What Keeps You Up at Night?
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.
Guest Post by Steve Hodgdon . Help? Explore? Email Steve!
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.
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. 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!
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? Advice? Counsel? Shoot an email to Steve Hodgdon
What do YOU think? Leave a comment! What’s YOUR biggest challenge TODAY? What does your Team need help with? Jer@TrihouseConsulting.com