Receivable/Accounts - Information for Credit and Collection Issues

Friday, October 31, 2014

Collection Tip - Sometimes Payment in Full Isn't the Answer

We have a national client that sends us second placement, or reassigned accounts on a regular basis.  Thousands of files that have been previously worked by another agency, and passed to us after twelve months.  An each time we call a batch of these files, we inevitably run into the following scenario:

"Bob, we represent XYZ Financial, and you have an outstanding balance of $859.65.  We've be assigned the file because you did not resolve your account with ABC Collections, to affect your credit rating."

"But I want to pay the account!  I offered ABC Collections $200 a month, and they refused it!"

So, because ABC Collections stuck to "payment in full", they received nothing.  We, of course, took the $200 a month because it was reasonable, and had the account resolved.

Yes, it is a collection agency's role to resolve an account, and absolutely payment in full is preferrable to $20 a month payments over 42 months, but the overarching goal is to resolve the accounts as efficiently as possible.  Collections is an intelligent process, not a brute force attempt to turn people upside down and shake them for money.  The point is to work out the best arrangement possible, that the debtor can keep.

Some agencies hinder their own success by building bad commisison structures or file  I management protocols.  A lot of agencies still use the outmoded 'front-line pif/second-line 3 pdc/third-line-nice-guy-will-take-anything' tiered collection process, pooled predictive dialing, or even keep partial payments as 'house commissions'. And that's crazy.  The point should be efficiency, efficiency, efficiency.

I distinctly remember an account I had many years ago -- it was a landlord-tenant judgment against a sweet old lady for about $9000.  I called her and advised her that she was in collections.  She was horrified, and offered $100 a month from her $900 Canadian Pension Plan at the end of each month.  The truth was, she couldn't afford that, and her payments would bounce if I took it.  I refused her $100 a month payments, and told her to pay $30.  You know what happened?  That sweet old lady came into our office on the first day of each month in person, with her walker, and paid in cash.  We never had to call her -- not once.  After about 10 months, she missed a payment, and we called, and she came in around the 7th of the month, apologizing for her 'small stroke that put her in the hospital for a few days', and paid her usual $30.  This woman was doing everything she could to resolve her account.  And after about 16 months, she came in with a cardboard box filled with twenty dollar bills to pay off her account because her older sister had passed away and left her some money.  This is a perfect example of someone paying their account to the best of their ability, in the most efficient manner.  On the life of the file, we made exactly three phone calls.

Yes, don't take the $20 a month payment if the debtor has the funds to pay, and yes create a sense of urgency and authority to make sure that arrangements are followed, but don't stubbornly demand payment in full and nothing but payment in full from 100 people because 2 will come up with it -- that's short sighted, and a losing proposition.

If anyone has questions about payment arrangements, negotiation, how collection agencies handle payments, or our company's APPRAISE process that outlines negotiation and treatment of consumers, I'm always happy to chat.

Blair DeMarco-Wettlaufer
KINGSTON Data & Credit
Cambridge, Ontario