I have always enjoyed the human interaction element of my various collections roles, and felt strongly that if I treated someone respectfully, tactfully and professionally then I could expect broadly reasonable behaviour in return.  However, despite this belief and my strong collections style ('firm but fair' personified) I was still dogged by the occasional customer who did not want to 'play the game'.

common behavioural traits

I have discovered many interesting aspects of the psychology of humans when they are faced with difficult behaviour.  While the examples I read about in Games People Play by Eric Berne M.D. were not specifically focused on the debt collection environment, the behaviours displayed certainly had a familiar ring to them:

• The person with little care for authority or rules.  This sounded very much like the habitual debtor who has little intention of paying or returning calls.
• The person who likes to use a little knowledge of the 'system' to intimidate, threaten or coerce to get what they want.  Sounds like the customer who quotes dubious 'legal' information picked up from mates in the pub or the less savoury web forums, as a way of stalling payment or endeavouring to get the debt written off for entirely unwarranted reasons.
• The person who is capable of fulfilling an objective, but likes to think of reasons why they cannot do it because they actually do not want to.  This reminded me of the many customers who had the means to pay, but used a 'Yes, but....' objections to every suggestion I made to facilitate them paying.

instinctive reactions to difficult behaviour

A collector's reaction to such customer behaviours will vary greatly depending on, among other things, personality, environment and stress levels, but needless to say our instinctive reaction is usually one which plays into the hands of the perpetrator of the difficult behaviour, and serves only to escalate, rather than remove, the problem.

Many have traditionally placed reactive 'bad' behaviour into two neat pigeonholes, aggressive and passive:

• A typically 'aggressive' reaction from a collector faced with a difficult debtor would be to get angry, raise their voice, stop listening and lose control of the call, leaving the collector psychologically upset, and allowing the customer to believe they were justified in their behaviour.  In addition, the company's reputation may be placed under threat, and/or an important piece of legislation or regulations breached.
• A typically 'passive' reaction from a collector would be to let the debtor take control of the call, allow themselves to be walked over and to feel uncomfortable about assertively exercising their rights to collect the money.  The result of this would include low self-esteem for the collector, a customer who is not aware of the true seriousness of the situation and is less likely to worry about future arrears and, ultimately, a company that will suffer greater bad debt. 

In the book Dealing with Difficult People by Roberta Cava, I learned about other categories of reactive behaviour, which fall somewhere between the two extremes of passivity and aggression.  Although the names of these behaviours were less recognisable to me, the characteristics of each were certainly familiar:

• Passive resistance is a behaviour used by people who are trying hard to be more assertive, but doing it ineffectively.  The description of this behaviour felt familiar to me personally when I recalled the times that I have lied to pushy salespeople so I did not have to talk to them, rather than informing them assertively that I did not want what they were selling.  The reason for anyone to adopt this type of behaviour would be that they want exercise their rights, but are fearful of coming across as aggressive.  Debt collection equivalents would be comments such as, 'Isn't there any way you could pay even a little more?", or "I could really do with that payment by Friday. Would that be ok for you?"
• Indirect aggression is used by those whose instinctive reaction is towards aggression, but who would rather do it subtly to avoid the retaliation engendered by more 'in your face' aggressive behaviour.  Indirect aggression usually takes the form of silent treatment or sarcasm.  This was another behaviour which made me blush with its familiarity when I thought of how many loud sighs, or muttered comments, I have delivered in normal life, just slightly within earshot of someone annoying me. Collectors equivalents would be comments like, "Do you not think the credit crunch affects everyone, Madam?" or, "So it's ok to go on holiday but not to pay your credit card, is it?"

The effects of these more subtle 'cousins' of aggression and passivity can be equally damaging.  Collector motivation, the business' reputation and success, and the customer's perception of the company they are dealing with and the attitude to maintaining payment in the future could all be detrimentally affected.

what do we mean by 'difficult' anyway?

Collectors will all have a different view on the 'worst' scenarios to deal with.  It is easy to define an individual as being difficult when actually it is the situation, rather than the person, that is causing the frustration.  Similarly, is it really the behaviour that is particularly difficult, or simply that the type of behaviour displayed is that which is difficult for us personally to deal with?

