Review of Wolf At The Door - Part II

I first heard of Mark Silverthorn nearly twenty years ago when a debtor forwarded me a copy of a collection demand notice on his letterhead, terrified a lawyer had threatened him, and then the outstanding account was placed with my firm as a second assignment.

Mr. Silverthorn’s letters and name have come across my desk from more than one agency over the years, and while he and I have never dealt with each other directly, we have many mutual business contacts and possibly friends in Guelph and Kitchener. While Mr. Silverthorn and I are now “on opposite sides of the fence” in the collection industry, I applaud a number of his efforts and sentiments. I may not agree with his reasoning or methods, but I appreciate the dialog he is opening up.

Of course, I am in the business of representing my clients’ best interests, and he is in the business of representing his retained consumers’ best interests, so we cannot certainly agree on every point, but I believe there is a great deal of value to his book and. After everything is said, while I am reviewing both the positives and negatives of his book in my opinion, I wish Mr.Silverthorn well on his new professional path.

Quibbles

As I read this book, a number of subjects raised my eyebrow or did not mesh with my experiences in the past. I would respectfully point out a difference of opinion for those interested who have also read The Wolf At The Door.

The “Debt Collection Game”

I don’t agree with Mr. Silverthorn’s representation of the collection agency industry as a game. I have seen tens of millions of bad debt write-off accounts be assigned, because consumers did not pay their accounts on a timely basis. To emotionalize the accounts receivable staff and credit managers who had to deal with this outstanding debt, and the agencies that exist to recover that debt is not an accurate portrayal of everyone in our industry. Receivables are a serious business.

While I have had the misfortune of also running across collectors who consider chasing debtors a“game”, or were encouraged by their managers to consider accounts they were collecting on as “their personal money they were owed”, I do not personally believe this, and I do not believe that a collector should be allowed to foster this attitude.

I agree with Mr. Silverthorn that someone should sleep well at night and find contentment in their profession. I have always believed as my time as a credit manager, and then as part of the collections industry that collection agencies exist as the voice of consequences. That voice may bear bad tidings, but it can be professional, and does not need to be antagonistic or demeaning. I have seen debtors assisted out of bad situations by agents, and reasonable payment terms being made. I also believe that conflict isn’t necessary, or meaningful to collections.

One of the telling items I can see from his book, and sadly it’s a symptom of the collection industry, is Mr. Silverthorn’s passing mention that a collection agent might receive on their desk 75-200 accounts a month. I have seen other agencies work in this manner, and it’s a perfect example of how management creates a monster of out collection agents. Imagine this – a collector makes one of his 100 calls for the day, reaching John Smith and advises him of his debt to ABC Company for $1200. John tells the collector to take a short walk off a long pier, as he refuses to pay his debt. In a professional collection environment, the collector would advise John that the debt will be listed on the credit bureau as a registered item, appearing in the section outlining collections, judgments, and bankruptcies with Trans Union and Equifax, and move on. However, many agency managers believe that this account is still collectable, and will continue to hound John Smith over and over. And if the collector doesn’t manage to collect from John Smith or his other 250 accounts he can work through over and over every two days, he may lose his job. This scenario, in my mind is poor collection agency management, and it fosters aggression and complaints when it isn’t necessary. If a debtor says they are not paying, they are not paying, they will live with the consequences, and everyone should move on.

I managed one agency, and we had a collector who had a full time position of handling inbound calls from a portfolio of consumers who had been denied credit due to that agency listing a debt on the credit bureau up to six years prior. That collector had to repeatedly deal with consumers crying “why didn’t you keep calling me?”, and she had to calmly point out the exact date the consumer was advised that the item would go to the credit bureau. These consumers then had to repay their debt to acquire their new car or house, and often with interest added by the terms of the original agreement.

