According to the annual CFPB 2017 report, there were 130,000 people employed by 6,000 collection agencies in the “$13.7 billion dollar industry”. Although the base salary of a debt collector is low, he (or she) can earn a lot in commissions, which are based on the amount of debt he collects. In this article, we are assuming that the reader of this article (you) is a debt collector.
Related article: Top debtor excuses and how to handle them
This is a fairly long and comprehensive article, we have attempted to make it as informative as possible.
Best case scenario:
Some individuals did not pay because they simply did not realize the seriousness of not paying the bill till they hear from a debt collector or they had simply forgotten to clear the dues. This happens more often than you would think. Lucky for you, such cases can be often cleared amicably in a single call.
a) Prepare your mind:
Before making a collections call, make sure you are fully relaxed, and regardless of how bad your last collections call was. Tell yourself “I will remain calm during this call, no matter what“. Let’s agree, a collections call from a debt collector is really the last thing any person wants to receive on any given day. About half of the debtors (or less) will talk to you properly, others will give you all sorts of excuses, some may even be nasty or abusive. Do not let any of this impact you, it’s a part of your job, laugh it off after the call is over. It is important for the debtors to understand that you are calling to work with them, not against them.
No checking Facebook, WhatsApp, Instagram, News or Sports during the call. Keep your cell phone aside and no browsing the internet. Stay focused and Listen carefully.
b) Yes, some debtors owe nothing, your data could be outdated:
Accept it, there is a possibility that the debtor might have already paid the debt, just that you are not aware of it or your corporate system is not up to date. In such cases, take whatever payment proof the debtor can provide and end the call nicely. Get the payment proof validated.
Collection calls are commission-based, the collection agency gets paid only when the debtor makes a payment. The debtors are ideally required to pay the collection agency directly, and then the agency remits the amount back to their clients after deducting their collection fees. Occasionally, debtors pay directly to the clients; in this case, the clients are required to pay the collection fees back to the collection agency. Your client could have just forgotten to inform you guys about this payment. Rarely, but you may come across some sneaky clients who intentionally do not tell you about the amount they have received, hoping to avoid paying your collections fees.
And lastly, it is possible that the person does not owe the debt, or is protected since he is legally bankrupt. The debt could also be past the Statute of Limitations (SOL). Clarify your company’s policy when handling such accounts.
c) Inaccurate billing by clients:
Inaccurate billing and overcharging is another big complaint from debtors. This is particularly common in the insurance industry, phone and cable companies. These clients generally have no problem in paying off the debt, provided the bill is fixed per their understanding. Listen to the debtor, if he sounds genuine and the difference is large, then discuss the matter with your supervisor after the call for a further course of action. At times, the debtor really owes a lower amount or nothing.
d) Be Professional, Confident and Somewhat Authoritative:
Imagine the debtor is sitting in front of you. Your attitude should be somewhat similar to a recruiter. Personally, whenever I have taken a job interview, I tend to be in my best behavior, act professionally yet authoritatively.
Be polite, a debt collector does not have the option to get angry. He should also avoid using any “Sense of humor” during the call. Something may be funny for you but may be offensive to the debtor. It is a good practice to keep a smile on your face while making these collection calls. It helps to maintain a positive attitude. Never eat or drink during the call.
Be aware of the FDCPA laws (Fair Debt Collection Practices Act) and other state laws that may apply. Never cross those limits. Other laws like HIPAA or TPCA may also apply.
f) Review all the documents that you have before the call:
Scanning through the related documents once you are on the phone with the debtor will look so unprofessional and unprepared. Here is some of the minimum information you should have in hand before making the call.
* Exact amount owed
* What services and products were sold and on what date.
* Date when the payment was due.
* Payment terms and any other supporting documents.
* A summary of previous communication between your client and your collection agency.
* If any payment has been made so far.
* Are you permitted to settle the debt for a lower amount?
