These days, consumers face all sorts of challenges when it comes to managing their money. And debt – be it a mortgage, car payment, student loan, or credit card – becomes a part of their financial life for years. Given the myriad forms of debt and what might be years of consumer touch points, businesses can benefit from an ongoing and long-term approach to educating consumers.
This is the third in a three-part blog series on the value of educating credit customers. In this series, we provide insights on customizing your approach to consumer education, making adjustments based on the type of loan, and the importance of a long-term commitment to consumer education.
Consider the Big Picture
For lenders who want to see those accounts stay current and in good standing, helping the credit customer better understand their loan responsibilities can result in its own payoffs along the way. Most experts agree that a long-term commitment to financial literacy augments consumers’ understanding of any particular notification. The auto industry provides a good example. Research shows that people tend to view financing for a new or used car as an afterthought with very little pre-planning.[ii] A good long-term approach would include proactive credit counseling, so people recognize the value of shopping around for the best borrowing terms at the outset. The more that creditors adopt proactive and ongoing education, the more consumers learn what to look for and understand the payment obligations that come with the debt. But in the end, any education effort must hold up in situations where those obligations aren’t met, and customers face delinquency or default. “Unfortunately, agents are all too familiar with the ‘how did I get here?’ phenomenon of consumer awareness only increasing when delinquency happens,” says one industry veteran. “And quite honestly, even some collections teams might not notice a problem until a customer has fallen behind. More awareness all around is what everybody needs.” So, how should your ARM operation incorporate awareness and consumer education? Consider the following: Before planning your strategy, learn the characteristics of default and other common lending problems. Also, consider the chronological patterns involved in borrowing: In the case of student loans, for instance, when are forbearances scheduled to end? When do deferments expire? What about grace periods? Monitor these milestones and calibrate engagement accordingly. One size doesn’t fit all, especially when it comes to the different financial situations, experiences, and circumstances facing most consumers. Agents need to be skilled in their approach and able to adjust to different conditions. Agents should also be able to adjust their sense of urgency to the situation. Bringing a problem-solving approach helps create a collaborative tone between the customer and agent, and that can build trust, confidence, and long-term relationships. Don’t forget the user experience As with any digital interface, the user experience is crucial. Consider eLearning best practices, such as manipulating white space, paragraph breaks, and page design for maximum focus and minimum distraction.[iii] Determining what colors to use or how many words to put on a page may seem like trivial concerns. But in the long run, they make a big difference when you’re trying to grab the attention of consumers who just want to navigate your website or payment app as quickly as possible. Consumer education in debt recovery involves long-term engagement and a delicate balance of customer service, regulatory compliance, and efficacy in generating cash flow. A consultative approach to collections can deliver results through collaboration and tailored problem-solving. When it comes to complex or long-term forms of debt, teaching customers about responsible credit and partnering with them to rehabilitate through crisis situations can improve relationships, safeguard your brand, and clear the way for more contact success. And, that makes good business sense. [i] http://blogs.wsj.com/experts/2015/09/21/why-just-in-time-financial-education-is-too-late/ [ii] http://www.consumerfinance.gov/data-research/research-reports/consumer-voices-automobile-financing/ [iii] https://elearningindustry.com/7-instructional-design-tips-effective-elearning
The more that creditors adopt proactive and ongoing education, the more consumers learn what to look for and understand the payment obligations that come with the debt.
Creating Your Consumer Education Strategy
Understand customer behaviors and historical patterns
Train agents for collaboration and problem-solving
Bringing a problem-solving approach helps create a collaborative tone between the customer and agent, and that can build trust, confidence, and long-term relationships.
The Bottom Line