In cases where we do identify difficult behaviour, it can be all too easy to 'punish' the debtor by the way we react, even thought the debtor may not be acting in a deliberately difficult way.  For example, the customer who phones up in a hysterical state because a standard letter threatening court action has been sent in error may well test a collector's ability to remain fair by assertive, but it needs to be remembered that was not the debtor's intent to create this problem.

Similarly, if there is a genuine language barrier between a customer in debt and a collector, than an 'extra challenge' may well be created, and the collector will require skill, patience and tact to deal with this assertively.  Once again, however, it is important to understand that it is the circumstances of the call which are causing the difficulty, not obstinacy deliberately adopted by the debtor.

TRULY ASSERTIVE BEHAVIOUR

As in so many relationships, when collecting a debt, the important aspect of the liaison between collector and debtor is an 'equality of rights'.  Truly assertive behaviour is not displayed in the sarcastic remark, the raised voice or the overfriendly yet ineffective comment.

When faced with difficult situations or behaviour, whether intentional or not, we must understand that our instinctive reaction may be one which feels the most natural and rewarding instant solution, but will invariably exacerbate the already difficult call.

Yes, debtors may occasionally intend to act badly (the 'treating debt collectors fairly' policies have yet to be issued). But retaliation, however human in nature, will only justify the 'bad behaviour,' and the problem will escalate beyond control.

Sometimes truly assertive behaviour involves doing the complete opposite of what our instincts tell us.  The 'fight or flight' option is one which the low intent debtor may use, but not the assertive debt collector who succeeds in achieving polite control of every call by:

• Maintaining a respectful but authoritative tone of voice, irrespective of circumstance
• Avoiding the temptation to make a sarcastic of defensive comment, or sound apologetic about asking for the arrears to be paid
• Using polite statements of fact to advise the debtor calmly of the current situation, the options going forward and the possible consequences of non-payment
• Retaining control by listening, empathising where appropriate, evaluating the possible solutions and, perhaps most importantly, understanding when the conversation needs to change from a 'statement' to 'question' strategy, and vice versa.

The collector who adopts these principles will limit their own level of stress, avoid escalated calls, unnecessarily long conversations and avoidable complaints about attitude, whilst retaining their place as one of the most consistently high-performing collection agents.

Thank goodness that, irrespective of economic conditions, the UK is spared such extreme levels of poverty. That is not to say, however, that financial hardship doesn’t impact on a great number of people, and it is unsurprisingly common to hear debtors cite general financial difficulties and ‘the credit crunch’ as being the core reasons behind their financial delinquency.

This article explores the meaning of modern day financial difficulties in the UK and considers the challenges faced by debt collectors in establishing whether or not a diagnosis reflects genuine financial hardship or, conversely, a reluctance to change lifestyle based on perceived contemporary need.

Historic culture of lending

The profile of the average creditor has changed. The safe lending culture of the last 20 years has broadly disappeared and been replaced by powerful, proactive campaigns to encourage the acceptance of debt as a life essential.

In the past, it was practically unheard of to secure a 100% or high-income-multiple mortgage, and the opportunities for those with a tainted credit history were severely limited.

The availability of unsecured credit to fund a holiday, a shopping trip, subscription to Sky, membership of a gym, to name but a few, was far less widespread than today and, consequently, the opportunity to rack up massive non-priority debts was restricted.

There were fewer tiers of expenditure in many areas of priority spending, as opposed to the now huge difference in price between, for example, neatly packed and prepared organic vegetables from the supermarket and those purchased from the local market at 4pm on a Saturday.

Whilst there are undoubted advantages of extending credit-taking opportunities and increasing customer choice, I believe that both these factors have contributed to the blurring of the previously well-defined line between want and need in our society.

Definition of financial difficulties

From the debt collector’s perspective, this situation significantly increases the complexity of fairly assessing cases of financial hardship.

