Did the birth of the “consumer” and the death of the “debtor” kill the debt collection industry?

As the debt collection industry has tried to be more consumer friendly we changed our vocabulary from “debtor” to “consumer”. How has that also changed the industries mindset? Is it a good thing?

I think not.

It was hard for me to change my vocabulary a couple years ago but it was willingly I did so. As the market started using the word consumer over the word debtor it seemed appropriate. But the longer this has been in effect the more and more I see it affecting the mindset of collectors, managers and owners in a negative way. Consumer lawyers (maybe we should call them debtor lawyers) are why we changed our tune but I think we should have kept the word debtor, its not a bad word.

Somehow the word debtor became a bad word and I am not sure why?

Wikipedia defines a debtor as “If X borrowed money from his/her bank, X is the debtor and the bank is the creditor. If X puts money in the bank, X is the creditor and the bank is the debtor.” and defines a consumer as “The consumer is the one who pays to consume goods and services produced.”

If this is the definition to both words they are debtors not consumers, consumers “pay to consume”,

So why did a whole industry change its vocabulary?  

The truth is we did it from pressure we created on ourselves as an industry. We thought its would make us look more consumer friendly in the eyes of regulators, clients and potential clients. But was this a good thing? I think it has gotten too many collectors and even managers in a mid set that the debtor is right and the collection strategy is the bad factor.

The truth is that debt collection has been getting more and more consumer friendly since I began collecting in 1979. But it has gotten to a high point in 2016 in my opinion. Debt collection has changed to accommodate the consumers’ habits by moving to self-cure websites and IVR systems.

The birth of self-cure 

The birth of debtors curing their debt online with no human interaction is a positive result of the consumer mentality of debt collection. It has allowed agencies and law firms to reduce its compliance exposure and collection expenses by letting the debtor pay online. Most debtors do not really desire to talk to a debt collector when it comes time to pay they just want to make the transaction online. So the use of a payment site is the obvious answer and a best thing to come from the consumer friendly era created by consumer attorneys.

Now what? 

I think as an industry we need to remember that that are both debtors and consumers. Actually our job as an industry is to turn them from debtors into consumers. We have to treat them like consumers but remember that they are debtors till they pay the debt and they need to be handled like debtors.

The fact that our industry has made the effort to allow the debtors to self-cure by creating elaborate payment sites shows our ability to adapt to the consumer model but we still have to remember that most debtors need help to pay their obligations. They need financial counseling, just the push a call makes or they need a payment arrangement that the website cannot approve for them.

Lets remember they are debtors and need our help to pay their bills and become consumers.

Re; My collection staff sucks!

Since 2007 I have seen the decline of the skill set of debt collectors in the US and it is at an all time low today. As a consultant to the ARM industry I see this daily and I have several ways to deal with the problem.

When the economy was really pumping in 2005-2007 or so the debt collection industry was at a high point and debt collection was easy. Debtors, now called consumers had the availability to get loans so money was flowing in debt collection, it was just financial counseling. After 2007 and the economy fell the ability of the debtor to get a loan was gone and so was the ability to collect money from debtors.

Along with that change in economy came a stoppage of training and development in the ARM industry which has continued until recently. Back when the money was easy to collect, training was not a big deal, just get someone on the phone and you had collection results. Now collections is much harder due to not only changes in the financial landscape in the US but in compliance costs as well.

With the birth of the “consumer” and the death of the “debtor” we have also changed the way we do business. As the ARM industry started using the term consumer over debtor a change in mentality also was created. The truth is “They are consumers.” So as that mentality changed so did the mentality of the average collection agent. But we did not provide new tools to collect from the new consumers. Training and development was and is still a last resort not a daily task. Managers would rather fire and hire than train and develop. Why? Because they don’t know how to train, that skill set is gone in todays C level managers.

So how do you solve this problem? You already know the answer its training and development but how do you do that is the real question. Most managers do not have a good training program. Most agencies I see just sit the new staff member next to their best collector to be trained. This is wrong in so many ways.

I have developed an extensive training  program that I can facilitate or help my client facilitate that starts with what is a debt? and ends with negotiation skills. It is very extensive on everything from credit reporting to an explanation of each bankruptcy type. This is how I solve the problem.

My second recommendation is to move some staff to Jamaica. The results of collectors in Jamaica is 90-110% of those in the US. The staff is much more eager to come to work and be taught and work for 1/3 the wages. I have helped several agencies set up in Montego Bay and in every instance the staff there is out performing the US collectors.

Either way you go you have to embrace the fact your staff must be trained and then they must be slowly developed into better staff. Its a big commitment and if you need a road map or some help just give me a call.

