The Dos and Don’ts of debt collection by SMS

Organisations rely on SMS to collect unpaid debts, whether it be for late or non-payment of mobile phone bills, tax (including council tax), mortgage, utilities or credit/store cards. That’s because text messages are immediate, inclusive, affordable and don’t get lost in busy email inboxes.

In many cases, a quick reminder is enough to prompt someone to pay – and avoids the time and cost associated with letters and enforcement action.

But while debt collection via text messaging is effective, certain situations require a more personal 1:1 approach.

By its nature, debt is a sensitive and emotive issue. Well over half (55%) of people contacting the debt support charity StepChange have a ‘vulnerable characteristic’ – a wide-ranging definition that ultimately means they may struggle to manage their finances and keep up with payments.

Even if customers aren’t classed as vulnerable, debt still carries a lot of stigma, so they may be reluctant to admit they need support such as a repayment plan.

Good debt collection processes are critical to the health of any company or public sector body that deals with payments. They ensure the financial viability of companies and fairness to other customers who do pay on time. In the public sector, they’re also essential for funding essential services delivered by councils and housing associations.

Government figures show that there is £6.6billion owed to local authorities in unpaid council tax, while unpaid rents owed to housing associations grew to nearly £800 million in 2024.

In this article, we’ll explore the dos and don’ts of text messaging for debt collection, so you can ensure the best outcomes for both your customers and the organisation.

The dos

Be proactive

A simple and proactive reminder can be enough for a customer to take action and avoid a late payment, which leads to debt and damages their credit score.

It allows them to make the payment directly, check there’s enough cash in their account, change their preferred account or set up a direct debit. Specify the amount and when the payment will be taken, so they can take appropriate steps:

Hi, [NAME]

A quick reminder that the scheduled payment for [AMOUNT] will be taken from your by [DATE]. To make changes to your payments, please visit [LINK].  

Make sure you have the right person

It sounds obvious but there are cases, like this one reported to the Financial Ombudsman, where people are hounded for debt that isn’t theirs. Not only does this waste considerable resources, but it’ll cause them unnecessary stress and damage your reputation too.

Misidentification could happen when someone changes address without informing the organisation, or you don’t have the right phone number. You can avoid this firstly by keeping your customer data fully up-to-date in a central CRM – and secondly, by using an API to integrate your CRM with your communications channels so your agents have the information they need to hand.

Encourage customers to regularly update their details. SMS is useful here – both in case they’ve moved addresses, and because a delivery fail indicates that you have the wrong number.

RCS – a rich messaging channel – can also be used to share ID documents securely, enabling agents to verify they have the right person.

Use automation

Every day that goes by without payment means the organisation misses out on valuable revenue, while the customer accrues more interest and damages their credit score. This is why automated reminders are so important.

By integrating your payment, CRM and communication systems, you can automatically schedule reminders before a payment is due and send another if/when it is overdue. It also ensures you have a fair and standardised system. Schedule texts for a day after payment is due, and then again the following week.

StepChange says there’s no legal limit on how often you can call a debtor but suggests that once a week is acceptable, whereas every day is too much. Although SMS is generally less intrusive than a call, follow a similar frequency to avoid harassing your customers.

Ensure the fair treatment of vulnerable customers

Regulated firms, like those in financial services and insurance, as well as local authorities and housing associations, have a duty to ensure the fair treatment of vulnerable customers.

Keep your records of known vulnerable customers up-to-date – and be sure to include their contact preferences. Some may prefer SMS because it gives them time to digest and act on the information, but others may want a call instead. By managing all your communications in one place and taking advantage of automation, you can efficiently and flexibly tailor your service to their needs.

The transfer of data between a broker and a provider is also important. Vulnerabilities are not always passed between the broker and provider which means the customer doesn’t get the best experience.

Use a template library

A template library is another way to standardise your text messages, both to save time and ensure that your communications are consistent and fair. We offer a comprehensive template library, which includes templates for payment reminders and overdue messages.

The Don’ts

Don’t make payment difficult

When a payment is due or overdue, you need to make it as easy as possible for the customer to settle it. A secure payment button or contact link is critical to encourage them to either pay immediately, or get in touch to discuss their options.

Don’t contact debtors outside of reasonable hours

It’s good practice to send any SMS communications during working hours (generally, between 9am and 6pm). It’s even more important with debt collection because receiving a message late at night or early in the morning because it’s stressful, and there’s also a risk it’ll be missed because the recipient is asleep. Sending text messages at antisocial hours might also be considered harassment, so stick to daytime.

Don’t be ambiguous

Use a direct yet friendly tone, so the recipient knows exactly what they need to do, and explain what will happen if they fail to. Address them by their first name so they know the message is intended for them and to maintain a constructive relationship with them through the collection process. Always provide a clear call-to-action button so they can take the next steps with ease:

Hi, [NAME]

A sum of [AMOUNT] is outstanding on your account. Avoid additional fees if you pay by [DATE]. For more information or to request changes to your payment plan, log into your account or give us a call.   

Don’t silo your systems

Lack of integration is a common problem in organisations – leading to fragmented payment journeys and a higher risk that someone will default. By integrating your CRM, payment and mobile collection systems, you can create intuitive and personalised journeys that encourage prompt payments. It also avoids data silos that make it difficult to identify vulnerable customers and their communication preferences.

Automations can also be a good way to give you the flexibility needed to deliver personalisation at scale.

Don’t overburden your contact agents

Customers – particularly vulnerable ones – may be dealing with highly complex circumstances and need to talk to a trained and empathetic agent on the phone. By using automation and encouraging self-service for routine collections, you free them up to spend more time with these people and ensure better outcomes for them.

Summary

Good payment and debt collection processes require both human empathy and strategic use of technology. Automation, self-service and pre-built templates are all effective ways of standardising and streamlining your processes, ensuring fair treatment across the board, while giving your agents time to focus on more complex cases. 

Find out how Esendex can help you improve your payment and debt collection processes.