Table of Contents
- The State of Debt Collection in the US
- What Are Compassionate Collections?
- What Is Customer-Centric Debt Collection?
- Why Customer-Centric Debt Collection Recovers More — and Costs Less
- Debt Collection Best Practices: 7 Ways to Make Collections Compassionate
- Making Compassionate Collections a System-Level Capability
- Key Takeaways
- Frequently Asked Questions
- Watch the Expert Insights Interview – The Shift Toward Orchestrated Communications in Auto Finance >
Debt Collection Best Practices: How Compassionate Collections Works in Auto Finance
Sharon Malloch 
July 9th, 2026
In Brief
Leading auto lenders now practice compassionate collections — a data-informed, AI-powered approach to debt recovery. When a customer has missed a payment, it doesn’t automatically send a collection letter. Instead, it uses borrower behavior to decide when, how, and whether to reach out at all. Some borrowers are likely to pay without any contact at all, so the system skips them. Customer communication management (CCM) software provides the orchestration layer. It makes this compassionate approach possible at scale, across every channel and compliance requirement. The result: lower operational costs and less distress for the customer.
Table of Contents
- The State of Debt Collection in the US
- What Are Compassionate Collections?
- What Is Customer-Centric Debt Collection?
- Why Customer-Centric Debt Collection Recovers More — and Costs Less
- Debt Collection Best Practices: 7 Ways to Make Collections Compassionate
- Making Compassionate Collections a System-Level Capability
- Key Takeaways
- Frequently Asked Questions
The State of Debt Collection in the US
Auto lenders today are collecting under conditions most haven’t seen in over a decade. Auto loan delinquencies of 60 days or more climbed to 1.68% in the third quarter of 2025. That’s the highest level since 2008, according to the Federal Reserve Bank of Philadelphia. Subprime borrowers are absorbing most of that pressure. 6.65% of subprime auto loans were at least 60 days past due in October 2025 — a record in Fitch Ratings data going back to 1993.
These numbers highlight a stark reality: borrowers today are living with real financial pressure. Total US household debt hit a record $18.59 trillion in the third quarter of 2025, with auto loan balances holding at a record $1.66 trillion of that total. As overdue payments climb, borrower frustration is climbing too, and many borrowers are filing complaints. In fact, debt collection complaints filed with the CFPB nearly doubled to 207,800 between 2023 and 2024.
That combination — rising delinquency rates, rising complaints, and regulators with little patience for either — is why lenders are rewriting their debt collection best practices. The old playbook treated every delinquent account the same way. It ran a fixed cadence of calls and letters, no matter who picked up or why they’d fallen behind.
Bob Johnson, Executive Vice President at Odessa, watched that model break down firsthand. “In the old days, if you were delinquent on your account, if you hit a certain number of days delinquency, it ended up in someone’s queue and they just start calling you,” Johnson said in a recent MHC 1.68% in the third quarter of 2025 conversation.
A more targeted approach is replacing it. It runs on behavioral data, AI-informed decisions, and communication systems that can act on both. Lenders that get this right don’t just avoid complaints. They recover more, faster, at lower cost. For this reason, a growing number of collection companies are investing in AI, growing from 11% in 2023 to 18% in 2024, according to TransUnion.
What Are Compassionate Collections?
Compassionate collections is an AI-informed approach to debt recovery. Instead of pursuing every delinquent account with the same script and cadence, lenders let data decide who actually needs contact, and when.
Bob Johnson, EVP at Odessa coined the term to describe a shift he’s watched take hold across auto and equipment finance.
“Now AI comes into this. The term I use — it might not be the proper term — but I call it compassionate collections, where they’re not chasing you as much as they used to,” Johnson explained. “They’re using AI to determine: what’s the right time to call this person? What’s the best way to communicate with this person? Do we even have to? Even though they’re late, there’s a trend of: we know they’re going to pay. They’re going to pay eventually. So why waste all of our resources chasing somebody that we know is going to pay anyway.”
And that’s not just the empathetic case for compassionate collections — it’s the practical one. Chasing every account the same way wastes agent time on people who were going to pay anyway. It also pulls focus from the accounts that actually need attention. AI-driven segmentation fixes that. Lenders using it see better recovery and fewer complaints — without trading one for the other.
