Collecting from Millenials

Millennials are an indebted generation, with substantial student loan debt, credit card debt, and auto loan debt.

Unfortunately, many young members of this generation have fallen behind on their payment obligations, with millennials leading other demographic groups in the percent of people who are 90 or more days behind on payments for various types of loans.  This is a big problem because millennials pose unique challenges for debt collectors for many reasons, even beyond the fact that many members of this generation have more debt and less income than their older counterparts.

But while developing an effective collection strategy for millennials borrowers may seem daunting, deepening your understanding of these younger borrowers can set you up for greater success.

Millennials may be harder to find

One of the biggest challenges when it comes to collecting from millennials is that many don’t have a home or apartment of their own. More than one in five still live with their parents, according to a recent Zillow analysis.

Without their own independent addresses, tracking down young people can take much more time and effort.

Most millennials don’t have landlines

Many millennials lack not only permanent addresses of their own, but also do not have landline telephones. Instead, it’s common for the members of this generation to opt for carrying a smart phone only.

Connecting with smartphone users is more difficult for two reasons.

One issue is that many people don’t pick up the phone when they don’t recognise the number. And some don’t even answer when someone they know is calling, preferring instead to communicate via text. If you can’t get a young borrower to take your calls, collecting becomes a major challenge.

The Telephone Consumer Protection Act also imposes more stringent regulations on telephone calls made to mobile devices compared with calls made to landlines. You need to know the limitations to avoid running afoul of the law.

Millennials may have a lot more debt

Even if you can connect with them, there’s an additional obstacle associated with effectively collecting from millennials. Many are heavily indebted to the federal government and to private lenders because they borrowed a fortune in student loans to fund their education.

Student loans are treated differently under the law than other types of debt. Because they can’t generally be discharged in bankruptcy and because the consequences of default could result in loss of a professional license or seizure of tax refunds, student loans are often considered a priority debt by those who owe.

Millennials who devote a substantial portion of their monthly income to student loan repayment may simply be lacking the cash available to make payments to other creditors. Or they may have given up on ever fulfilling their financial obligations if their total debt balance is unmanageable.

This can leave them with a major lack of motivation when it comes to dealing with debt collectors to resolve defaulted debt.

Millennials may be less interested in preserving their credit

Many millennials are wary of borrowing, perhaps because of their large student loan balances. For those who don’t plan to take on more loans in the future, maintaining good credit becomes far less important.

Without the motivation that comes with improving credit or keeping a good credit score, young people may be much less worried about how nonpayment of debt will affect their future prospects.

Millennials often distrust financial institutions

Many members of the millennial generation came of age during the 2008 financial crisis. They saw banks get bailed out while consumers got foreclosed on. Understandably, this has created a wariness when it comes to dealing with any financial institution.

This can make it far more difficult for collectors to gain the trust of millennial debtors or to convince them that repayment is a moral imperative.

Tips for collecting from millennials

Despite the challenges that millennials present, there are some proven tips that can help make collecting from members of this generation easier. Some best practices for collecting from millennials include the following:

  • Make online payment easy: Most millennials prefer to conduct their financial affairs online. If you can set up a web portal to make online payments easier, you may be more likely to get younger debtors to make regular payments.
  • Personalize your approach to collection: There’s nothing more upsetting to a delinquent borrower than feeling like no one is listening. And millennials have even less patience for this than most. To avoid millennials tuning you out entirely, avoid creating a situation where a borrower talks to someone today that has no context about conversations from the past. When collectors remember and make reference to the borrower’s personal situation and understand the context of past calls, millennials will feel like they’ve made the type of connection they need to make any effort to repay.
  • Aim for a compassionate approach: It’s common for young people to feel they’ve had a harder road to traveler than their older counterparts due to the increased cost of education and the reduced likelihood of a steady, well-paying job with benefits. Showing you have an understanding of their unique life challenges can make millennials more responsive.

While it may require creativity and some changes to normal collection practices, it is definitely possible to find solutions to successfully collect from millennials.

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Brian Reed

Posted by

Shantanu Gangal


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