Avoiding Collection Calls

The Wolf At The Door dedicates a great deal of time and space on tips to avoid contact with a collection agent. I believe this is a disservice to consumers. A collection agency makes hundreds or thousands of calls each day, and the majority of consumers fall into the category of avoiding contact. Screening your calls with an answering machine doesn’t have your call fall outside of the collection work flow, and at the same time your account might be incurring interest, or be listed on the credit bureau. If you want to avoid collection calls, you can go to great efforts to do so, but it won’t end the consequences.

The Credit Bureau

It is likely from Mr. Silverthorn’s experience with agencies he has worked with, but he undervalues the credit bureau and the consequences of not paying accounts. In this day and age, credit bureau reports are pulled for credit applications, new bank accounts, car loans, mortgage approvals and renewals, prospective landlords renting a housing unit, and more. I had one occasion where a debtor called our agency because he was denied a public library card – they had performed a credit bureau check!

As well, he talks about an R9 being removed once an account is settled. In my experience, that’s not accurate. With Trans Union, if you have a $3000 RBC Visa you have defaulted for three months on after six months of mostly timely payments, it will show your monthly payment history, such as 99922111211. This tells your creditor a great deal. It will then be assigned a score, which is determined by these monthly ratings (R9, in this case). It is then sent to ABC Collection Agency, which you settle with for $2000 two years later. It will still show as R9 on your credit bureau, and appear again under the registered items section as ABC Collections/RBC Visa 3000 bal-- 2000 pd --settlement.

Borrowing Money To Pay Your Debt

The book strongly advises against borrowing money to pay your debt. I would like to speak up here. Often, consumers that end up in collections are not bad people, but they have made bad financial decisions or suffered bad financial circumstances. They may be carrying a debt on a retail credit card, a second mortgage,or a debt to a lender that has an outrageous amount of interest being charged on their debt. Every dollar you spend on interest is a dollar wasted ‘treading water’. If you have a creditor, or several creditors charging in the neighbourhood of 28.8% interest on outstanding accounts, it may very well be in your best interests to seek a consolidation loan or renegotiate existing lines of credit to pay off existing debts. Not only will your monthly cost of interest paid be lower, it can reduce your monthly output of funds towards your debts to keep them current or reduce them.

Settlement Strategies and Your War Chest

Mr. Silverthorn outlines a couple of strategies to settle accounts. A number of these strategies involve building a war chest and letting debts age, setting up a siege against creditors and collection agencies while building up funds to settle. I see a couple of flaws to this plan.

The first, and foremost problem is building a war chest sounds like a great plan on paper, but unfortunately, it relies on self-control and discipline. Most debtors listed in a collection agency are simply human, and many of us lack self-control and discipline. If people saved their funds before buying items on credit in the first place, they wouldn’t end up in collections. If you can save a war chest to settle, by all means do so – but with caution!

Secondly, I believe his debt settlement plan does not sufficiently address the impact your credit bureau will suffer from non-payment. The record that you stopped making payments will remain on your credit bureau for seven years. When you settle your accounts, that restarts the seven year limitation period. It will impact your ability to acquire credit, overdrafts, low-interest loans, and other credit instruments for that period of time. Tread cautiously. Again, people are people – if you are in collections due to poor spending habits or living beyond your means, it is likely you will be seeking credit again at some point in the future.

Conclusion

Next week, I will deal with the items I strongly disagree with in the book.

But to end on a positive note, the one thing I can agree with in this book is that it suggests you should have a strategy to deal with your debt, and especially if things have deteriorated to the point of collection agencies contacting you. I couldn’t agree with this more.

As well, if you can, seek advice from a number ofsources. I am sure that Mark Silverthorn and I would offer different advice to the same consumer, based on our experience. Gather advice from your bank manager, your well-off friend, a lawyer, credit counselling company, or one of the many books out there on financial subjects, but definitely do come up with a plan to make your personal financial situation better.

If you need advice, and it isn’t a conflict of interest, I’d be happy to give you a bit of my time. My office number is 226-444-5695, or alternatively, you can email me personally at bwettlaufer@gmail.com.

Blair Wettlaufer