Deceased Account Collections - A Closer Look at an Often Overlooked Revenue Source

Linda Straub Jones

With the increased attention the credit and collections industry has been receiving lately, it’s more important than ever to not only know the status of your consumers, but to also have a plan on how to handle accounts as they move into different statuses. One account status that should not be overlooked is that of the deceased account holder.

With the aging of the Baby Boomer generation (the oldest of which are now in their mid-Sixty’s), we have a much larger population of older consumers, and thus older debtors; and with older individuals comes the unfortunate increase in deaths.

Having a plan in place for how your company will handle collections of deceased account holders, once they are identified will go a long way towards making sure this delicate situation is handled with extra care.  Additionally, with the increased visibility the collections industry is receiving lately from the CFPB, FTC and consumer advocate groups, it is essential that your plan is not only well thought out, but that it is in compliance with regulations.

Statistics to consider:

• 2014 U.S. Population: 319,000,000
• Approximate % of population that die each year: 0.8%
• Estimated deaths in 2014: 2,552,000
• Approximate % of deaths of those who have a probate filed: 25%
• Approximate number of probates filed in the U.S. in 2014: 638,000
• Average household credit card debt in 2014: $15,611
• U.S. consumer credit card debt as of October 2014: $882B
• % of U.S. households with credit card debt: 46%

Sources:
http://www.census.gov
http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household

Even with such a large potential impact, most collection agencies and creditors often do little or nothing to collect debt from deceased account holders because it is not only a sensitive subject, but it is also a very complex process.  Probate laws can vary by state, and it takes a lot of time and effort to remain current with each State’s laws.

Additionally, collecting on the account of a deceased consumer requires a unique team of collectors, with special training and a very soft touch.  The same tactics and talk tracks do not apply in this type of collections scenario.  Most of the contact is with family members, and often times, family members are emotional and just need to talk.  Collectors need to be sensitive to the family member’s situation, but also need to be well versed in how to re-direct the conversation gently to find out the information needed to file a claim or otherwise collect the debt.

According to an FTC policy statement regarding collecting of debts of deceased account holders, which was issued in July 2011, the FTC will be looking for transparency in collecting this type of debt.  They emphasize that debt collectors may not mislead relatives to believe that they are personally liable for a deceased consumer’s debts, or use other deceptive or abusive tactics.

There are options available for handling accounts of deceased account holders:

• Set up an internal collections department dedicated to deceased account collections
• Outsource to a specialty collection agency
• Sell to a specialty debt buyer

As you determine which option best fits your company’s business model, make sure to be aware of what the regulators are saying, and how that may impact your decision.  Not only is there the FTC policy statement mentioned above, but the CFPB has also made statements about collecting on accounts of deceased account holders, and the OCC has commented on the sale of debt of deceased consumers.

Additional information and details about deceased case management can be found in this free whitepaper: Deceased Case Management, by Linda Straub Jones of LexisNexis and Tracey Bannochie and Elizabeth Melton of DCM Services.

This article originally appeared in the latest issue of Know Your Debtor, a free quarterly newsletter focused on the U.S. consumer environment. Make sure you’re registered to receive insideARM’s newsletters on your User Profile page.