Economic Slump Sends Hospitals, Banks, Auto Lending Firms Looking for New Ways to Collect Unpaid Consumer Debt

The nation’s economic troubles may have started in the real estate market, but as more consumers struggle to pay their bills, a growing number of industries are also feeling the impact. From hospitals to automotive finance firms, companies in virtually ever sector are seeing a rise in unpaid customer bills — and they’re looking for new solutions to stop the bleeding, such as hiring professional collection management companies with expertise in this specialty area.

Unpaid customer receivables, or "bad debt," are not uncommon in business. But as economic conditions have worsened, the value of these delinquencies has skyrocketed. According to a recent article in Healthcare Finance News, Tenet Healthcare Corporation, which runs over 50 hospitals in 12 states, has seen unpaid patient fees rise 5.8% to $163 million. The news is equally grim in the consumer credit industry. Last October, BusinessWeek reported that credit card issuers projected bad debt to reach an estimated $41 billion in 2008. Issuers estimated that the debt would grow more than two-fold in 2009, reaching $96 billion.

Companies have traditionally managed unpaid accounts by either contacting customers directly, or outsourcing the task to one or more professional debt collection agencies. But the old approaches are no longer working the way they once did.

Lauren A. Irwin-Szostak, Founder and President of Business Processes Redefined, LLC an expert in consumer debt collection, says companies are facing numerous collection hurdles. "Today’s consumers are savvy. They know their rights when it comes to receiving calls or notices from debt collectors. And in this economic environment, when you contact a customer about an outstanding bill, chances are you’re competing against the credit card company, the cell phone company, the auto loan company, and other credit grantors who are also trying to collect from the same customer." Irwin-Szostak adds, "It becomes more difficult to reach consumers at their residence and place of employment, so creditors must apply an analytical strategy to their call and letter campaign to maximize the likelihood of establishing contact with the right party."

As a result of these challenges, many companies are now exploring new approaches, such as enlisting the help of professional collections management outsourcing firms. "When you hire a debt collection agency, you don’t know how they’re going to contact your customers, or if they have proven expertise collecting your particular type and age of bad debt," says Ms. Irwin-Szostak.

Professional management firms differ from debt collection agencies because they don’t directly collect the bad debt. They analyze the delinquent accounts, segment them by like attributes, such as age, credit history, and account type. Then they match the accounts to one, or multiple, debt collection firms with specialized expertise. Ms. Irwin-Szostak says this new approach is a better all-around solution. "Companies can not only collect more money from their overdue accounts, but the net collection costs are lower. Plus, they can redeploy any internal collections staff to focus on core aspects of the business. Finally, the company retains more control of the process, which can help preserve delicate customer relationships."

About Business Processes Redefined, LLC (BPR)
BPR is a receivables management firm that provides turnkey solutions to companies with delinquent consumer accounts. Working with a proprietary network of the best independent collection agencies in the country, BPR executes a highly analytical, results-oriented approach to collections. Drawing on decades of experience represented by the firm’s leadership team, BPR monitors and manages the recovery process from start to finish, always ensuring strict compliance with the laws that govern the collection industry and the highest ethical standards in the business.