Priority expenditure comprises:

• The repayment of secured loans,
• Payments that need to be made to avoid loss of the home, liberty or essential services (such as gas and electricity),
• Payments which are being deducted direct from a customer’s salary via, for example, an attachment of earnings order, or as repayment of a student loan
• Outgoings deemed necessary for a basic standard of living commensurate with a western society, such as food and water.

Everything excluded from this definition falls into the category of non-priority expenditure.

Financial difficulties are usually described as being ‘serious’ if there is insufficient income to cover a customer’s priority debts and priority outgoings, with a more general description being given to anyone who is able to pay their priority outgoings but is left with insufficient money to fund the non priority expenditure.

In the past, calculating a disposal income (namely, subtracting the priority debts and priority expenditure from the customer’s income) was straightforward for two core reasons. Firstly, it was taken as read that the priority outgoings would be at a reasonable level and, secondly, it was accepted the customer would have minimal discretion over the level of spending in this category.

Areas of change

For me, the two most significant areas of change in cases of financial difficulty cover, firstly, the widening definition of ‘basic standards of living’ and, secondly, the greater choice which some customers now have over their overall level of expenditure.

Knowing that the fee charging debt management companies will only take on a case if the customer has a minimum positive disposal income, and the fact that the customer may choose to pay for this service when they have been made aware of completely free alternatives are issues which in themselves put a somewhat modern twist on the definition of financial difficulties.

I am not for one moment suggesting that all customers claiming financial hardship are in fact living a life of luxury in a palatial home, guarded by a kennel of pedigree guard dogs and waited on hand and foot by a highly trained butler and loyal team of house servants.

Nor do I believe that genuine financial hardship is exclusively a thing of the past, a situation brought on solely by the customer’s behaviour or attitude to debt (the creditors must certainly shoulder some of the responsibility here), or that all customers can easily and quickly find a stress-free escape route from their financial predicament.

There are undoubtedly many instances where financial destitution has been brought about by circumstances outside of the customer’s control, and it would be naïve and wrong to believe that all financial hardship can be attributed to a general uplift in expected living standards and basic human greed.

Discretion over level of spending

However, I do find the long-term excuse of financial difficulties given by certain customers for non payment of council tax extremely weak when they are living in a valuation band H house and making no realistic attempt to down-size.

Similarly, to give a ‘protected’ priority status to a hire purchase loan which is funding a top of the range new vehicle is, in my opinion, putting the rights of the customer above those of the creditor and is therefore unacceptable.

I also believe that items such as private pension, optical and dental care, club fees, hairdressing and ‘contingency’ are being seen more commonly now on income and expenditure breakdowns and the levels of expenditure within these categories are sometimes alarmingly high.

The same can be said of a seemingly excessive shopping bill which results largely from the customer’s choice as to where to buy their food, toiletries and clothes, rather than the nature of the items themselves.

I am in full agreement with the industry’s regulatory obligation to treat customers fairly, and it would clearly be a breach of this requirement if a customer was somehow ‘not allowed’ to spend money on any non-priority area, simply because they are behind with their payments. The key for me lies in establishing what constitutes ‘reasonable’ in the context of discretionary expenditure.

Updated common financial statement

On Monday 16 June 2008, the updated common financial statement (CFS) and trigger figures were launched formally. The CFS provides an open and transparent income and expenditure document drawn under guidelines in a consistent and standardised format and uses data taken from the Office for National Statistics’ - family expenditure survey.

The CFS, in my opinion, provides a sensible interpretation of reasonable discretionary expenditure in the twenty first century and I would urge any company which is dealing with repayment proposals to obtain the necessary licence now required to use the CFS - available free of charge from http://www.moneyadvicetrust.org - in order to formulate a fair and reasonable policy in this area.

Summary

In summary, I believe the key to fairness in cases of financial difficulty requires the debt collector to both:

• Acknowledge the rights of the customer to spend their money in whatever way they wish, irrespective of the state of the account
• Offer, where feasible, realistic and constructive alternatives which provide the customer with an opportunity to adjust their levels of expenditure with or without the help of a free debt management company and increase their level of income via, for example, the claiming of additional benefits.

In turn, however, the customer needs to acknowledge the creditor or debt owner’s right to execute a breach of contract by way of further action in cases where they believe that the offer of repayment is unreasonably low or based on a set of lifestyle choices which the customer is able but reluctant to change.

