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Bankers call bad debt the unreturned loan, including the principal and the interest. Its causes may be completely different: from customers’ forgetfulness to fraud.

Structuring of bad debt management is the number one task for the collection department of a bank. The need for structuring the above activities is caused by constant emergence of new customers who are in arrears.

The structure of working with individual debtors usually looks as follows:

• Remote impact on the debtor;
• Personal interaction with the debtor;
• Impact on the debtor by third parties or law enforcement agencies.

Remote impact. Typically, when information confirming that a customer is in arrears reaches the collection department, the warning system automatically sends the customer an SMS message. The message informs him of arrears occurred asking him to repay the debt. If there is no effect, a letter is sent to the customer. After that, the bank starts calling his home, working place and registered residence, i.e. the bank employees are taking measures to trace the debtor in order to convince him to repay the debt.

Personal interaction with the debtor. If the above steps do not lead to the desired result, the employee of the collection department personally visits the debtor at home or at work, trying to convince him to return the borrowed money. In addition, the employee informs the debtor of a possible appeal to the government agencies if he does not fulfil his obligations towards the bank.

Impact on debtor by the third parties or law enforcement agencies. The last element of the mechanism of working with bad debt comes into effect only after all other options have been tried. Bank addresses law enforcement agencies or a court in order to recover the loan through the courts for the purpose of tracing the person who did not return the loan on time.

If you are interested in the programs on bad debt management, please call +7 (812) 498 65 80.

TA Consult experts will answer your questions. 

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