Early in my collections career, I worked for a collection agency that had strong-spoken, front-line agents that demanded payment in full from a debtor, refusing all offers for partial payments in what they called “the sweat-out period”. If unsuccessful, the files went to a more reasonable second-line agent that demanded arrangements of half of the balance now, and half in three post-dated cheques. If still unsuccessful, the account would then pass to a soft-spoken third and final agent that would take whatever arrangements they could get.
I believe in handling things differently.
When an account goes to third party collections, its understood by the creditor that the balance is due in full. If that’s what the creditor expects, that needs to be projected to the debtor -- and if the debtor had been making payments previously, it would have likely not ended up in collections. That being said, because the consumers (or companies!) we are contacting typically don’t have $10,000 in their pocket, that’s why they end up in collections, arrangements are often necessary to repay the debt owed.
Payment Arrangements Are a Privilege, Not A Right
As long as the debtor understands that a payment arrangement is a privilege granted by the creditor, and it is a sign of lenience by the creditor, you are off to a proper start. However, payment terms should not be rammed down a debtor’s throat. There cannot be a summary article saying “negotiation should be thus and so” … every creditor is different, and every debtor has unique circumstances that have to be factored in. However, some tips to consider are:
· * The debtor must understand that a ppa shows lenience by the creditor and agency
· * Arrangements proposed should include specific dates and amounts, preferably secured by post-dated cheques or EFTs.
· * Payment arrangements should be proposed by the debtor, not the agent – they are more likely to be fulfilled.
· * Payment arrangements should be proposed and responded to formally, not arbitrarily accepted.
· * A proposal for payments should stay ahead of interest incurring on the balance, or the agent should freeze the interest being applied, if they have the authority.
· * If a proposal is exceedingly low, or extended in time, supporting documentation or proof of income or expenses may be required by the agent.
· * If legal action is possible, the likely outcome is a garnishment of wages for 20% of their net pay – this can be used a yardstick for reasonable arrangements.
· * It’s not the amount, it’s the schedule – a payment arrangement should show the debtor to be making a serious, regular attempt to resolve the debt.
· * If the arrangements failed, the debtor understands that the debt will be due in full.
Post-dated cheques, payment arrangements, and cessation of interest are all part of being reasonable when securing the creditor’s balances – and should be available on the table as an option from the beginning, rather than engaging in scare tactics demanding payment in full. If the debtor is on social assistance, or is currently being garnished, being moderate in your approach may be the difference between collecting the account or not.
Arrangements are one of the key factors in our APPRAISE recovery program, and represent at least half of our liquidation of a creditor’s receivables. If you are a interested in speaking about professional representation of a creditor, or the finer points of negotiation, whether you are a creditor or a consumer, by all means contact my office to speak with me. My office number at Kingston Data and Credit is 226-444-5695.
Kingston Data and Credit
Kingston Data and Credit