Payday Loan & Check Cashers-Collection Strategies - Continued
Alright, in a previous issue of our Payday Loan & Check Cashing Newsletter, we discussed the current trend in our industry of our collection activities increasing. Not a day goes by that we don’t get phone calls and emails from payday loan operators and check cashers begging for help with their collection tactics and strategies.
If you get ANYTHING from this Newsletter, get this:
Successful Payday Loan Businesses & Check Cashers are COLLECTION BUSINESSES.
If your team is uncomfortable with this notion and unwilling to accept this truth, YOU WILL FAIL!
So… let’s dig into a few techniques for creating a win-win transaction for both you and your customer.
Unless you’re in a cave or on an island without an Internet
connection you know consumers are getting beaten up; particularly
our customers! They’re sweating their job, if they’re lucky enough
to have one. Their credit card company is lowering their credit
card limit, increasing their interest rate and charging them for
every fee known to man. Their cable provider, their utility
company, their bank, their gasoline station, their food market…
all these companies are monitoring our customer closely to minimize
their potential losses. Their house is worth less, their 401K is
worthless and on and on. Everyone is banging on our customer daily
for money!
On top of all these problems our customer has 3 existing payday
loans and wants another one! After all, where else can they go for a
short-term, non-collateralized loan?
What do you do? How do you get your share of your payday loan
customer’s limited funds? What magic formula will deposit cash back
into your bank account? How do you squeeze a little cash out of
your customer’s pocket and not destroy your relationship, not only
depriving you of your principal and fees but just as importantly,
losing the lifetime of fees a successful relationship with your
customer will result in?
First, just how bad is it? Right now, based on our own payday loan
operations and those of our clients and the anecdotal information
we receive on a daily basis, payday loan Internet operations are
experiencing a 20% to 30% default rate while brick-n-mortars are
closer to 10% to 20%.
OK, Ok! Whoa… Default rate? What’s that? One certainty in the
payday loan industry is that there are many different ways to
measure default rates and there are many definitions used for
“default” in our industry. For our purposes here, it simply means
our customer has failed to perform as promised. The funds were not
present on the due date. The customer has “come to our attention.”
A “default” in this scenario does not mean we’ll lose 100% of all
our principal and fees!
Now, this Newsletter issue would be a mile long if we attempted to
discuss the entire approach we use for dealing with our
collections! So first things first! Let’s start at the beginning;
the “Front End.”
By “Front End”, we mean:
GETTING ACCURATE INFORMATION and VERIFY BEFORE YOU FUND the LOAN!
As Cindy stated at CFSP in Newport Beach at the Western States Payday
Loan & Check Cashing Convention:
“If it’s not verifiable it’s not collectible.”
To improve your collections, it’s CRITICAL you get complete,
accurate and up to date information from your applicant!
This could easily take 20 minutes or more to achieve for a
first-time payday loan applicant. Get used to it. Get Good At It!
Now, the following applies to BOTH Internet lenders and
“brick-n-mortar” operators. Obviously, the exact procedures will be
adjusted based on your Model; UNDERSTAND & IMPLEMENT the SPIRIT of
this DISCUSSION!
A few Issues & Strategies:
In today’s economic environment, you’ve got to go above and beyond
the normal collection theories, procedures and tactics. Our typical
client is bombarded daily with requests for money. You’re goal is
to be at the top of their list!
Roll Playing:
Have your employees who handle collections for your operation role
play. Practice, practice, practice. Get everyone comfortable with
collections by taking turns playing the part of an applicant, an
applicant’s supervisor, a Human Resources employee… Don’t forget
to have each member of your team use Google, 411.com and the other
tools mentioned later in this Newsletter. Don’t take role-playing
lightly! This practice will make a huge difference in your
collections success!
Verification:
“If it’s not verifiable it’s not collectible.”
Verify, call, Google, Twit and use the other tools disclosed here in
front of your store applicant or while you have your Internet
applicant on the telephone.
Personal References:
Must include at least three contacts and two of these must be
immediate family members. Call these numbers and verify they know
your applicant while your applicant stands before you or listens on
the telephone line.
Google both the employer address and phone number; verify
Supervisor:
Call the employer using Google.com, GoogleMaps.com 411.com,
TheWorkNumber.com… to get the employer phone number. Do not rely on the
employer telephone number supplied by your applicant. Ask for your
applicant’s supervisor by name. You can let the supervisor know
you’re helping their employee with a situation, or you can just ask
for their employee to determine if the supervisor recognizes the
name.
Human Resources:
You may be forced to call your applicant’s employer Human Resources
Dept. to verify employment. Granted this only works in 40% of your
attempts but try it anyway.
Followup:
Keep in touch; constantly! Use one-week reminders, the day before
and the day of a payment due date. Call, email, fax and text
message. Payday loan customers, like most customers, need reminders
of what they owe and when they owe it.
Brainstorm:
Gather your collections team together and discuss various tips and
tactics members of the team use to collect. Often, one or more
members of your team will utilize some very creative techniques
that your entire team can embrace.
Telephone numbers:
Call them all; every number on the application. Call the
applicant’s home even if they’re on the telephone with you or
standing in front of you. Do they answer? Do you get a busy signal?
Do you hear their voice requesting you leave a message? Anything strange?
Bank Information:
Use Intercept, Veritrac, Check-a-Check or whatever data base you
prefer to verify routing numbers and bank account information. Call
the bank and ask for the “open and active department” to make certain
the applicant’s information is correct and you can debit and credit
their account with an ACH.
Bank Statements:
Get at least the last 30 day statement. 90% of your applicants can
access their bank statement online. Allow your applicant to go
online while you wait when necessary.
Rapport:
Always strive to develop a warm, congenial relationship with your
customer in collections. Don’t immediately attack them when they
answer your telephone call!
