Deceased Account Collections Requires A Specialized and Compliance-Based Approach

Linda Straub Jones

The credit and collections industry has been receiving an increased amount of attention lately from the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC) and consumer attorneys. It is more important than ever before not only to know the status of your consumers, but also to 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 a deceased account holder. With the aging of the baby boomer generation (the oldest of which are now in their mid-sixties), there is an increased population of older consumers, and thus older debtors. As these individuals age there comes the unfortunate increase in deaths.

Having a plan in place for how your company will manage collections of deceased account holders, once they are identified, will go a long way toward making sure this delicate situation is handled with extra care. It is important to note that the baby boomer generation is far more credit savvy, and will expect there to be a disciplined process around this inevitable event. Additionally, 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  percentage of U.S. population that die each year: 0.8 percent
• Estimated U.S. deaths in 2014: 2,552,000
• Approximate percentage of deaths in the U.S. of those who have a probate filed: 25 percent
• Approximate number of probates filed in the U.S. in 2014: 638,000
• Average U.S. household credit card debt in 2014: $15,611
• U.S. consumer credit card debt as of October 2014: $882 billion
• Percentage of U.S. households with credit card debt: 46 percent

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 while these laws provide windows of opportunity for presenting claims to the estate of a deceased account holder, it takes a lot of time and effort to remain current with each state’s laws.

Collecting on the account of a deceased consumer requires a unique team of collectors with special training in dealing with the probate process and a sensitive approach. The same tactics and talk tracks for recovery do not apply in this type of collections scenario.  Contact is mostly with family members of the deceased, and often family members are emotional when discussing the death of a loved one.   Collectors need to be sensitive to the family member’s situation, and also 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 a policy statement regarding the collection of debts of deceased account holders, which was issued in July 2011, the FTC will be looking for increased transparency and integrity in collecting this type of debt. They emphasize that debt collectors may not mislead relatives to believe they are personally liable for a deceased consumer’s debts, or use other deceptive or abusive tactics. The FTC policy statement also highlights how debt collectors may communicate with family members and others to locate someone authorized to pay the deceased account holder’s outstanding debt.

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 debt to a specialty debt buyer

As you determine which option best fits your company’s business model, make sure you are aware of what the regulators are saying, and how these regulations may impact your decision.  Not only is there the FTC policy statement mentioned above, but the CFPB has made statements about collecting on accounts of deceased account holders. Additionally, the Office of Comptroller of Currency (OCC) has commented on the sale of debt of deceased consumers, providing national banks and federal associations with consumer protection requirements and safe and sound banking practices with regards to the pursuit of collections on a deceased consumer’s debt. Ultimately, it is imperative to determine the best options for recovery while adhering to regulations designed to protect consumers – both living and deceased.

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