Debt Collection During Tax Season
To debt collection what tax season is to retail what the holidays are to food. The National Retail Federation reports that of the 66% of consumers who are anticipating a tax refund this year, 35.5% intend to use their refund to pay off debt. Many in the industry believe that mid-February through May is the most fruitful season of the year for debt collection as a result.
Results for the Debt Recovery Agency
We were interested in how tax season might affect our business compared to conventional collection methods because a b2b debt consolidation agency’s strategy is distinct in the debt collection industry. The trend of collections growth in the first half of February was consistent with that of earlier months.
By focusing only on payment arrangements, we can emphasise the impact of tax refunds even more. As more consumers can afford shorter-term plans, the average instalment amount per plan also rises. With various degrees of impact by client (from a few percentage points to over 300% month-on-month change), we observe this trend across our client base.
In the past, when traditional agencies like MNS Credit Management Group compete against one another, the collections rates for both start off very close. Then, after 50–60 days, a typical direction shift occurs, where standard agency curves start to flatten while it continue to develop linearly, increasing the performance gap over time.
Why is this important to debt collectors?
The clever debt collectors may use this information to create workable payback programmes for debt recovery after customers consent to begin making payments using their tax refunds, is the response. Following is how the collector might respond:
It’s fantastic that you want to pay off your debt with your tax refund. Let’s plan your initial payment for one month from now. … What’s the process like for you?
Thousands of times each tax season, seasoned debt collectors who are committed to effective debt recovery will perform this scenario. The collection technique, however, actually starts in the fall when agents talk about recovering debt and filing for tax refunds, if and when debtors bring up the topic during phone calls.
Before the new year, a collector, for instance, can concur that using a tax refund is beneficial but emphasise the need for starting an urgent repayment plan to prevent that person from going further into debt.
These collection agencies are run by operations managers who design a whole tax season strategy based on the notion that around 35% of people who receive refunds intend to use the money to pay off debt.
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What makes a tax season collection plan successful?
In order to develop and sustain a successful tax season strategy and secure debt recovery, experienced operations leaders are aware of the significance of readiness, timing, modification, and flexibility.
The following operations leader acts are taken into account by these four variables:
Beginning in the fall of the preceding year, keep tabs on consumer patterns, regulatory changes, and economic situations. Share the findings with collectors.
Conduct the necessary consumer outreach and provide incentives for repayments throughout tax season.
As a result of market conditions, trends, or customer satisfaction surveys, use strategic predictive analytics to make in-the-moment adjustments to broad segments (or individual accounts).
If more collectors are required to manage the increased call centre volume during tax season, do so.
Identifying which customers are most likely to obtain refunds and using them to support debt repayment schemes is a crucial part of strategic predictive analytics.
Getting support for debt recovery
Top-tier firms with thoughtful tax season plans have significant advantages over internal initiatives. There are significant launch and ongoing expenditures for in-house businesses, and a lack of competence could lead to compliance problems or even legal action.
Due to this great power, taxpayers have no choice but to settle their tax issues. Though many people believe that taking care of their tax issue is optional, they actually don’t have a choice. The choice between solving your tax problems on your terms or theirs is a straightforward one.
