Delinquent payments affect revenue timelines and require coordination across servicing, compliance and finance teams. Failed attempts add manual effort, borrower outreach and reconciliation work.
Many lenders, mortgage servicers, collection agencies and credit unions continue to rely on ACH for delinquency recovery, despite its limitations. Settlement delays and elevated return rates increase complexity, especially when working with at-risk borrowers. These limitations slow down recovery and create pressure across both internal systems and staff.
Consider the example of the auto loan industry. According to the latest Consumer Federation of America report, auto debt in the U.S. is at a record high of $1.66 trillion. Worse, severe delinquencies (90+ days past due) and repossessions are at levels not seen since the Great Recession. When borrowers pay with ACH, that brings return and NSF risk, exacerbating this problem.
Debit payments offer an alternative that aligns with borrower behavior. They provide immediate authorization, lower failure rates and strong adoption across digital channels. For collection teams managing rising delinquency volumes, debit delivers a more reliable payment method that supports faster resolution and cleaner execution.
In this article, we examine the cost and operational impact of using ACH for past-due accounts and help you consider why a shift to debit can improve cure rates, reduce servicing strain and support a more scalable recovery model.
ACH is a familiar part of most recovery workflows, but its structure makes it difficult to rely on when borrowers are already past due. Transactions are submitted in batches and settled on a delay, which limits realtime visibility into payment status. When payments fail, there’s no immediate feedback, only return codes that appear hours or days later, often after a borrower has disengaged.
Returns also carry hard costs. Nacha return codes like R01 (Insufficient Funds), R02 (Account Closed) and R10 (Unauthorized Transaction) are common in delinquency scenarios. ACH return rates in this context can rise above the averages reported across the broader ACH network. When return volumes exceed Nacha's thresholds, organizations may be subject to increased oversight, documentation requirements and reputational risk.
These patterns create inefficiency across the servicing environment. Delays lead to manual reprocessing, reporting issues, delayed revenue recognition and increased compliance workload, all of which strain operations.
In collections, time and consistency drive results. ACH adds friction at critical moments when borrowers are finally ready to engage and resolve outstanding balances. The result is a lower cure rate, a higher cost per recovery and a servicing model that struggles to scale under pressure.
Debit card payments align with how today’s borrowers manage their finances. They deliver immediate results, higher reliability and more flexible engagement options. These are all benefits that directly support collections teams aiming to improve cure rates and reduce servicing friction.
Debit transactions are authorized in real time. This allows servicing agents to confirm payment success during live borrower interactions, reducing the need for follow-ups or post-call reconciliation. Faster settlement improves cash flow visibility and accelerates internal reporting cycles.
Because debit payments are authorized against available funds, the risk of failed transactions is significantly lower. Unlike ACH, which can encounter reversals due to insufficient funds or account issues, debit offers a more consistent path to successful payment completion.
Debit is a preferred payment method for many consumers, especially in digital and mobile-first contexts. According to recent data from the Federal Reserve Bank of Atlanta, debit card usage leads all other payment types for everyday purchases. When servicing teams offer debit as a repayment option, they remove barriers to action and meet borrowers on channels they already use and trust.
Recovering past-due balances affects nearly every part of a lending or servicing organization. Payment method performance directly influences how much is recovered, how quickly accounts are resolved and how efficiently internal teams can operate.
When debit is introduced as a core repayment option, the business impact is measurable.
With fewer failed transactions, fewer returns and better borrower adoption, debit drives more successful payments on the first attempt. That consistency leads to higher overall recovery rates and reduces the need for multiple outreach attempts or extended payment negotiations.
Every failed payment introduces extra steps: calls, retries, manual reprocessing and reporting. Debit reduces those failures, creating a smoother, more automated recovery process. Agents spend less time on exceptions and managers gain clearer insight into account status and resolution timelines.
Debit transactions authorize and settle quickly, giving finance teams near-instant insight into inbound payment volume. That clarity supports better forecasting, tighter reconciliation and fewer delays in recognizing recovered revenue.
Borrowers benefit when payment works on the first try. Debit fits naturally into digital, mobile and self-service channels, allowing customers to resolve delinquencies without additional friction. That ease of use supports stronger follow-through and reduces the likelihood of extended delinquency.
In delinquency recovery, payment failures introduce regulatory exposure and increase the complexity of compliance oversight. When payment methods introduce return risk or settlement uncertainty, servicing teams must allocate more time and resources to monitoring, documentation and remediation.
Debit provides a more stable foundation for payment compliance, especially when managing high volumes of at-risk borrower accounts.
ACH transactions are governed by return rate thresholds. Excessive returns – especially those marked as unauthorized – can trigger additional oversight.
Debit rails authorize transactions at the point of payment, limiting reversals and reducing exposure to network limits.
Debit payments are authorized at the point of interaction, creating an immediate record of consent and confirmation. This reduces the window for disputes and limits the need for post-settlement investigations or reversals. Each transaction includes built-in validation that supports both consumer protection and operational transparency.
Debit processing platforms can post payment outcomes in real time, streamlining back-office reconciliation and minimizing delays in reporting. There are fewer return codes to manage, fewer exception reports to process and fewer gaps in audit trails. This helps finance and compliance teams maintain clear, verifiable records without additional effort.
For lenders and credit unions focused on compliance readiness, debit delivers a more controlled and less reactive environment. It reduces points of failure and simplifies the process of maintaining both internal standards and external obligations.
REPAY helps lenders, mortgage servicers, collection agencies and credit unions modernize delinquency recovery by making debit payments faster, more accessible and easier to manage across every borrower channel: web, mobile, IVR, text and live agent.
The REPAY platform integrates with leading loan management and servicing systems to automate payment posting, simplify reporting and reduce manual processes. With realtime transaction confirmation and unified reporting, recovery teams gain full visibility and improved control.
REPAY supports efficient, scalable operations, helping teams resolve more accounts with less friction and lower risk.
To strengthen your recovery strategy with modern payment infrastructure, explore how REPAY can support your shift to debit.