Collections Workflow Automation
Building automated collections workflows that balance recovery rates with customer experience. Dunning strategies, payment arrangements, and escalation paths.
Starting Point: Manual Collections Don’t Scale
Early-stage lenders often handle collections manually. An agent reviews overdue accounts, calls borrowers, negotiates payment plans. This works when you have 50 loans. At 5,000 loans, you need automation.
The challenge isn’t automating the calls or emails. That’s easy. The challenge is automating the decision-making while staying compliant and maintaining customer relationships.
The Dunning Ladder
Think of collections as a ladder. Each rung represents an escalation level. Borrowers start at the bottom and move up based on delinquency age and response patterns.
Our ladder looks like this:
- Days 1-3: Friendly reminder via email. “Your payment is coming up soon.”
- Days 4-7: SMS and email. More direct but still friendly.
- Days 8-15: Phone calls begin. Escalate tone.
- Days 16-30: Daily contact attempts. Payment arrangement offers.
- Days 31+: Final notices, account review for charge-off or legal action.
The key is personalization. Not every borrower follows the same path. Someone who always pays 2 days late isn’t treated the same as someone who ghosted you after the first payment.
Payment Arrangements That Work
When a borrower can’t pay in full, offer a payment arrangement. Automating this requires clear business rules.
We allow arrangements if:
- The borrower has made at least 3 on-time payments historically
- They’re less than 60 days delinquent
- They agree to a plan within 30 days of the first missed payment
The system auto-generates arrangement options based on the outstanding balance and borrower’s payment history. A borrower with good history gets better terms than someone with spotty payment patterns.
Compliance Is Non-Negotiable
FDCPA, TCPA, state-specific regulations. One mistake and you’re in legal trouble.
Build compliance into the workflow from the start:
- Time-of-day restrictions for calls (no calls before 8am or after 9pm borrower’s local time)
- Frequency caps (max 7 call attempts per week)
- Required disclosures in all communications
- Opt-out handling (cease communication requests must be honored immediately)
We log every collection action with timestamps, agent IDs, and outcomes. If we’re ever audited, we can prove every contact was compliant.
Measuring What Matters
Track these metrics:
- Contact rate: Percentage of accounts you successfully reach
- Promise-to-pay rate: Percentage of contacts that result in a payment commitment
- Keep rate: Percentage of promises that result in actual payment
- Roll rate: How quickly accounts move from current to delinquent to charge-off
The goal isn’t maximum pressure. It’s maximum recovery with minimum damage to customer relationships.