The Psychology of Collections

A lot of folks look at collections as a numbers game, a series of financial transactions … but it isn’t.  Collections is very much about human behaviours.

Studying English and psychology in university helped me far more for my career than my courses in accounting or economics.  Here’s why.  People who end up in collections are mostly, by and large, decent people – however, people who end up in financial difficulty react to stress with emotions.  They either hide from the problem, procrastinate, attempt to justify not paying, or even emotionally lash out.  Solving these problems are not just about demanding money.

When I started at my first agency, the ‘opening dun’ was under a piece of glass on the desk, demanding payment in full today, no room for excuses, stalling or empathy.  The basic concept was to create a sense of urgency and collect the money, but it left no room for creating communication.  And collectors, being told that it was appropriate to stand on their desk and yell, bang their phone in the garbage can, or come in at 7:00 am to call their ‘breakfast club’ of consumers with broken arrangements kind of missed the point.

I’m really glad those days are far behind us, for me and many other collection agencies – but there are still some people who get into collections lose sight of the big picture.

Human beings will inevitably owe money for reasons in their control, or outside of their control, and human beings as a whole dislike conflict.  If someone knows that you are calling to yell at them, they now have the technology and tools to just ignore you.

Yes, creating a sense of urgency is important – to a point.  A good collector creates a sense of importance around a debt and resolving it, but doesn’t make it about conflict between the collector and consumer.  They make it about the collector helping the consumer resolve the problem.  And putting blame on the consumer for ending up in collections is the last thing you want to do.  It’s important to address the present, offer options, and come up with a solution.  Ideally with the consumer paying their debt, so it’s a win-win-win scenario.  The client is paid, the consumer doesn’t suffer a negative credit rating or accumulating interest or legal action, and the collection agency earns a fee for collections.

Also important is the psychology inside the collection agency – if you have collection agents that lack empathy for the consumers they deal with, they start treating the consumers they call as numbers or obstacles.  They start assuming everyone is lying about promised arrangements, or purposefully avoiding them.  They take glee at a consumers discomfort, and it stops being about solving problems and it becomes about an ego trip or adrenaline rush when a payment comes in.  And this often can spill into the workplace with trying to create a dog-eat-dog environment, unhealthy competition between collectors, or management creating a work environment of fear and intimidation.

We were talking to a potential client yesterday about the psychology of collections – they completely got it.  They are looking to resolve accounts and keep customers for the future.  Collection agencies should be doing the same thing, trying to resolve accounts and keep their clients’ reputation intact.

We reward empathy in a couple ways – we allow team members to recognize folks who go out of their way to help their co-workers, we reward positive social media reviews, and ultimately, we understand that the people who work for us are human beings with their own personal challenges and a work day is more than just ‘how much did you collect today’ boiler-room telemarketing nonsense that burns out employees and spits them out.

Glad I went for that Arts degree. 

Want to talk about reinforcing positive behaviours in your workplace, and empathy and how it’s the most important driving force in collections?  Drop me an email or give me a call.

Thanks kindly,

Blair DeMarco-Wettlaufer
KINGSTON Data & Credit
Cambridge, ON
226-946-1730
blair@receivableaccounts.com