Unlike the tracers used to track motion in the military, medicine or science, debt collection skip tracing involves searching for consumers or business owners who have gone missing. These individuals may be evasive debtors or those who have inadvertently dropped off the grid for a variety of reasons. The U.S. Postal Service, for example, estimates that nearly 30% of “undeliverable” mail is sent to people who have not left a forwarding address after moving to a new residence.
Skip tracing in the credit and collection industry has come a long way from the days of using phone directories, hand-written ledgers and file cabinets. Today, skip tracers rely on a variety of public records and or specialized databases to locate hard-to-find individuals.
Technology is at the core of modern debt collection skip tracing, and savvy practitioners understand the fastest, more economical channels to source.
- What Is debt collection skip tracing?
- Is skip tracing legal?
- What resources are available to skip tracers?
- How much does skip tracing cost?
- What are the benefits of skip tracing?
What is debt collection skip tracing?
Debt collection skip tracing is a type of data mining used to locate right party contacts (aka debtors) whose contact information is no longer accurate or available. Consumer information becomes obsolete for a variety of reasons, including changes to names (e.g. through marriage), mailing addresses, phone numbers (e.g. disconnected or different lines), or financial accounts.
Third-party collection agencies often have dedicated internal skip tracing departments that are thoroughly familiar with the latest skip tracing methodologies. These departments are able to find debtors in minutes using the latest skip tracing innovations. Internal departments often use external skip tracing vendors to augment their own efforts.
Is skip tracing legal?
Skip tracing is legal in the United States providing agencies and other searchers obtain the information via legal channels and without violating specific state laws designed to protect consumer privacy. Skip tracers should be compliant with the laws controlling access to public records in each of those states.
What resources are available to skip tracers?
Skip tracers at debt collection agencies use a wide variety of techniques to update right-party contact information. The revised data is entered into the individual’s contact file so that normal and compliant collection activities can begin or resume.
Top-tier agencies generally store contact files within receivables management software that have the capacity to categorize account information according to specific agency clients and their respective collection buckets.
Debt collection skip tracing often entails working in a circular fashion. A search for an updated mailing address, for example, could lead to locating family members and or former roommates. The information obtained from or about those individuals could produce related data such as property ownership records which can be used to further an investigation.
In addition, a simple web search via Google can help discover changes in legal names and aliases; current and past street addresses, phone numbers and email addresses; friends, relatives, neighbors and roommates; and or current and past employers.
Much of that information can also be obtained via social media channels (Facebook and Instagram) or professional networks such as LinkedIn, chambers of commerce, or alumni associations.
Public records from the federal, state, county and city levels of government offer a variety of debt collection skip tracing capabilities:
- Property deeds and property taxes
- Court records, liens, judgments or civil suits
- Criminal activity or arrest records
- Department of motor vehicles data (driver’s licenses and vehicle registrations)
- Business licenses
- Information from educational institutions
Debt collection skip tracing also involves asset location via financial institutions or those selling registered vehicles or watercraft. Examples include lenders, credit card companies, creditors, credit bureaus, credit histories, banks and credit unions, ACH processors, insurance companies, and auto dealerships (for sales and or service records). Furthermore, running a credit check could lead to new lines of credit with updated contact information.
Major phone carriers, cable companies, gas and electric companies, and water departments are other excellent sources.
Subscription-based sources offered by skip tracing vendors provide agencies with access to specialized databases containing millions of consumer files. Experian, for example, states that its database contains “more than 220 million credit-active consumers.” The skip tracing services offered by TransUnion and LexisNexis are among the most reputable in the nation.
There are even high-tech solutions such as searches conducted with the help of license plate recognition software.
It is important to mention that best-in-class collection agencies have layers of data security systems in place to protect sensitive consumer data.
How much does skip tracing cost?
Skip tracing fees vary considerably as a function of the available services, their frequency and the vendor. At one end is the plethora of online “gotcha” offers that entail paying a single search fee. Reputable third-party collection agencies don’t go there.
Instead, they opt for monthly subscriptions or user-based plans (i.e. how many internal skip tracers are using the services) with well-known skip tracing vendors. Other vendors sell their services by-the-search on a contingency basis (i.e. “no hit, no fee”).
It is not unusual for large collection agencies to spend tens of thousands of dollars each month on skip tracing vendor services. This may sound like a lot of money, but the favorable search results justify the means.
What are the benefits of skip tracing?
Skip tracing is an essential component of third-party debt collections because it saves time and provides more accurate account information. Benefits include determining right-party contacts, improved productivity among collectors, reduced churn, better recovery rates, and increased revenue.
Furthermore, the data obtained via skip tracing can enhance collection strategies.
For example, the location of new consumer credit accounts may lead to the discovery of assets that affect the respective collection scores and risk scores. After applying the new assets, the debtor accounts can be entered into simulation models within collection software platforms. If the simulations are successful, then the strategies are rolled out to the appropriate account segments to prioritize collection activities. Segmented groups include those who are most likely to repay over the next three months.
Other types of data help code individual accounts to ensure that optimized strategies are being applied downstream. The result is a customized treatment of specific consumers.
Optio Solutions was established on a foundation of longstanding experience in financial services, a comprehensive compliance management system, advanced collections technology, and the latest data security certifications. The agency is a member of ACA International where it maintains PPMS certification (one of only 48 companies worldwide).
Optio uses a combination of internal and external skip tracing efforts that are fully compliant with all federal and state regulations. These skip tracing features help the agency provide clients with a favorable return on investment, brand protection, and customer retention.
Contact us today to learn how an individualized collection strategy can improve your organization’s profitability.