► Watch the clip: How AI Enables Compassionate Collections
Bob Johnson explains how lenders are using data and AI to identify when, how, and even if they should reach out — focusing efforts where they actually matter.
What Is Customer-Centric Debt Collection?
Customer-centric debt collection treats the delinquent borrower as a customer, not a workflow trigger. It’s the broader idea that compassionate collections put into practice. Instead of generic, one-size-fits-all outreach, the communication is shaped by the borrower’s payment patterns, engagement behavior, and the options actually available to them.
Why Customer-Centric Debt Collection Recovers More — and Costs Less
Borrowers who feel pursued disengage, dispute, and complain. Borrowers who feel understood are more likely to respond and resolve. That difference shows up in retention, complaint volume, and long-term borrower value. Johnson described the shift away from indiscriminate outreach this way:
“Before it was a shotgun. You just went after everybody. Now it’s much more targeted. They take that subset of delinquency, and they can whittle that down to the ones they know they have to get in contact with.”
► Watch the clip: How AI Can Reduce Unnecessary Collections
Bob Johnson explains how AI helps lenders reduce unnecessary collection efforts by identifying who actually needs contact — and when. The result: fewer wasted resources and more effective communication.
Debt Collection Best Practices: 7 Ways to Make Collections Compassionate
Compassionate collections isn’t a mindset. It’s built directly into a lender’s debt collection processes — the data, decisioning, and communication infrastructure that make it operational.
Here’s what that looks like in practice.
Segment Before You Reach Out
Not every delinquent borrower needs the same response. Some will pay without any intervention. Others need a gentle reminder. A smaller group genuinely needs direct outreach. Treating all groups the same way wastes collections capacity on accounts that don’t need it — and under-serves the ones that do.
AI-powered segmentation fixes this. It analyzes payment behavior, account history, and channel preference to decide when, or whether, to send a communication at all. A system like MHC NorthStar CCM can apply that logic directly to outreach decisions, so effort goes where it actually changes outcomes — not wherever a fixed schedule happens to point.
01.
Communicate on the Borrower's Preferred Channel
Forcing a borrower onto a channel they don’t use doesn’t create engagement. It creates avoidance. Digital-first communication is now the baseline: email use among debt collection companies grew to 74% in 2024, according to TransUnion, and self-service online payment portals now reach 88% adoption. SMS, meanwhile, consistently gets better response rates than email alone.
An orchestrated, multi-channel strategy — email, SMS, secure portal, and print — meets borrowers where they actually are. A CCM platform makes that possible by managing delivery across every channel from a single template engine, so the same compliant message reaches the borrower however they’re most likely to act on it. AI can go a step further, picking the best channel for each borrower based on how they’ve engaged before.
02.
Personalize the Message — Not Just the Name
Personalization in debt collection has to go further than a mail-merge field like “Dear {First Name}.” It means the message reflects the borrower’s actual account situation, payment history, available options, and a tone that fits where they are in the delinquency cycle — not a generic template with a name dropped in.
This isn’t a nice-to-have. Research shows that personalized emails see higher open and click-through rates than generic versions. And AI now makes that kind of individualization achievable at scale. MHC NorthStar CCM’s AI Assist, for example, can pull account-specific data into a message, adjust tone and urgency to the situation, and surface the payment options most relevant to that borrower — without a human rewriting each one by hand.
03.
Time Your Communications with Behavioral Data
Legacy collections ran on rigid timing: contact after a fixed number of days past due, at a set time of day, no matter who the borrower was. Behavioral data breaks that model. Contact timing is becoming a competitive differentiator in collections, according to TransUnion, precisely because fixed-schedule outreach misses real windows of borrower engagement.
AI-powered systems close that gap. They analyze engagement patterns to figure out when a specific borrower is most likely to open, read, and act on a message, then schedule outreach accordingly. Real-time event triggering in CCM platforms takes this further, firing communications based on what the borrower actually does — a payment attempt, a portal login, a servicing interaction — rather than a calendar date. As Johnson noted, that shift from batch-based to real-time communication is foundational to how modern collections work.
