Don’t Be Delinquent: Some Lessons on Collections Leslie Hoffman Accion New Mexico ∙ Arizona ∙...
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Transcript of Don’t Be Delinquent: Some Lessons on Collections Leslie Hoffman Accion New Mexico ∙ Arizona ∙...
Don’t Be Delinquent:Some Lessons on Collections
Leslie HoffmanAccion New Mexico ∙ Arizona ∙ Colorado
Lend for America SummitOctober 28, 2012New Brunswick, NJ
Agenda
• Who are we and why are we here?
• The philosophy of collections as mission
• The psychology of strong repayment
• The approach
• The daily practice
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First things first…
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Who are we in the room?
Why? The business case for collections
Repayment has direct economic viability implications for
microfinance:
• Prevents economic value from exiting the balance
sheet
• Can represent a major cost center if clients fail to
pay
• Reputational risk
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The stakes are high
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Nicaraguan protesters during an earlier period of "No Pago" movement activities
Image credit: El Observador Económico
Our work is our harbor
• Our mission is empowerment
• Our method is service
• The magic is the change clients create in the world
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Collections as a deep connection
• It is the most intimate mission-centered part of what we
do
• It is the time to deliver the value we’ve promised our
clients
• How you feel about this work will show
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Psychology matters in collections
Behavioral psychologists tell us:
• Ambivalence and resistance to persuasion are core
human traits.
• Motivation is formed in the context of relationships.
• No one is completely unmotivated.
• We tend to believe what we hear ourselves say.
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Your psychology matters
• If you’re arguing for change, you may be in the wrong
role.
• Help the client discover how he/she can make
changes.
• People respond to options, not obstacles.
• Remember your kindergarten fire safety rule!
10
Your approach makes the connection real
• Invest early and often in the relationship
• Be sure you have the right tools
• Have fun!
• Seriously, fun is possible!
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Good quality must start early
• Marketing and outreach
– Messages that support philosophy
• Credit application process
– Offers value, is thorough
• Underwriting
– Codified, clear standards
• Ongoing account education
– Send regular statements
• Great customer service at every step!
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Collectors as underwriters
• Collectors underwrite past-due accounts
• What can a review of The Five Cs of credit tell you?
• Character
• Capacity
• Creditworthiness
• Collateral
• Conditions
• Verify, verify, verify … and write it all down.
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Is everyone on the same page?
• How does your group define key terms?
• Who’s collecting and when?
• What expertise and resources are available? (i.e. legal,
auction, repo, etc.)
• Set goals and expectations for past-due metrics:
– Expected portfolio at risk
– Expected net write-offs
– Expected customer service
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The collections cycle
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• “The Days of Our Lives” as collectors:
– Start: Loan X is past due.
– Fact:
• We now know that this debtor faces a higher risk than
the one originally foreseen when the loan was
underwritten.
– Objective:
• Find out what is going on…
You collect before you dial
• Before the call
• Your opening
• Overcoming objections
• Appeal to their desire for change
• CLOSE the deal
• Follow up
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Tips on preparation techniques
• Do you have an opening that feels comfortable and is
effective?
• Do you walk through options and role play with a
colleague beforehand?
• What’s your motivational appeal?
– Core values
– Honest broker
– Maintain good credit
– Future business, etc.
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My organization’s protocol at a glance
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And if you need to renegotiate the loan?
• Check your docs!– Be sure the original loan documentation is in order
• Chat up the borrower– Now is the time to emphasize relationship; dig until
you find the reason for trouble.
• Pull a credit bureau– Recent activity can reveal a lot.
• Are there other lenders involved to consult?
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Before you pull the trigger on a new agreement (workout)
• Know where your collateral stands
– Are landlord waivers and subordination agreements in
place?
– Are you sure your lien position is perfected? (check
UCC status, mortgage/deed status)
– Is it where you expect it to be and in the condition you
expect?
• Know where Uncle Sam stands
– Tax liens can throw a major wrench in things
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Injecting fun and joy is key!
• How do you celebrate portfolio quality activities and
victories?
• What do you do to continue to improve your knowledge
of lending and how can you share that with colleagues
and clients?
• Do you change the routine to inject some fun?
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Bringing it back to mission
• These are hard times for borrowers and lenders -- find
common ground.
• See yourself as a problem-solver, not an enforcer.
• Celebrate small victories every day.
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Resources and suggested readings
Training• Your state’s independent community bank association
or chapter of the American Bankers Association (www.aba.com)
• Risk Management Association www.rmahq.com
Readings:• Motivational Interviewing: Preparing People for
Change, Rollnick & Miller, 2002.• Crucial Conversations: Tools for Talking When the
Stakes are High, Patterson, et al., 2002.
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Myths you can now help dispel!
• “It’s the economy’s fault”
• Being a good collector = years of collections
experience
• Collections = clean-up work
• Collections ≠ fun
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Investing in individuals.Improving our world.