While working last evening, I was listening to CNN when a disturbing report about debt collections aired. The segment contained several recorded conversations with a collector who was beyond abusive. The exchange reminded me of an op-ed piece I wrote for a collections magazine in 2008. I will not bore you with the technical data from the article, but I would like to share the logic I felt would be in the best interest of both the collector and the debtor. The following is an excerpt from “You’ll catch more flies with honey…”
The Psychological Impact of Debt
Any type of collection activity causes a certain level of stress for the consumer, even for minor amounts of debt. Compound that stress with the threat of foreclosure, and the stage is set for a volatile collection climate. Studies have already indicated a correlation between many common social problems and indebtedness. Findings suggest that the inability to pay debts often exposes debtors and their families to harmful levels of stress, contributing to insomnia, anxiety, depression, increased marital tension and, most startling, to the deterioration of parent-child relationships. Additional studies have concluded that those who are subject to aggressive collection activities have even more to contend with. These individuals were much more likely to suffer mental and physical complications. Such studies reinforce the belief that money problems undermine both individual health and family structure. The conclusion of one researcher summed up what health professionals had theorized for years, “Findings would suggest that the current system of resolving disputes between creditors and debtors is far too costly, both to the debtors and to society at large.”
Effective Collection Practices
What the American family truly needs right now is a friend rather than a foe – which is unfortunately how collectors are typically perceived. The media rarely presents stories of collectors who work with debtors to help them satisfy their obligations. Rather, the public hears the most sensational accounts of collectors who overstep the boundaries of professional conduct. Needless to say, a little good will, especially under the current circumstances, could go a very long way for the entire collection industry.
A Win-Win Situation
In 2008, it will be necessary for industry professionals to reassess the consumers from whom they hope to collect. These debtors may well have made the same mistakes as debtors have in years past, but many have not. They represent a different type of debtor: well-intentioned, but the victim of forces in the housing market (and other circumstances) well beyond their control. They are also different in that they probably have fewer reasonable or apparent options. Maintaining an adversarial approach with these individuals will be of little benefit, to collectors or to our society. As the aforementioned studies have indicated, the bonds that hold families together are already strained. Increasing the pressure will only break those bonds. Now, more than ever, the collector will have to work harder to provide viable solutions to consumers who want to satisfy their debts.
Evolution = Empathy and Education
There’s an old adage that tells us, “You’ll catch more flies with honey than you will with vinegar!” These days, Americans have had more than their fill of vinegar and are ready for some honey. Essentially, people need to hear options presented by a caring professional, rather than ultimatums from a collector. Collectors who can provide reasonable solutions to consumers will be successful. We’ve already noted that consumers who’ve fallen behind on one of their obligations are also likely to be delinquent on their other payments. Imagine the public relations impact, not to mention the boost to the bottom line, that a collector could experience if they took the time to help someone develop a budget, not only to satisfy one debt, but to address other financial shortfalls.
This assistance can come in many forms. Collection agents could work with an individual independently, or develop strategic relationships with the thousands of debt management agencies that exist to help the public. Such productive relationships could not only change the public perception of collectors, but also give the American public something they so desperately need – a little honey.
The best way to protect yourself against aggressive collection practices is to be informed of your rights under the Fair Debt Collection Practices Act. The Federal Trade Commission has a fantastic Q&A page that I encourage you to become familiar with. Please click her to access the FTC’s Facts for Consumers.
For more information, or to speak with a certified credit counselor please contact Cambridge Credit Counseling at 800-897-2200 or www.cambridgecredit.org.