Social media channels offer rich opportunities to improve and even redefine the debt-related interactions between creditors and consumers. Like any new and disruptive technology, however, the difference between positive and negative outcomes depends on the
intent and behavior of those involved.
Done properly, social media could be the answer to helping consumers understand and manage their debt burden while avoiding default. If social media is misused, however, the consequences could be harmful to consumers and creditors alike.
Because social media is a relatively new channel for default management, its legal and reputational risks are not entirely clear, and the necessary regulatory frameworks surrounding its use have been slow to emerge. As a result, many creditor organizations
have been understandably cautious. However, not long ago, consumer use of websites to purchase goods or manage bank accounts seemed unrealistic, too.
Given the way that social media seems to transform virtually every walk of life, it seems more than reasonable to suppose that, in the near future, social media also will be used to help consumers better manage debt, understand repayment options, and restructure
payments. As this happens, creditor organizations will begin to enjoy new, unprecedented levels of collections productivity, efficiency and effectiveness.
Social media could benefit consumers in the following ways:
- Friendly reminders about missed payments
- Education to understand effective budgeting or interest rates
- Strategies to avoid interest penalties and late fees
- Options to restructure debt and develop workable repayment plans
- Interactions more in line with consumers’ increasingly digital expectations and channel preferences
Creditors, in turn, could gain from the following:
- More effective borrower identification, compared to what is available offline due to constantly changing physical contact information
- Higher contact rates, resulting in default prevention
- Less expensive collections cost via consumer self-service
- Conversion of delinquent accounts into loyal and lasting customer relationships
Clearly, the enlightened use of social media has the potential to improve the consumer and creditor experience alike. So what’s not to like?
The possible misuse of social media is one cause for concern. This could lead to debt collection practices that are problematic, counterproductive, or downright illegal. For example, social media is easy and inexpensive to use, readily accessible and, as
a result, difficult to control. Competitive pressures or compensation programs can easily tempt collections organizations or employees to color outside of the lines. Abuses, in turn, could lead to substantial government fines, damage to business reputation,
How can misuse be prevented? The organization interested in using social media for default prevention needs a code of conduct and a well-defined set of ethical practices incorporating existing law, business and community values, and industry norms. In creating
such a code, care should be taken to ensure that:
- Social media identities clearly divulge professional affiliation and avoid any misrepresentations or attempts to deceive, intimidate, embarrass or confuse
- The content of messages is limited and discrete, and always in compliance with applicable laws
- Messages are not overly familiar so as to be considered excessive or extreme
Several other steps can help organizations build the guard rails and lane dividers for safe, effective social media use. Establishing a comprehensive and interdisciplinary risk management program, including business, legal, technical and customer service
departments, should be a definite step. Starting such a program leads logically to the development of education and training resources that employees need to understand and comply with acceptable practices. Audit regimes will then be needed to verify compliance.
Finally, a robust software solution can help organizations avoid pitfalls while ensuring compliance with applicable statutes and regulations.
A partner with experience developing sophisticated collections and debt management solutions can help organizations make the most of social media. With the right expertise and solutions, organizations can use social media to cut collection costs, improve
collection results, better inform consumers, and enable consumers to better manage their debt, gaining a clear competitive edge in today’s increasingly volatile collections industry.