Probe for the smallest details about your clients lives. What’s
going on with them? What challenges are they experiencing? What
interests them? Are they married? Single? Hobbies? Kids? Soccer?
Football fan? If you’re brand new to collections this may seem
crazy to you but it’s not. Get in the habit of probing in a
friendly, interested way. You’ll make use of this info later.
Hopefully, your payday loan software solution provides you with the
ability to make notes for each conversation you have with your
client. Review these notes before and during the call to help you
achieve some degree of warmth and caring with your client. For
example, you’re preparing to make a follow up call to Mrs. Jones in
an attempt to get her to pay $100 towards her past due loan with
you. You note that in a previous call she mentioned her husband was
ill causing the couple to experience difficulty in paying you on
time. In your opening dialog with Mrs. Jones, mention her husband’s
illness. Ask how he is doing. Don’t fake this; be genuine. The
majority of your collection clients will respond favorably to this
approach. And yes, a minority will immediately begin screaming and
yelling at you.
You’re a pro! You must let it simply wash right off you!! Let them
blow off and then bring the conversation back to business; back to
YOUR GOAL; back to collecting something $$ today.
NEVER make threats! Never lose your cool! You must remain calm and
professional at all times.
Make a “connection.” “Hello Jose! How are you today! This is Emma
at Payday Loan Industry Dot Com. I have great news for you! I’ve
received approval to set you up with a payment plan so we can help
you payoff your loan with us and improve your credit score.” (You do
report to PRBC don’t you?)
“How much can you afford today, Jose?”
Find a Solution:
REMEMBER! This client could be worth thousands of dollars in fees
to you over their lifetime!
Your goal is work with your collection client and get SOMETHING.
Ideally, money today; even if it’s only $20. Always be pressing to
help your client figure out a way to pay down their loan with you.
If it appears to be impossible to get a portion of what is owed
you today, get a promise. Lock this promise down; $50 on March 24
the date of their next payday. DOCUMENT this and FOLLOWUP!
When it makes sense, offer a discount to your collection client for
settling an outstanding balance due. For example, mail, fax and
email a “Discount Notice” (see our Payday Loan & Check Cashers
C0ollection Manual” for a sample letter at:
http://www.paydayloanindustry.com/payday-loan-collections.html.
Get a debit card number from your client. Update during each phone
call. (Check with your legal dept.)
Get a credit card number from your client. Update during each phone
call. (Check with your legal dept.)
Get an ACH authorization from your client. Update account
information during each phone call. (Check with your legal dept.)
Update all telephone numbers and employment information during each
phone call.
Update all addresses and references during each phone call.
Update email addresses, Facebook, Myspace and Twitter accounts.
YES, do this! (Use a very general message with these social book
resources. “Hey, this is Emma, call me.”
Make it Easy to Pay You:
Provide as many methods as you can to allow the collection client
to pay you. This includes credit cards and ACH’s, money orders,
Western Union and Paypal.
Forms:
You must develop and employ approved, legal, compliant forms and
documents to allow your team to document every communication with
your client. It’s critical these meet all regulatory requirements
and are easily accessed. (Again, see our Payday Loan & Check
Cashers Collection Manual described at:
http://www.paydayloanindustry.com/payday-loan-collections.html
Resources:
CHECK THESE OUT! Everyone on your team should be familiar with
these tools and incorporate their use into their daily collection
and “front-end” due-diligence activities.
http://www.CheckDataSystems.com
Use SCAN (Shared Check Authorization Network) to collect!
Your “BAD” customers are prevented from writing checks to 70,000 plus
retailers or open a bank account until they pay you!
http://www.TheWorkNumber.com
Verify employment and income
http://www.Google.com
For searches on phone numbers, addresses…
http://www.Twitter.com
Does your client have an account?
http://www.Myspace.com
Does your client have an account?
http://www.Facebook.com
Does your client have an account?
http://www.Merlin.com
For finding people, businesses and assets
Your State Contractor Board
http://www.cslb.ca.gov/contractors/ as an example. Google your state.
http://www.manta.com/
A great resource for researching businesses
http://www.fededirectory.frb.org/search.cfm
Bank routing number directory
http://www.paydayloanindustry.com/check-verification.html
Check-a-Check Real time check verification
* Immediately, in real time, Verify the item BEFORE you take it
- INSTANTLY! Account closed?
* Stop payments exist on the account?
* Non DDA Account (debit card or other type of account)?
* Invalid account number?
* Invalid routing number?
* Account doesn’t exist?
* Stolen? Forged? Fraud?
* Information on invalid routing numbers
* Information on invalid account numbers
* Duplicate check number information
http://www.intercepteft.com/business/payday_adv_check_cashing.html
For collecting on checks returned for Non-Sufficient Funds (NSF)
using ACH to electronically convert and re-present checks that have
been returned for insufficient/uncollected funds. You control the
timing of the re-presentment.
http://www.OrionPay.com
Money orders online
FINALLY, for an exhaustive discussion of payday loan and check
cashing collections, consider an investment in our newly updated
“Collections for Payday Loans and Check cashers” available here:
http://www.paydayloanindustry.com/payday-loan-collections.html
OK! This Newsletter is MUCH TOO LONG! Good collections
procedures and systems are critical to your success. This subject
is huge and there’s no way we can cover all of it here.
We’ll continue to address this topic in the future. Meanwhile, TALK
TO US! What do you need help with? What are your challenges? What’s
working great for you? What tools do you use? What are you HAPPY ABOUT?
Hey, that Guiterrez Sub-Finance Committee Meeting went well, eh?
http://paydayloanindustryblog.com/hr-1214-payday-loan-reform-act-2009/
Later…
The Trihouse Team
Trihouse Payday Loans
702-889-9555
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