04.
Write Collection Letters and Emails That Respect the Borrower
Debt collection correspondence is heavily regulated, governed by the FDCPA, Regulation F, and a patchwork of state rules. None of that requires cold or clinical language. The most effective debt collection letters and emails are clear, factual, empathetic in tone, and focused on options rather than ultimatums. This is where customer-centric debt collection actually shows up on the page.
A CCM platform keeps these compliant templates in one place, so legal and compliance teams review and approve language once — and it applies consistently across every borrower communication, regardless of channel or volume. State-specific regulatory language gets pulled in automatically, which removes the manual errors that creep into high-volume, multi-jurisdiction collections work. These best practices for debt collection emails and letters apply just as much to digital debt collection as they do to print.
05.
Orchestrate the Full Borrower Communication Journey
Collections don’t happen in a vacuum. It’s one phase in a borrower relationship that spans origination, servicing, payment, and renewal. Fragmented systems produce fragmented communication. A borrower might get a helpful payment reminder from the servicing platform and an aggressive collections notice from a totally separate system on the same day — with neither one aware the other exists.
An orchestration layer connects those touchpoints so the borrower experiences one coherent relationship, not a set of disconnected systems talking past each other. Johnson put it this way:
“An orchestration layer helps bring those data sources and trigger points together, so lenders can deliver consistent, compliant communications across channels. It is not just about producing a statement or delinquency letter. It is about interpreting the right data, understanding when a communication should be sent, and creating a more connected borrower experience.”
MHC NorthStar CCM works this way — pulling data from origination, servicing, collections, payments, and compliance systems to manage the relationship as one journey instead of a set of isolated events.
► Watch the clip: Why Auto Finance Needs Communication Orchestration
Bob Johnson explains why auto and equipment finance organizations need an orchestration layer to unify data, triggers, and messaging across channels.
06.
Build Compliance Into the Communication System — Not Around It
Debt collection is one of the most heavily regulated communication environments in financial services. The FDCPA governs what a debt collector can say, how often they can make contact, and what they must disclose. State law adds more on top. And as AI takes on a bigger role in collections decisions, explainability requirements are starting to show up — if an AI-informed decision affects a borrower, the resulting communication may need to disclose how that decision was made. Manual compliance review can’t keep up with that, especially with complaint volumes already climbing, according to the CFPB.
A production-grade CCM platform treats compliance as part of the system, not a checklist applied after the fact. Legal language, disclosure requirements, and state-specific templates live in one central, versioned system and apply automatically. That’s a meaningfully different posture than reviewing each communication one at a time. As AI-driven decisions become more common in collections, that same infrastructure is what lets lenders keep communications compliant and explainable as standards around AI accountability keep evolving.
07.
Making Compassionate Collections a System-Level Capability
These seven practices aren’t a checklist to work through one at a time. They’re connected pieces of the same shift. Segmentation identifies who needs outreach. Channel and timing decisions determine how and when to reach them. Personalization and respectful language shape what they receive. Orchestration and compliance-by-design hold all of it together, across every system and every jurisdiction a lender operates in.
That’s the real difference between compassionate collections as a philosophy and compassionate collections as an operating model. The philosophy is easy to agree with. The operating model needs a communication system that can act on borrower data in real time, apply the right compliance logic automatically, and deliver a consistent experience no matter the channel. That’s what MHC NorthStar CCM is built to do — connecting the data, decisions, and delivery that compassionate; customer-centric debt collection depends on.
That same infrastructure connects collections into a lender’s broader accounts receivable communications strategy, so a delinquency notice draws on the same account history as an invoice or a payment reminder — not a separate, disconnected system.
For auto lenders deciding where to start, the payoff runs both ways. Lenders see lower operational cost and fewer complaints. Borrowers get a collections experience they’re willing to engage with instead of avoid.
Dig Deeper: Follow-up Resources
EXPERT INSIGHTS
Watch the full conversation with Bob Johnson, EVP at Odessa, on AI, orchestration, and the future of borrower communications.
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A closer look at why communications have become operational infrastructure across the borrower journey.