Many debtors crosscheck the information a debt collector has about the debt in order to fend off the collector. But if within the first 30 seconds the debtor strongly feels that the collector must be having sufficient information about the debt, he will likely not go into further details, the tide will quickly turn from interrogation to how the debtor is going to pay.
g) Maximum time for the call:
Do you want to spend the same time collecting on a debt which is $100 vs which is $1000, probably No. Obviously, you do not want to spend too much of yours and the company’s time on a small debt. If the collection call on a lower outstanding debt happens to go for a longer time than anticipated, and it is still unclear whether the call is going productive or not, try to get the debtor back from auxiliary discussions or end the call nicely, and possibly call the client at a later time. Try to keep your call short but effective.
2. Starting the call – First thing first:
a) Are you talking to the right person:
By law, you are not allowed to discuss collection matters with anyone other than the debtor himself (or the co-signer of the debt if the debtor is unreachable/unable to pay). This is also called the No-Third party disclosure law. Ensure that it’s the right person on the other side. Some debt collectors additionally verify customers by checking their last four digits of SSN or address. Start your call by speaking clearly and with confidence, neither too loud or too soft.
b) If someone else picks the call:
If the person on the phone does not know the debtor at all, then it’s possible that the debtor’s contact information has changed. You may need to do an advanced Skip Tracing to locate the debtor.
If this other person asks what you are calling about, you can simply say it’s regarding some business matter. In case it’s the debtor’s correct number, just that he is not available at the moment, you can either decide to call at a later time or politely leave a message with your name and number and request them to pass it to the right person.
c) Landline or Cell Phone
It is always beneficial to be aware if you are calling on the debtor’s landline, cell phone or work phone. FDCPA Collection laws are more strict when calling on the cell phone. In some states calling on cell phone is prohibited by default, unless the debtor has permitted you.
You can leave a voicemail but do not mention that the call is regarding a past-due bill because if it is a shared voicemail box then you have can potentially disclose the debt to an unrelated person and violate FDCPA. Leave your name and number and request the debtor to call you back.
Good morning, my name is [ your name], we have an important message from [company name] for [Mr. John Doe]. Please call [company’s telephone number] and please mention the reference number [***xyz] when you call us back.
3. Your collection call starts now:
a) Address the debtor by his First Name, avoid using words like “Sir / Mam / Bro/ Buddy / Sis”.
b) Tell the debtor that this is an attempt to collect a debt, any information obtained will be used for collections purposes only. Some debt collectors record collection calls.
You are legally required to disclose that you are a debt collector and calling regarding an unpaid bill.
A little off the topic – These states require All-Party Consent if the call is being recorded. (Washington, Pennsylvania, New Hampshire, Nevada, Montana, Michigan, Massachusetts, Maryland, Illinois, Florida and California.) This list could have changed by now, but overall your agency will make you aware of their call recording procedures and/or if you need to ask the debtor’s permission before recording the call.
c) Then you let them know who your client is, which would be whomever you got the actual debt from ( the original creditor).
d) Make them aware that the client has legally authorized your collection agency to collect the debt on their behalf.
e) Then right away ask the debtor how they would like to pay. Most collection agencies will accept payment over the phone. Get ready for all kinds of debtor excuses. Most likely, the debtor himself will tell you the reason for non-payment, but if they do not then ask them.
f) If you end the call without getting a payment or without a commitment of payment date/amount, then that call has been wasted.
g) Sound serious about getting the payment, if you do not show seriousness and haste, then the debtor won’t get serious either.
h) You can indirectly have the debtor accept the debt by simply asking “Do you have any more questions regarding this debt?”
i) If the debtor tells that he will make payment at a later date, then right away ask him will it be by Check, Credit Card over the phone, Money order, (or other options like Western Union). Most debtors reply that they will mail a check, ask them which Bank/Credit Union will they use. All this will reflect how serious you are to get the bill paid off. If the debtor demands a return envelope for making the payment, then confirm their latest mailing address. In fact, sending a payment envelope is encouraged, as serves as an additional payment reminder.
j) If the debtors tell that they do not have money now, ask them when they will get their salary. Tell them to remit the following day and if they can call you to confirm when the payment has been sent. Besides asking open-ended questions to get as much information as possible from the customer. to eventually nail down a commitment.
k) Many debtors will start explaining to you their personal financial hardships, although they may be correct but do not fall for those and yet do not appear indifferent. Take a middle route – “I understand why you are feeling this way“.