I too, have gritted my teeth at the prospect of accepting a reduced contractual payment so that a debtor can keep their horse in the stables to which it has grown accustomed. Oh dear, how easy it is to become cynical!

The reality is, as with most issues in life when viewed from one side, things become a little, well, one-sided.

Research

As such, it was with several pre-conceived ideas that I set about researching the role of third party advisors in cases of financial difficulty.

Is the debt management route really just another way to shirk financial responsibilities?

What is actually discussed and given as advice before we receive the ubiquitous financial statement? Are debtors really ‘allowed’ Sky TV, tobacco, charity giving and leisure activities, when they cannot afford to pay their contractual payments?

If I google ‘debt help’ I get around 469,000 possible links for UK sites. Of these, how can the average debtor differentiate between who will charge, who will offer potentially damaging advice and who provides a robust and compliant service?

Regulations

There has been much work done already, both by the Office of Fair Trading (OFT), in its Debt Collection Guidance Note of July 2003, and the British Bankers Association (BBA) and Money Advice Trust with the Common Financial Statement.

This gave me a sound set of guidelines on how the debt collector was expected to deal with debtors who have appointed a third party, how the relationship with the third party had to be conducted and what items of discretionary expenditure – mobile phone, travel and pets – should be accepted without question by creditors who are members of the BBA.

Similarly, the OFT’s guidance note of December 2001, Debt Management Guidance, sets out minimum standards by which debt management companies (DMCs) should behave if they too are to be judged fit to hold a consumer credit licence. The guidance is relevant to the activities of all such providers but is aimed primarily at the fee-charging companies.

My research was conducted using a ‘mystery shopper’ methodology, which was clearly going to achieve a more realistic response than asking: “Excuse me, could you tell me if you give fair and accurate advice to your customers, in line with the OFT guidance note? No? Fantastic!”

Advertising

By firstly trawling several formats of advertisement I was able to gauge the general level of ‘reality’ displayed in the marketing for, predominantly, the fee-charging debt management companies – the free organisations being limited in their ability to advertise due to budget restrictions.

To start on a positive note, it was hearteningly difficult to find any breaches in the advertisements in newspapers and on TV, and we should applaud the OFT for its influence over the previous trend for misleading marketing through these medias.

More worryingly, however, was the newer trend for less than transparent IVA adverts which dominate the back pages of the tabloids and the television advertisements in the breaks of _The Jeremy Kyle Show_alike.

Similarly, I found many online advertisements for the DMCs were, at best, misleading and economical with the truth. With unlimited space to extol the virtues of reduced repayment programmes, many companies did little to share the complexities and consequences involved in such a course of action.

Tucked away quietly in the Frequently Asked Questions section of their websites were vague references to credit ratings and potential further action, but by no means were these ‘warnings’ given similar prominence to the service they referred to, as is required by the OFT in their guidance note.

Telephone advice

Encouragingly, my suggestion of only paying my creditors half of my disposable monthly income to the first (very well known) DMC was met with a firm “No”.

Regrettably, this encouragement was not to be matched in subsequent calls to some of this company’s competitors.

I was advised by one company that having a representative meant my offers were more likely to be accepted as “it’s the law”, that being on a debt management plan would improve my credit rating and that interest would be stopped if I went with them as opposed to trying to manage my debts myself.

The fee, which was only mentioned following my continued questioning, was given to me incorrectly, and I was told my debts would take less time to clear off than is actually possible, as the DMC had not accounted for the fact that their fee would reduce the amount I was paying my creditors.

I was also surprised by another company which advised me that I could pay my monthly repayments by credit card. When I acted perplexed at the prospect of having a credit card that was not included with my list of creditors I was advised to go out and apply for a new one. Displaying concern about obtaining further credit was met with the response that it was fine as long as my current creditors did not find out.

Presumably, consumers would then find it odd to receive the terms and conditions for this particular company which state that you should not apply for further credit and get yourself into further debt whilst they are your representatives.

