricted the use of automated dialing systems and artificial prerecorded voice and SMS messages left on mobile phones.
In response, the American Credit and Collections Association (ACA) filed a petition with the Federal Communications Commission (FCC) seeking clarification on whether or not the restriction surrounding mobile phones applied to debt collection under the “express prior consent” clause of the law.
In 2008, the FCC ruled in favor of the ACA, indicating that, under the TCPA, a person who voluntarily gives his or her wireless number as a means to be contacted constitutes prior consent. .
The FCC’s 2008 ruling led to a lawsuit heard by the Northern District of California federal court, which eventually ruled that the FCC overstepped its authority when interpreting the TCPA. Many in the debt-collection industry interpret this ruling to mean that contacting a consumer on his or her mobile phone is prohibited - even if the wireless number was obtained through a source such as a credit application.
Oversight of the debt collection industry is also evolving. The recently passed Financial Regulatory Reform Bill, which created the Consumer Financial Protection Bureau (CFPB), now has the authority to regulate the debt-collection industry.
However, the full extent of the CFPB’s oversight and authority to regulate the industry is yet to be seen. It’s important to note that the Federal Trade Commission (FTC) has launched a thorough investigation into the debt-buying industry, and the outcome of this investigation is still pending.
The bottom line is that current laws surrounding the debt-collection industry are constantly changing and in some cases are confusing. Therefore, it is essential to work with a skip-tracing partner that is fully apprised of the most recent laws and regulations and has a proven track record of successfully working with a number of clients during this ever-changing regulatory environment.
Reduce Skip-Tracing Expenses, Increase Accounts Located
As mentioned earlier, the waterfall approach is a method commonly used today in skip tracing. In light of continued advances in communications technology and skip-tracing methodologies, you should evaluate whether or not the waterfall approach is still producing a solid return on investment (ROI).
You may be able to streamline your skip-trace waterfall by working with a skip-tracing partner who can provide you with direct access to contact data sources.
There are a number of data sources, including the Internet, credit bureaus, marketing databases and public records, and it is important to choose the best data sources for your company.
One misconception when it comes to data sourcing is that there are numerous layers of various bulk data providers.
In reality, the majority of small to midsize data providers today are simply reselling other data sets. However, this is not to suggest that these types of data providers don’t provide value.
The key differentiator is their matching logic and the ability to link data from various sources. If your skip-tracing waterfall already includes original data providers as mentioned above, then adding layer upon layer of data sources may not provide any additional lift.
Identifying The Best Skip-Tracing Partner
Here are a few tips to keep in mind to help you find the best skip-tracing partner for your company’s specific needs:
• Define your skip-tracing strategy.
• Seek out reputable companies that gather data legally and ethically.
• Be skeptical and investigate your options. If the source seems too good to be true, it probably is.
• Choose a partner that is mindful of the shifting regulatory landscape.
• Assess your company’s specific needs. Do you require ancillary data or services such as a confidence score, cell phone indicator or collectability score?
Evaluating Your Skip-Tracing Partner
Before you decide to collaborate with a skip-tracing partner, it is important to examine thoroughly the potential partner to ensure that it is the best match for your company’s overall business strategy. Below are seven steps you should take to evaluate your skip-tracing partner:
1. Define your strategy. Now that you’ve decided to align with a skip-tracing partner, you must first determine what type of approach will best fit your business needs, whether it is looking to do a “one-stop” data collection or a “waterfall” type of approach. Be prepared to also ask yourself, “What level am I testing - broad, cheap, deep or expensive?”
2. Level the playing field. Always submit the same set of accounts to all partners since providing different portfolios and information can skew the results in terms of determining the best partner for you.
3. Eliminate bias. One best practice is to use the same collectors to dial results from all partners. You should also make sure that you are consistent in your calling efforts when it comes to the number of redials, the time of day the call is made, and whether or not you choose to leave a message to eliminate bias.
4. Hit-rate myth. Keep in mind that the highest hit rate is not important if the phones don’t lead to a contact with the debtor.
5. Total Right-Party Contacts (RPCs). Make sure you focus on the total RPCs, and not just a percentage, to get a complete picture. You should also work to obtain the highest number of RPCs and unique phone numbers.
6. Determine your total cost of RPC.
7. Avoid payment ROI. It is important to remember that data providers do not have control over debtors or collectors. Therefore, you should avoid promises for increased payments and ROI evaluation.
Skip tracing will continue to evolve. The emergence of new data sources and communication channels are certain. In addition, new methodologies such as consortiums and scored and segmented skip tracing are already gaining speed.
Also, the ever-changing regulatory environment means that it is more important than ever to contact the right party and eliminate incorrect party contacts from your database.
In the end, identifying and working with the right partner can have a critical impact on your skip-tracing process. Evaluating your skip-tracing partner fairly and accurately will affect your ROI analysis and determine if your skip-tracing efforts are truly effective for your organization.
David Ingram is director of Marketing at Experian.
To comment on this article, contact Darren Waggoner at Collections & Credit Risk at 815.463.9008 or firstname.lastname@example.org.