Bank debt collection is somewhat different from other kinds of debt collection in more than one aspect. When armed with a few facts about bank debt collection, you’ll be able to choose the correct collection agency by being able to tell which one understands the unique needs of bank debt collection.

What is bank debt collection, exactly? It can mean credit card debt, mortgage, HELOC, commercial loans, personal loans, or auto loans. The practices that are allowed by the government regarding debt collection, such as the times of day you can call, are the same no matter what type of debt you’re talking about. However, depending upon the type of loan, laws regarding raised interest rates, late charges, and other financial issues are very different. Because of this you need to choose a bank debt collection firm that understands the types of loans you’re collecting on.

If bank debt collection touches your business you should be aware that once a customer gets past the 60 day mark, it becomes increasingly likely over time that he or she won’t pay at all. Because of this, as soon as you start approaching this mark, it makes sense to call in a collection agency that is familiar with the intricacies of bank debt collection. Such an agency will know exactly how to coax these difficult clients into paying, and they will not charge anything up front. They only charge a percentage of what they recover, so there is no risk.

Specialized bank debt collection firms have innovative ways of getting the troublesome debtor on the phone. Rather than haranguing people with harassing phone calls, they are turning to unusual incentives to get the debtor on the phone.

Some banks are sending packages containing gift cards or checks that require codes in order to be activated. The customer calls in to the collection agent in order to retrieve the code and talk about how to get their account current. Such incentive programs have a high success rate because people are more motivated by positive reinforcement than fear.

On the other hand, for secured debt, the techniques are very different. Whether you have an in-house collection department or use a collection agency that specializes in bank debt collection, you’ll want to approach the debtor differently. Financial hardship programs are common among secured loans like mortgages and car loans.

Financial hardship programs restructure the client’s payments in one way or another. They can defer payments and tack on the missing money to the principal, lengthen the loan terms (from, say, 30 years for a mortgage to 40 years), or switch the payments to interest only for a period of time.

Financial hardship programs are an important recovery method when it comes to the secured loan type of bank debt collection. They allow the bank to recover its investment much better than taking over the property does. Any of the above techniques actually cause the customer to owe more principal over time, which means more interest over time as well. But because they earn the customer’s gratitude, they are much more likely to be adhered to than other types of repayment plans. Any effective bank debt collection program needs to consider the different strategies required for the two different types of loans, secured and unsecured.

David P. Montana has been a recognized industry expert, business consultant and writer in collection agency services for thirty years. He offers additional beneficial tips and resources on bank debt collection.