Terms and conditions

I received written terms and conditions from several companies which, being printed in migraine-inducingly small text, left me dubious at their ability to provide clear and compliant advice.

Another highly disturbing aspect of the research has been the subsequent barrage of calls and letters to my home offering consolidation loans, IVAs, debt management plans and other so-called ‘personalised debt solutions’ from either a sister company of the DMC or a company to which my details have been passed by the DMC – without, as far as I am aware, my consent.

These issues, along with the fact that none of the DMCs I contacted offered any form of debt rehabilitation or education other than to offer a reduced repayment programme, left me concerned about the obstacles faced by the less ‘in-the-know’ consumer who approaches a DMC.

If an appointed debt representative does little to educate a debtor about the consequences of a reduced repayment scheme and the future problems they may face when or if they clear their current debts, then can we realistically expect a debtor to have learnt from the experience and be a ‘more responsible’ borrower in the future?

Free advisory services

During my research, I found the advice given from the free advisory services to be easy to understand, realistic and correct. Unfortunately, however, the ever-growing demand for such services and their overstretched resources meant that it was incredibly difficult to get through to some advice services and, in one scenario, I gave up trying to contact a Citizens Advice Bureau after eight calls during their opening hours.

Their recorded message stated they were too busy and listed other possible options, but charged 4p more per minute than a local peak time call while I was waiting.

The way ahead

As we are all now aware, with effect from 1 October 2008 creditors will be required to provide an information sheet compiled by the OFT when a default notice is issued to the debtor.

Mentioned in this document is contact information for the Citizens Advice Bureau and the Consumer Credit Counselling Service.

Although many creditors may fear that advertising these services in such a way may lead to a massive increase in debtors going on a reduced debt repayment programme, I believe that this step towards highlighting ‘recommended’ advice agencies to a potential hardship case should be seen as a broadly positive move.

No-one is suggesting that the free advice agencies offer a fault-free service or that all the DMCs are out to deceive.

However, if debtors are contemplating seeking advice, it should now be more likely that they will, as a result of the information sheet, seek ‘better’ advice, sooner.

Hopefully that will leave them less likely to fall prey to the less scrupulous of the DMCs I encountered during the course of this research.

Best practice training

Within this context, I believe best practice training:

• Is tailored to the unique culture, policies and training goals of your organisation
• Gains the immediate respect of the delegates
• Provides all delegates with a tool box of compliant tactical options that guarantee to improve your debt collection performance.

Gaining respect

I believe that delegates will respond the most positively to training if they believe the trainers have themselves faced the many challenges of modern day debt collection. The trainer needs to be able to empathise with the wide spectrum of feelings a debt collector will inevitably experience throughout their career and convey their own debt collection ‘stories’ as part of this process.

Understanding your business

The trainer needs to understand how your business operates to ensure the training is tailored to take full account of the level of collector experience and ability, different product types, targets and rewards, policies regarding financial difficulties, types of further action and methods of payment – to name but a few. It is important, therefore, for the training organisation to conduct a robust training needs analysis, to include the evaluation of live collection calls across the department.

It is also vital that all material is aligned with the method used to evaluate collection calls within your organisation, to ensure the message and definition of best practice debt collection is consistent.

Teaching effectively

However, the ability to understand the job of the debt collector and the environment in which they work is clearly not enough on its own. Like all good teachers, the trainer must be able to extract key learning points from the scenarios and course material being discussed and convey these in a way that increases the delegates’ collection skills quickly, and provides the confidence needed to use the new tactics as soon as the workshop is over.

It is therefore imperative to check with your training partner’s existing clients to ensure that the workshops provided have resulted in improved performance – for example increased cash collection, increase in immediate debit card payments etc.

Evaluating debt collection calls

A best practice training organisation will also offer training sessions dedicated to the role of evaluation of the debt collection calls undertaken by department supervisors, team leaders and managers. As an adjunct to this, it is also important that your chosen training provider is equipped to conduct individual one-to-one sessions with a selection of your collections staff, after the initial training, to assist with the transition from ‘old to new’ and embed the new tactics as quickly as possible.

