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Credit bureaus

Many consumers identify the work of credit bureaus with negativity. Registering defaults is indeed an important task, but the work of companies in the sector goes beyond that. For a long time now, credit bureaus have been offering services ranging from credit recovery to portfolio monitoring. In fact, the bureaus' portfolio of services is divided into four groups: credit analysis for new clients; relationship management; portfolio management and recovery; market prospecting and marketing. In this context of a broad portfolio, product development is continuous, always with one eye on innovation and the other on the needs of clients, whether they are individuals or companies of any size and in any region of the country.

In general, the activities of credit protection bureaus are multifaceted. For example, negativation has benefits for the creditor, but also for the borrower and for the market as a whole: it reduces the chances of a credit rating. over-indebtedness and signals to other credit grantors about the risk of a person or company defaulting. But the primary objective of those who deny credit is to collect the debt that has been left behind. By negating, their chances of success increase. And they become even greater if there is good credit management. credit recovery.

One study carried out by researchers from Federal Reserve Bank of New York showed that in places where there are more restrictions on debt recovery, the supply of credit tends to shrink and defaults tend to increase.

Credit recovery is more than simply collecting a specific debt. It means rehabilitating the consumer for the credit market and for the consumption. It must be borne in mind, however, that this activity is far from trivial: just like other activities, it is subject to rules and requires negotiation skills. An incisive approach can break the relationship once and for all with a customer who has delayed payment to cover an unforeseen event, but is keen to pay; on the other hand, a delay in the approach can accommodate a customer who takes the default as a habit.

Even before the approach, the first challenge facing the creditors is, of course, the location of your customers. Location is important for making contact. Without it, neither a good negotiation proposal nor the most precise approach will be successful. This is why marketplaces renegotiation in which the location is provided by the participant, which facilitates the process and increases the recovery rate. A survey by @ GEOC Institute showed that in 2019, 75% used messaging apps to make payment agreements - a significant jump compared to 2018, when the percentage was 45%.

Some companies resort to complete outsourcing of recovery. But not all businesses have the scale to outsource the task. Among the wide variety of services offered by bureaus, credit recovery solutions seek to help the areas responsible to adopt the most precise approach, optimizing results while at the same time taking care of customer relations. These solutions serve companies of all sizes, bypassing problems of scale.

It would be a mistake to think that recovery is limited to exhausting a telephone directory of consumers with overdue bills. Today data intelligence The use of data intelligence applied to recovery makes it possible to identify where the approach is most likely to be successful, allowing for better targeting of efforts. In addition to using data intelligence, companies can associate communication with their customers with the credibility of credit bureaus, through a multiplicity of channels, including the traditional letter by post, but also using digital means.

The solutions offered by the bureaus reduce business costs with the recovery of credit - in other words, they increase efficiency, allowing more to be done with less. At a time when companies are still feeling the economic effects of the pandemic, reducing costs and increasing recovery can bring decisive relief to cash flow.

According to data from the credit bureaus, The number of consumers in default rose by 2.7% in the first half of 2020, compared to the same period in 2019. On the other hand, the number of debts per consumer fell by 4.2%, as a reflection of the renegotiation measures taken during the most acute period of the crisis.

Recently, here we deal with the risk of a surge in defaults in the coming months, with the end of stimulus and assistance measures. This makes the need for credit recovery management, which is important at any time, even more pressing.

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By: Elias Sfeir President of ANBC & Member of the Climate Council of the City of São Paulo & Certified Advisor