See how MHC NorthStar CCM enables auto lenders to produce customer-centric collection communications — Request a Personalized Demo >
Key Takeaways
- Debt collection is going compassionate. Volume-based outreach is giving way to a targeted, AI-informed model that decides when, how, and whether to contact a borrower at all.
- Customer-centric collection outperforms generic outreach. Treating borrowers as individuals, not accounts moving through a fixed workflow, shows up directly in recovery rates and complaint volume.
- The seven best practices work as one system. Segmentation, channel matching, personalization, behavioral timing, respectful language, journey orchestration, and compliance-by-design succeed together, not independently.
- None of this scales manually. A CCM platform is the infrastructure that turns compassionate collections from a philosophy into a repeatable, compliant operation.
FAQs about Customer-centric Debt Collection
What are the most effective debt collection best practices for auto lenders?
The best debt collection practices combine behavioral data with an orchestrated, multi-channel strategy. Instead of applying one cadence to every account, top lenders use AI to segment borrowers first. Some need intervention. Others will pay without any contact. From there, personalized messaging, channel-matched outreach, and compliance-by-design systems separate high-recovery operations from high-cost ones.
What are compassionate collections?
Compassionate collections are driven by an AI-informed approach to debt recovery. It prioritizes targeted, data-driven outreach over high-volume, schedule-based contact. The term comes from Bob Johnson, Executive Vice President at Odessa. Instead of pursuing every account with the same script, lenders use behavioral data to decide the right time to reach out, the right channel to use, and — increasingly — whether to reach out at all.
How is customer-centric debt collection different from traditional collections?
Traditional collections treat delinquency as a workflow trigger. An account hits a threshold, outreach begins, and the cycle repeats no matter who the borrower is. Customer-centric debt collection treats the borrower as a customer with a history and a preferred way of being reached. In practice, that means fewer complaints, lower costs, and stronger recovery — borrowers who feel respected engage more than borrowers who feel pursued.
How does debt collection fit into a broader accounts receivable communications strategy?
Debt collection is one stage in a longer sequence of accounts receivable communications, or AR communications, that includes invoices, payment reminders, statements, and servicing updates. When these run on the same platform instead of separate systems, a lender can see a borrower’s full account history rather than just the delinquency snapshot — which makes it easier to identify who actually needs collections outreach and who’s already on track to resolve.
What does a debt collection letter need to include to be compliant?
Under the FDCPA, a debt collection letter must identify the debt collector, state the amount of outstanding debt, and inform the borrower of their right to dispute the debt within 30 days. It must also explain that the collector must stop contact if the borrower requests it in writing. State laws often add requirements on top of those. A CCM platform keeps compliant templates in one place and applies the right legal language per jurisdiction automatically.
How does AI improve debt collection communications?
AI replaces calendar-driven outreach with behavior-informed decisions. It looks at payment patterns, account history, and engagement data to figure out when a borrower is likely to respond, which channel they prefer, and whether a message will actually drive action. AI also flags accounts likely to self-cure, so teams can focus effort where it counts — and it increasingly surfaces the explainability signals regulators expect.
How does CCM software help with debt collection compliance?
A CCM platform like MHC NorthStar CCM builds compliance into the system instead of relying on manual review. State-specific legal language, required disclosures, and approved templates live in one central, versioned system. They apply automatically based on the borrower’s jurisdiction and get audited through a complete communication record — which matters more as operations scale.
Which digital channels work best for debt collection communications?
Email, SMS, and self-service portals perform best, and they work even better together. Email use among debt collection companies has grown to 74%, according to TransUnion, and self-service portal adoption has climbed to 88%. SMS gets meaningfully higher response rates and works well for time-sensitive notices. An omnichannel approach, run through a CCM platform, consistently beats any single channel on its own.
Sharon Malloch
Sharon leads content marketing at MHC, overseeing strategies that fuel sales and demand generation. With more than a decade of experience in customer communications, Sharon brings deep insight into customer pain points, industry trends, and the critical role of solutions in managing regulatory communications. Before joining MHC, she honed her marketing expertise at Doxim, Messagepoint, and OpenText.
