An estimated 37 percent of U.S. consumers carry telecommunications debt states “Consumer Experiences with Debt Collection,” a report by the Consumer Financial Protection Bureau. Published January 2017, the findings were released after reviewing data compiled December 2014 to March 2015. Large debt has been an industry liability since the boom years of the late 1990s, but the sense of urgency to resolve it has been ratcheted up more recently.
The deregulation resulting from the Telecommunications Act of 1996 coincided with new services and technological advances (e.g. caller ID, mobile phones and bandwidth) that spurred immediate growth and attracted considerable investment capital. Delinquencies were common during this period as was the prevalence of inadequate debt collection programs and poor customer service. The delinquent accounts were often neglected, but the ensuing losses were overshadowed by the profits realized as subscriber bases doubled each fiscal year, sometimes every three or four months.
By the early 2000s, however, the industry experienced a nearly proportionate decline due to over-investment and the global recession. Simultaneously, operators were vying for the same market share, and the losses sustained by unattended delinquencies were now standout liabilities on ledger sheets.
Sources of Telecommunications Debt
The early competition gave rise to carriers implementing hardball tactics to “steal” consumers away from other companies. This competition created a buyers’ market as brands cut rate plans or paid early termination fees to attract new business. Thus, it become all too easy for consumers to switch operators without paying off outstanding fees owed to their previous provider.
Second, the inherently transient nature of mobile phone accounts covered the tracks of debt trails that were traditionally attached to land lines and physical street addresses.
Third, issues with cryptic user agreements and confusing monthly statements went unresolved as poor customer service systems failed to offer clarity or satisfaction. Consequently, it was often faster and simpler for consumers experiencing “bill shock” to change providers than attempt to reason with customer service reps.
Ironically, providers reacted by also following a path of least resistance. The rising debt toll went uncollected because it was more cost effective for operators to find new customers than to collect on delinquent accounts. This approach was acceptable in the boom years, but the absence of debt collections infrastructure has proven to be a serious flaw during today’s leaner economic times.
Challenges to Telecommunications Debt
Collecting telecom debt can be difficult given its unique circumstances.
When consumers switch providers, the previous brand loses leverage since “hard collection actions” such as disconnection notices no longer pose a threat.
Also, consumers often move their place of residence while simultaneously changing providers, thus exacerbating the difficulty of locating consumers and conducting collection efforts. This problem will continue to rise as more and more consumers surrender their land lines in favor of mobile phones.
Finally, the Telephone Consumer Protection Act (TCPA) includes restrictions that complicate the debt collections process. For example, the TCPA limits the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages and fax machines. Furthermore, “all non-emergency robocalls, both telemarketing and informational, require a consumer’s permission to be made to a wireless phone” (Prior Express Consent), and consumers may rescind their consent at any time.
Solutions to Telecommunications Debt
Collecting telecom debt is certainly difficult, but some agencies have developed proactive approaches to garnering a favorable return on investment for their clients while fostering consumer retention.
First, top-tier agencies are built on a foundation of compliance and certification, data security and technology. Compliance is maintained with the help of ACA certified officers, ACA collectors and legal teams; consumer data is protected by the Payment Card Industry Data Security Standard PCI DSS 3.2 (PCI DSS 3.2); and advanced technologies such as accounts receivable management software streamline the process.
As always, time is of the essence with best-in-class agencies placing new accounts into their systems within 24 hours:
- Accounts are scrubbed for deceased and bankrupt information upon receipt.
- Skip tracing is added to locate consumers with expired contact information.
- Vendors provide the most recently reported address and credit scores.
- Written demand letters are generated and mailed immediately.
Acknowledging the transiency of mobile phones, the importance of locating consumers using comprehensive skip tracing programs cannot be emphasized enough. Best-in-class agencies subscribe to services provided by large vendors such as Experian, TLO/TransUnion and LexisNexis that locate consumers via government records (court, law enforcement, IRS, DMV and Social Security), the US Postal Service, credit reports, libraries, phone books and public utility statements.
The high volume-low value of consumer debt in the telecom industry is a perpetual challenge. Consequently, agencies segment consumer portfolios to optimize time and resources. For example, a segmentation strategy may consider the validity of contact information, credit scores and propensity to pay.
Collecting telecommunications debt also entails effective operations management. Call center directors generally analyze collections data day-to-day, week-to-week, month-to-month and year-to-year in order to provide the best ROI. Tools of the trade include dialer reports, dynamic scoring and challenger strategies that test sample segments prior to full implementation. These metrics, in conjunction with trending information, enable directors to make real-time adjustments to collections strategies and plan future programs.
Acknowledging the high cost of acquiring and retaining customers, service providers are best served by ethics programs and consumer satisfaction surveys.
The sum of these efforts creates a consumer-centric approach that enhances the retention management programs established by proactive telecom providers.
Contact Optio Solutions to learn how it can help your company with best-in-class debt collections.