l) Try to finalize the payment arrangements, if the debtor cannot pay lump-sum then offer them to pay in installments. “To prevent you from going further into the debt, I can offer you to make payment in installments“.
m) If the debtor is unreasonably aggressive or angry, ask them “I have clearly called you at a bad time, when will be a good time to call you again.”
n) Take short notes, so you can recall what happened during the call. It will also help you to pin-point if the debtor changes his story in the next call. Before the call ends, do let the debtor know that you have taken notes from this call. All this conveys your seriousness to collect the debt.
o) Give a few seconds pause after your questions, especially when you ask for the payment arrangements, allow the debtor to speak. Short silences are a powerful tool in debt collections; they will likely spill vital information.
p) Debtors may get angry, emotional, embarrassed and may even yell at you. Remember to stay calm and focused. Over time you will get immune to all these things. But, you can never threaten a customer. Making false statements like “You can go to jail” or “We know how to get money out of people like you” is completely prohibited.
q) If the debtor is not willing to pay at all, politely let him know the consequences of not paying the debt, which includes entry of this unpaid bill on his credit history.
Read your company’s policy before telling the debtor that “this account may be transferred to the legal team” is acceptable or not. If debtors feel that they are about to get sued, they will also contact a lawyer making your collection efforts even harder.
r) The debtor has the right to tell you to never call him. He can also tell you to perform all collection activities in writing rather than a phone call. These are his legal rights.
s) Lastly, if the collection call is going unfavorable, try to intelligently end the call rather than hanging up. This will help avoid making matters worse.
4. After the call ends:
a) Finalize/formalize your notes from the call, including dates on which the debtor has agreed to send money.
b) Most debt collectors become better over time. Do not hesitate to ask your co-workers (collectors) how they would have tackled a situation which you were not able to handle too well during the call.
c) If you unfortunately/mistakenly violated any collection laws or yelled back on the debtor, do make your supervisor aware of that right away before the situation gets worse. Any unfortunate/critical situation should be documented and communicated to your supervisor immediately.
d) Put a reminder for yourself to contact the debtor on the date on which you had agreed to talk again or when the payment is supposed to be made. Regular follow-ups will maintain the pressure on him.
5. Debtor’s Legal rights:
a) Beware, the debtors are aware of their legal rights more than ever. There is an unlimited supply of articles and videos telling the debtor how to escape from making payments. Many of these videos do provide valid information but more often than you think these videos go overboard and land up providing misinformation as well. People posting these videos are often not even associated with the collections industry or lawyers. Their experience and suggestions may not even fully fit with the debtor’s own situation. They often arm themself with this misinformation and argue with you unnecessarily.
Even the state collection laws vary largely by state, which these videos generally do not talk about. Many people post these misguided videos just to make money out of advertisements, nothing else. So, yes there is pretty good information online regarding the debtor’s rights, but there is an equal amount of incomplete/misinformation out there which a debtor may not realize.
Then there are lawyers who make a living out of filing lawsuits against the collection agencies. Many debtors are so much loaded up with information (and misinformation), that they may start sounding attorneys themselves.
b) According to consumerfinance.gov, the debtor has the legal right to ask you these things:
* Identity of the debt collector, including name, address, and phone number
* The amount of the debt, including any fees such as interest or collection costs
* What the debt is for and when the debt was incurred
* The name of the original creditor
* Information about whether you or someone else may owe the debt
The debtor can also tell over the phone or send the collection agency in writing:
* I do not owe this debt.
* I need more information about this debt.
* I want the debt collector to stop contacting me.
* I want the debt collector to only contact me through my lawyer.
* I want to specify how the debt collector can contact me.
* Dispute the debt itself, likely within 30 days of the first contact.
A debt collector needs to be flexible and handle situations smartly and diplomatically. A collections call is never easy. There is no magic wand to collect a debt.
Information presented here is not a piece of legal advice or something which fits in all situations. There are way too many situations and laws beyond what has been covered above. A large portion of this article is based on the feedback I got from co-workers during my last 17 years in the collections industry.
We would appreciate your feedback on this article, and how to enhance it further.