Banks are taking extra steps to collect unpaid credit card debt…
Banks have stepped up their collection efforts on delinquent credit card accounts in an attempt to prevent further crisis. Delinquent customers will be receiving calls about even one missed payment sooner and more frequently and may be offered a payment plan, a break in interest or fees and incentives to pay off their debt more quickly. With unemployment on the rise, many consumers are defaulting on their credit card payments. The percentage of delinquent credit card accounts rose to 4.51% in the first quarter from 4.41% the year earlier, according to the American Bankers Association. And banks are reporting increases in delinquency rates in their second-quarter earnings reports, and are expecting the problem to get worse.
In the midst of a mountain of bad loans and mortgages, banks are under tremendous pressure to balance their financial accounts and are responding by working past-due accounts more aggressively. They are putting their best collectors on their toughest-to-collect accounts (those that are at least 60 or 90 days past due), hiring outsourcing firms to supplement their internal efforts and putting new hires on accounts that are in the early stages of delinquencies.
To help increase the frequency of calls to delinquent customers, CitiGroup, Inc., has hired additional collectors and has expanded programs that allow borrowers to temporarily postpone payments or to settle debts for less than they owe. Some borrowers with large balances are being offered a percentage of their payment made above-and-beyond the minimum amount due, typically up to $550, if they make a large chunk payment over several months. The match is delivered as a credit to the account a few months after the offer period ends.
Bank of America is contacting delinquent payers earlier than in the past. “We are doing a lot more collection work than we ever have, putting a lot more people on the issue than we have before,” said Bank of America’s chief executive Ken Lewis. While, American Express is offering some of their customers a break on fees, monthly payments and interest rates. Washington Mutual Inc. started directing borrowers who were several months late with payments to a self-service Web site where they could make a payment or set up a payment plan. “It lets them avoid the phone call,” says spokesman Keith Givens. “It’s a very confidential service.”
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