In a previous issue of our “How to Lend Money to the Masses Newsletter,” we discussed the current trend in our industry; consumer loan collection activities are increasing. Not a day goes by that we don’t get phone calls and emails from Lenders begging for help with their collection tactics and strategies.
If you get ANYTHING from this Lender Newsletter, get this:
Successful Consumer Loan Businesses are COLLECTION BUSINESSES. This is true for payday loan lenders, car title loan lenders, installment loan lenders, line-of-credit loan lenders… all Small Dollar Lenders making consumer loans.
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.
(Got a question? Need help specifically with Collections? Reach-out to TrihouseConsulting@gmail.com)
Unless you’re in a cave or on an island without an Internet connection you know borrowers are getting beaten up; particularly our consumer loan 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 customers closely to minimize their potential losses. Their house is worthless, their 401K is worthless, and on and on. Everyone is banging on our borrowers daily for money!
On top of all these problems our customer has 3 existing payday loans or installment loans and wants another one! After all, where else can they go for a short-term, non-collateralized loan?
As a lender, what do you do? How do you get your share of your 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 Lender operations and those of our clients and the anecdotal information we receive on a daily basis, Internet Lenders are experiencing a 20% to 30% default rate while brick-n-mortars are closer to 10% to 20%. [Covid related government subsidies have temporarily improved lowered our FTPD [First Time Payment Defaults] BUT things will soon be back to normal. So, enjoy your respite while you can!
OK, Ok! Whoa… Default rate? What’s that? One certainty in the business of lending money 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 Consumer Loan & Check Cashing Convention:
“If it’s not verifiable, it’s not collectible.”
To improve your payday loan collections, it’s CRITICAL you get complete, accurate, and up-to-date information from your applicant!
NOTE: If you think this article we’ve written on consumer loan collections is useful, you should get a copy of our industry bible: “The Business of Lending Money to the Masses.”
Getting complete and accurate borrower identification could easily take 20 minutes or more to achieve for a first-time loan applicant. Get used to it. Get Good At It!
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. Your goal is to be at the top of their list!
Have your employees who handle payday loan 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!
“If it’s not verifiable it’s not collectible.” Verify, call, Google, Twit, and use the other tools disclosed here in front of your payday loan storefront applicant or while you have your Internet applicant on the telephone.
Instant Wage Verification [IWV]
There are new tools & platforms introduced to our industry weekly. IWV is one of them. Basically, IWV vendors have direct data pipes to your loan customer’s wages; IN REAL-TIME! Here’s an example:
“Sorry ABC Loan Company! I have not been working. My employer furloughed me. You know, that Chinese virus thing... Well Mr. Jones, I can see in my report that you worked for Starbucks 4 hours today and 32 hours for Best Buy so far this week. And I can see you put in 3.4 hours driving your 2017 Prius license plate number "I OWE MONEY" for Uber on the 14th. It appears you’ll be receiving approx. $632.82 this week. And then there's that extra cash you received from taxpayers via Washington D.C. So, let's honor that deal you made with me!"
Visit https://iwvpro.com/ for a test drive of Instant Wage verification!
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
Call the employer using Google.com, GoogleMaps.com 411.com, TheWorkNumber.com… to get the employer’s phone number. Do not rely on the
employer’s 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.
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.
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.
Gather your consumer loan 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.
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?
IBV – Instant Bank Verification:
There is a multitude of tools, platforms SAAS services… available to B2C Lenders today. Technology enables direct Lenders immediate, instant access to a potential borrower’s “read-only” bank account status, transaction history, employment situation, direct deposit history… It’s unfathomable just how much real-time insight a Lender can employ in their loan decision process! [For more on this topic and direct access to providers, visit https://IOUUmpire.com for a free demo!
Bank Statements: [Refer to IBV above!]
Get at least the last 30-day statement. 90% of your applicants can access their bank statements online. Allow your applicant to go online while you wait when necessary. [Refer to “Instant Bank Verification above.] IF you dig into our “Bible,” you’ll learn about brand new state-of-the-art 3rd party vendors that enable Lenders to gain “Instant Bank Verification” [IBV] insight into your loan applicant’s bank statement. You can view how they spend their money. Did they purchase a Starbucks this morning? Do they have any NSF’s? Are they making payments to other lenders? How often and how much $$ does their employer deposit into their bank account.
Always strive to develop a warm, congenial relationship with your customers in collections. Don’t immediately attack them when they answer your telephone call!
Probe for the smallest details about your client’s lives. What’s going on with them? What challenges are they experiencing? What interests them? Are they married? Single? Hobbies? Kids? Soccer? Football fan? If you’re brand new to collections this may seem crazy to you but it’s not. Get in the habit of probing in a friendly, interesting way. You’ll make use of this info later.
Hopefully, your consumer loan software solution provides you with the ability to make notes for each conversation you have with your client. Review these notes before and during the call to help you achieve some degree of warmth and caring with your client. For example, you’re preparing to make a follow-up call to Mrs. Jones in an attempt to get her to pay $100 towards her past due payday loan. You note that in a previous call she mentioned her husband was ill causing the couple to experience difficulty in paying you on time. In your opening dialog with Mrs. Jones, mention her husband’s illness. Ask how he is doing. Don’t fake this; be genuine. The majority of your collection clients will respond favorably to this approach. And yes, a minority will immediately begin screaming and yelling at you.
You’re a pro! You must let it simply wash right off you!! Let them blow off and then bring the conversation back to business; back to YOUR GOAL; back to collecting something $$ 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 pay off 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 to 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 Bible” for a sample letter at TheBusinessOfLending.com.
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, Instagram, 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.
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 “Bible:” “The Business of lending Money to the Masses.”
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.
Verify employment and income
For searches on phone numbers, addresses…
Does your client have an account?
Does your client have an account?
Again, does your client have an account?
For finding people, businesses, and assets
Your State Contractor Board
http://www.cslb.ca.gov/contractors/ as an example. Google your state.
A great resource for researching businesses
Bank routing number directory
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 another 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
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.
Finally, for an exhaustive discussion of consumer loan and check cashing collections, consider an investment in our newly updated “How to Loan Money to the Masses and Achieve Massive Profits” available here: The Business of Lending Money to the Masses
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?
The Trihouse Team
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