House Payments Are Stupid

I was talking to an experienced collection agent from another agency the other day, and the issue of ‘house payments’ came up.  That’s what happens when an agency takes a payment for ‘the house’ rather than posting it to a specific collection agent’s revenue tally for the month.

I believe that house payments are stupid.

Here's why they happen ... collection agencies mostly work on contingency or commission – when the agency collects for a creditor, their percentage of revenue goes to the agency's bottom line for that month.  Inside the agency, credit is broken down between various collection agents.  But each agent’s revenue total will affect their bonus, if they even get one, that they will receive each month on top of their salary. 

So how do agencies credit payments to individual collectors?

Well, if the file is in a collection agent’s queue of files that they are working, it’s easy – that collector is the ‘owner’ of the file and will receive credit when payments on their accounts arrive in the office.

Things can get complicated for assigning credit if multiple agents have touched an individual file – some agencies might do revenue splitting between agents, or establish a first-touched or last-touched policy on assigning credit to a file.  But what gets more complicated is when a payment comes in and no collector is assigned to the file.

So, Bob the collector handles XYZ Credit accounts at the agency – 100 files a month come in, are imported and are assigned immediately to Bob’s queue, and Bob letters them and calls them, so any payments that come in from XYZ are clearly assigned to Bob, regardless of the provenance of those payments.  Simple.  It’s even likely Bob is posting the payments personally.

Now, what happens when Nancy the collector heads up a team that handles QRS Hydro accounts for the agency, and they send 5000 files a month?  It’s too many accounts for Nancy to handle personally, so the files first go into a holding queue, and are lettered before being assigned, or have some sort of bulk process like a predictive dialer call them.  Payments that come in on files assigned to a specific collector are easy, but what happens when a consumer pays off an initial demand?

Usually, the agency posts the payment to no collector at all, to ‘the house’.  And that’s where I have a problem.

Collectors tend to spend 80% of their time generating the last 20% of their revenue – they deal with consumers that don’t return calls, don't keep arrangements, refuse to pay, have numbers go out of service, and so on, for hours every day – the collector's effort and intent is there, so if a payment comes in without clear provenance, that collector should get credit when possible.  It can be an even distribution of unclaimed payments between the team members, a randomization scheme, or some other fair method.  It shows trust and support for the team from management, and doesn’t nickel and dime down their bonuses or commissions.

An argument for not boosting collectors’ commissions can be made – an argument can also be made for charging your staff members a quarter for every coffee, not giving them pensions, asking them to pay for their individual collection licenses, and other cost-cutting schemes that creates resentment, a high turnover, and a dog-eat-dog environment between employees.  The cost of not giving these payments to your team far exceeds the cost of giving it to them.

That’s why house payments are stupid.

Give collectors the tools to do their job … give them the training to do the best job they can … and lastly, give them a leg up where you can, and give the random payments flowing into the agency to your hard working team members.

At our agency, we have a mathematical formula that anyone can use for an unassigned file, to ‘spin the wheel’ and give odds to every staff member who has a historical paid in full or settlement account for that client – if that means that five collectors have 46%/27%/15%/10%/2% distribution of those accounts, then those are the odds of each payment being posted to each collector.

Giving credit to your collectors whenever you can is not stupid at all.

You have a different method for giving house payments to collectors?  You’re a collection team lead or manager that wants to develop a process for assigning payments?  Give me a call.

Thanks kindly,

Blair DeMarco-Wettlaufer

KINGSTON Data & Credit

Cambridge, Ontario

226-946-1730

bwettlaufer@kingstondc.com