Soft Collections vs Silent Collections
Published: Mon, 04/08/13
What Keeps You Up at Night?
Guest Post by Steve Hodgdon ( Steve@PaydayLoanIndustry.com )
The CFPB? That State AG's are after you? Is it the Legislators
regulating you out of business? Where do all these issues start
from? Consumer complaints. Does every loan you make turn into a
complaint? No, complaints only come from consumers who don't repay
the loan on time.
I'm a bill collector. I've been doing this for a while too. Started
collecting department store checks in Christmas of 1980. 32 years
as a collector, lender, debt buyer, and 17 of those operating the
squeaky cleanest collection agency ever.
Prefer to read Online? http://goo.gl/Xfr5I (Google URL Shortner)
Short of just forgiving every loan, you're going to have use some
kind of collection method. Pick your poison, outsourcing, calling
yourself or selling the accounts to recoup some losses. You've
already learned they all have their negatives.
Silent Collections
About 3 years after buying my first agency, I had a breakthrough.
Not a breakdown, a breakthrough, an epiphany.
Clients viewed me as a necessary evil. I was "Guido", the enforcer,
the bad guy. They always took the debtor's side, even though it was
their money! How dare they! So, I turned my techniques upside down.
Being a collector is being a salesman. Nothing more. It's my job to
sell you, the borrower, on the benefits of paying your bill.
So, here's your first take away:
* The money is in the first call. First contact is the best contact.
Take your time and "close the sale".
* EVERYBODY wants to be heard. Building empathy and recognizing
you're talking to another human being with the same kinds of
problems you've faced will pay off for both of you. Don't
sympathize; just make sure they know you LISTENED.
* What's in it for them? We're all motivated this way. Why should
they pay you? What do you have to give them in return? Every
collector should have a positive and negative list to work from.
I promised my agency clients that there would be no complaints.
Period. I worked for charity hospitals in some of the toughest,
poverty stricken areas. You and I were neighbors! The same consumer
who borrowed money from you paid me first. No doubt about it. How?
Here's your 2nd takeaway:
* My collectors LOVED their job. Careful hiring and lots of hand
holding for new hires. We were practically a cult. Folks would
leave for greener pastures and come right back.
* We built a team. We all had each others' backs. They knew they
could count on me.
* There were achievable goals, public recognition, and contests all
the time.
* Commission Commission Commission. Pay them and they'll stay.
You should check under the hood... BEFORE the CFPB does!
The regulatory mood is, and always will be, pro-consumer. Look at
the FTC settlements over the past year:
http://www.aba.com/Solutions/Compliance/Pages/compliance_UDAP.aspx
If AMEX settles for $85 million among many others, seems likely
that the door is wide open for more actions.
State regulators and consumer attorneys take their lead from the
CFPB and FTC. Federal sanctions play really well in State courts.
There's no need to fear the CFPB if you're doing things right. You
can stop living on the edge and sleep better with some simple
steps.
Takeaway #3:
* Google your agency partners.. Do they dominate the debtor boards?
* Conduct a mini audit. Internally and externally. Listen to 10
calls on paying accounts to start. What, you can't listen to call
recordings? No time? I'll audit for you.
* Go to www.webrecon.com. It's a great database of FDCPA lawsuits.
Search your vendors. I scrub every portfolio I buy through this to
identify known litigious debtors.
* Add a layer of protection. Update your 3rd party contracts to
include TCPA, GLB, and PCI compliance for starters.
* Is your complaint resolution process geared toward getting
customers back or collecting money? Ask me how client satisfaction
leads to better collections, for free! Steve@PaydayLoanIndustry.com
Ask yourself this - Would you let the agency call customers in YOUR
NAME? Do they present your values? Could what they say to a
customer be said in person? Is the collector hiding behind an
alias, at an untraceable number, with no published address?
Doesn't Anybody Like Us?
Reputation management can be more than damage control. Remember,
CFPB's view is that you are liable for bad acts performed by
agencies. Let's get ahead of the regulators.
If all your practices treat consumers as YOUR CUSTOMERS, even if
they didn't pay, all these problems go away. I know from personal
experience you can generate thank you letters from consumers and
improve liquidity at the same time.
Caveat Venditor - "Seller Beware"
Debt buyers should be vetted through the steps above and more. It's
the Wild, Wild West out there. You want to know what happens to
your customer post sale. Liability and reputation damage continue
forever.
The difference in price between an ethical, insured, licensed buyer
and a cowboy is zero. Market price is market price. Choose buyers
you'd let coach your kids soccer team.
You can improve your valuation by documenting and adhering to good
underwriting rules. As a buyer of payday loans, my hot buttons are
frauds and excessive rollovers. Three reference numbers will boost
your valuation 10%.
If you do a good job underwriting then the charge-offs will perform
better. That leads to a good reputation in the buyer community and
a higher price for you. When we take your product to market,
telling the story of your excellent verification procedures adds
value.
All good buyers want good sellers. Our investors are spending
$10,000 to $1,000,000 for good portfolios. We analyze data and get
competitive bids in days, not weeks
I personally oversaw agency management of 500,000 payday loans in
2012. Nothing is better than an "in the trenches" knowledge of the
consumer, the lender, and the regulatory landscape.
Putting It All Together - Revenue Cycle Management
* Tune up internal practices. Are you the best payday shop to work
at in your market? Let's start the party!
* Examine value add of 1st party outsourcing. Can it be better,
faster, cheaper and not degrade your selling value?
* Set a high bar for agency and buyer qualification. Do business
with the best.
* And, of course, use an experienced guide to get you home safe and
sound. In 30+ years, I've seen and done everything in the A/R
spectrum. Knowing where to look for problems gets you to the
solution faster.
Fluff up that pillow and worry about something else.
, need help with your collections? Want to
explore? Shoot an email to Steve@PaydayLoanIndustry.com
Include your phone number for immediate service.