Knowledge is like manure. It’s no good unless it’s spread around.

As a consultant and thought leader in the debt collection industry, I spread lots of manure I mean knowledge around the industry. But just like manure helps many plants to grow and flourish, so does knowledge in the collection industry. Does your company need some fertilizer?

As a consultant to the ARM industry, it amazes me just how few companies are looking for more knowledge. Most are just in survival mode; whether the industry is strong or weak, but there has always been enough companies looking to get better that I have remained busy for the last 17 years. Still, it amazes me that there are not a dozen other companies like Lighthouse Consulting offering the same services that I do. Do you want to know why?

It’s because of the type person who is drawn to debt collections is not a person who takes advice well. In most cases I am called when the owner or operator has reached the limits of their management capabilities. They call me to get past an issue or set of problems, but really do not want to be told what to do. So over the years I have learned that the hard part of consulting is not the solutions I present, it’s the way in which I present those solutions to the owner/operator that that determines how they will accept or reject my recommendations.

So I have learned how to get the buy-in from management and staff to get the changes not only implemented but embraced by the entire team. Changes that are not embraced, never become effectively implemented, and therefore have no positive  or lasting impact on the organization. I am hired to make an impact, and changes in operations, strategies, policies and procedures are at the heart of all the consulting I do. So I have learned to educate the client instead of tell them what to do.

Educating my clients is the core of what consulting is to me. I do not always just tell the client what they should do I lead them to the water and hope they get thirsty. If you want to help your company to grow, then invest the time to educate your team and then foster an environment to spread the knowledge within the organization and to each individual. If you need more knowledge to spread around, call Lighthouse Consulting.

4 Things I Find In My Consulting Practice In Almost Every Engagement.

As a consultant I find the same 4 things are lacking or missing at almost every engagement.

  1. 1. Training and development programs and scorecards
  2. 2. Automation of processes
  3. 3. Clear communication from management to staff of goals
  4. 4.The right people in the right jobs

These things seem to be lacking or non existent in most organizations, so how do I suggest they do business, read on.

POST: As a consultant I find the same 5 things are lacking or missing at almost every engagement. It has been a blessing for me as a consultant as it has given me infinite opportunity to build programs that overcome theses deficiencies.

TRAINING AND DEVELOPMENT

When I entered the debt collection industry in 1979 training was the most important thing emphasized by management. In fact the job I applied for was not title debt collector it was entitled “management trainee”. The company made every effort to make sure every employee was able to move up the ladder with promotions. As you moved into management the biggest emphasis was in training a replacement for yourself so you can move up.

Training and development plans seem to have lost the war with the annual budget. you do not have a trainer much less a superior training program. Between 2000 and 2007 the industry quit training and instead created a bunch order takers. Times were good, collections were high and the need for a highly trained staff just didn’t seem to make sense. In 2007 the very best US trainers left the country headed to India where they have a desire to learn. Many of those traders are still there.

Most US call centers have not gotten back to a training mentality to date. The use of a scorecard for every staff member helps to identify deficiencies and training opportunities. The only way to develop a team is to understand their deficiencies and create training programs to combat them.

AUTOMATION OF PROCESS

I find that most collection agencies and especially law firms prefer to do many tasks manually. In many cases they know that the task could be performed in an automated fashion but they just resist the change as they are afraid of their software. Yes afraid of the cost, the hassle the time and money.

By showing them how to embrace their systems and in some cases adding systems to get the job done they are able to get tasks performed in a error free environment.

CLEAR COMMUNICATION

Most owners and CEO’s think that everyone is on the same page as they are but seldom is that the case. Type A people tend to think the word is either following along or already on board with their ideas. Therefore they do not make an effort to share their goals, direction and thoughts.

Simple things like a mission statement printed and framed can help this. Company newsletters and town meetings also help drive engagement from the top down. I have help to set up these types of communication in many engagements and the results are tremendous. The staff are glad to understand the direction of the company and the CEO now knows that the company is all headed the same direction, together!

STAFFING

One the main reasons I have to do an onsite evaluation of new consulting clients is to evaluate the staff and management. If I just ask questions online and sent solutions it would not work as the people getting the blueprint may not have the skills to enact the plan. The plan has to be customized to fit their skill sets.

Often I find that staff that is considered as under performing is just in the wrong job or has not been properly trained. Often I find management that is underperforming and being over paid. All of these are opportunities to help the company to make improvements and increase profits.

If you think that one or all of these things exist in your operation the next step is to pick up the phone and talk with me free of charge to see if I might be able to help you increase profits and improve strategies. Phillip w. Duff CEO Lighthouse Consulting 904-687-1687