PNC and KeyCorp upgrade collections technology as CFPB deadline approaches

Exchanging calls for texts and emails is a kinder, more compassionate way to get delinquent customers to pay off their debts.

It is also more efficient.

This is the view at the heart of efforts by PNC Financial Services Group in Pittsburgh and KeyCorp in Cleveland to digitize their collection processes. Rather than blocking the way for customers with phone calls and letters, they’ve expanded their outreach efforts to encompass emails, texts, push notifications, and on-screen messages.

“It’s an older mindset where you have to try to call customers a lot to catch them when they’re at home,” said Jennifer masterson, Director of Personal Loan Default at PNC.

There are several reasons why banks such as PNC and Key rely more on digital awareness. Some customers avoid answering calls from unknown numbers. A phone call can also seem confrontational or embarrass a customer. Digital outreach is more efficient and cost effective than assigning agents to track down customers who can quickly respond to a reminder or SMS notification.

These changes are also welcome. Banks that deploy such methods may find that they align well with certain Consumer Financial Protection Bureau debt collection rules that take effect November 30, such as restricting the number of calls collectors can make.

“Digital channels are much more profitable for collections than relying on large call centers with humans doing this work,” said Matt Higginson, partner at McKinsey in Boston. “There is also regulatory control to ensure that lenders do not call clients multiple times a day, as this can be viewed as borderline harassment.”

At the same time, many banks will want to make sure that they comply with the rules governing electronic communications. The rules are aimed at third party debt collectors, rather than creditors or primary collectors, but banks tend to use these rules as models.

McKinsey’s 2019 research found that predominantly digital customers who are contacted electronically make 12% more payments than those sought through traditional channels.

“We believe this is because customers can pay off their debt at a time and on whatever channel they prefer, rather than being called out coldly by a human, which is inconvenient and can be embarrassing,” he said. Higginson said.

A McKinsey article from May also found that lenders favoring digital solutions have seen monthly payments tripling across all portfolios and the cost of collections falling by more than 15%.

The most sophisticated banks use a wide variety of physical and digital channels for debt collection, including phone calls, letters, emails, texts and on-screen messages when logging in, Higginson said. . Many also offer a landing site for customers to review their defaults and easy ways for customers to pay; sites can be a dedicated web page or a feature on a mobile device that allows users to pay with one or two clicks.

Typically, he finds that monoline lenders, such as large credit card issuers, are better equipped to embrace digital collection methods than universal banks with split mortgage, credit card, and loan departments. in silos. He has not seen regional banks as a whole invest heavily in digital collection processes.

The PNC, with $ 553 billion in assets, began incorporating texts and emails into its awareness campaigns at the end of 2019 to supplement phone calls. Depending on the customers and what they have chosen or refused, they may receive all or part of these communications. Most of these features were built in-house, although a third-party service sends the texts.

“A lot of customers just need a reminder because they forgot to make a payment,” Masterson said. them ”to make this payment.

Another advantage of SMS and emails is that they are less confrontational.

“Maybe people are avoiding our calls because they know they owe us money and they don’t have money that month,” Masterson said.

Additionally, an email may explain solutions to difficulties, such as skipping a payment or temporarily reducing payments, and directing customers to the appropriate part of the PNC website via a link. Ultimately, Masterson plans to add an online chat feature so customers can discuss options with the default team.

Overall, the goal is to pave the way for self-service wherever possible and to reserve employee discussions for customers who need to explore solutions to difficulties. This outreach range also recognizes that some customers respond better to certain forms of communication than others, or rarely take calls from unknown numbers.

“Email isn’t always a great way to reach me because you get so much spam,” Masterson said. “But if someone texts me, I will respond almost immediately.”

This three-pronged approach has supported or improved PNC’s ability to reach people, Masterson said, and allowed PNC officers to speak with clients who need more personalized assistance.

Key’s efforts, with $ 187 billion in assets, were born out of a larger digitization effort more processes and improve self-service.

Starting in 2020, defaulting customers may receive a mix of calls, letters, texts, emails, push notifications, and messages that appear when logging into online banking, depending on the forms. communication they have chosen to receive from Key. Text messages and emails will contain links to the KeyBank Payment Assist portal to make or schedule payments, extend their loans, make a promise to pay or initiate loss mitigation. A promise to pay will temporarily suspend all telephone calls.

“This provides great flexibility to our customers,” said Amy brady, chief information officer at Key. “They can do it at 2 am when we are closed or our agents are not on the phone.”

Brady sees pop-ups and online notifications as sweeter reminders than phone calls. Like Masterson, she notes that this type of outreach allows agents to use their time more efficiently and focus their energy on customers who need a phone conversation.

Key worked with Katabat, a debt collection software company, to activate their email and SMS distribution strategy and create a personalized portal. The bank reports a 25% reduction in staffing requirements throughout 2021 and a reduction in losses that began in 2021. It expects the new system to save $ 7 million in 2023.

“These abilities allow clients to maintain their dignity during times that can be very difficult, and sometimes avoid embarrassment if a situation were to be wrong,” Brady said.

The CFPB rules that come into effect on November 30 do not apply to creditors or debt collectors, but “banks and other creditors have for decades used the Fair Debt Collection Practices Act as a guide on how they are managed. ‘engage in their own collections,’ said Jeff Naimon, partner at Buckley. “I strongly expect that banks will largely follow the substantive rules created when making the rules.”

PNC and Key state that they follow the guidelines of the FDCPA.

Some changes align well with a digital-centric approach. For example, text messages and emails can replace calls, which will be limited to a maximum of seven times in seven days. Still, there are gray areas for banks wishing to comply.

The CFPB requires third party collectors to instruct customers how to opt out of electronic communications. This could be difficult for banks to implement. “Where do you include that in a one-sentence text that says ‘It wouldn’t be great to square that up, click here’?” Said Naimon. “Should the disclosure have been in-text, or is it okay to delve deeper into it in the online process?” “

Masterson said the PNC is implementing the next CFPB guidelines, such as putting in place controls to keep calls within the maximum of seven per week, and is on track to do so by November 30. .

“I see these rules as doing what’s right for the customer,” she said.

The key is in a similar place.

“We are very satisfied with our opt-in, opt-out practices in the digital space,” said Dave DeSantis, defect management manager at Key. “I am convinced that the new rules will have no impact on what we need to do to serve our customers or will not have a financial impact on our results.”