Choosing the right debt collection training partner

In summary, therefore, a best practice training provider will:

• Guarantee the teaching of compliant tactics which will improve your debt collection performance
• Provide tailored debt collection programmes for all levels of staff
• Undertake a comprehensive training needs analysis
• Ensure maximum interaction and transfer of proven collection skills
• Provide daytime and evening delivery to suit your company’s needs
• Deliver the service at a competitive price.

Within the debate, the same scenarios were being discussed but there was an amalgam of powerful rhetoric, antagonistic exchanges and significantly differing ideals.

In many ways, I believe the relationship which originally existed between the customer, the collector and the fee-charging debt management company (DMC) bears some similarity to this political analogy.

Thankfully, however, and in no small way due to the excellent work of the Office of Fair Trading (OFT), this sad reflection of hostile and ineffective communication has given way to a much healthier relationship between ‘the two main parties’, based on the setting out of clear rights and responsibilities.

Key obligations

The relevant rules for the DMCs and debt collectors respectively are contained in the OFT’s guidance notes, which can be found in full at http://www.oft.gov.uk. Each note sets out minimum standards which must be met if the company or individual is to be judged fit to hold a consumer credit licence.

• Debt Management Guidance (December 2001). This is relevant to the activities of all who provide debt management services, whether they charge a fee or not, but it is aimed primarily at DMCs.

• Debt Collection Guidance (July 2003). Particularly the section regarding ‘deceptive and/or unfair methods’.

Perhaps understandably, many debt collectors have a better understanding and awareness of the July 2003 guidance than they do of the 2001 version.

The obvious impact of such ignorance is that the risk of misinformation is significantly increased and unambiguous communication between debtor, creditor and DMC becomes almost impossible to achieve.

2003 Debt Collection Guidance

Before quoting from the guidance note, it is worth stressing that where payments are tendered by someone acting on the customer’s behalf, it is a principle of law that creditors cannot refuse to accept those payments.

Therefore, the practice of creditors returning payments, or not crediting payments to consumers’ accounts, purely because they are received through a DMC, is totally unacceptable.

The note specifically cites the following as examples of unfair practice:

• 2.8.d Contacting debtors directly and bypassing their appointed representatives.

• 2.8.e Operating a policy, without reason, of refusing to negotiate with DMCs.

The definition of ‘appointed’ in this context is key, and I believe it is reasonable for the collector to expect written confirmation from the DMC that they are dealing with a case, together with signed authority from the debtor or debtors, before considering them to have been appointed. It is, of course, important that debt collectors are aware of any backlog in correspondence before informing the debtor that no such confirmation has been received.

In terms of “operating a policy, without reason” I believe it would be reasonable to refuse to negotiate with any DMC which consistently failed to comply with the behaviour detailed in the 2001 note.

2001 Debt Management Guidance

In its entirety this is wide ranging and sets out minimum standards for DMCs in the marketing of their services, pre-contract contact, the provision of pre-contract information, contract terms, advice, and the nature of the debt management service provided.

By way of brief example, consumers must be clearly warned in writing that creditors are not obliged to accept reduced payments or to freeze interest, and that any existing or threatened proceedings will not necessarily be suspended or withdrawn.

For the purposes of this article, however, I have chosen to focus on the areas which are relevant to arguably the three most common scenarios which debt collectors continue to encounter in 2007, namely:

• The customer saying they have been told not to speak to the creditor because the DMC is now dealing.

• The customer saying they have entered into a contract with a DMC and are under the impression they are unable to break that contract.

• The customer failing to understand why the creditor has not received payment as they have already made their first payment to the DMC.

This article in no way seeks to apportion blame for the customer’s sometimes inaccurate understanding of their position, but simply endeavours to provide clarification of the relevant facts.

Contact with the creditor

With regard to the first point, it is important to remember the following key obligation given under ‘Information to be provided before the contract is signed’, which states that consumers must be clearly warned in writing not to ignore correspondence or other contact from creditors or those acting on behalf of creditors.

Similarly, the contract itself must not prohibit clients from corresponding with, or responding to written or oral communications from creditors or others acting on behalf of creditors.

In my opinion, the requirement that the debt collector does not bypass the customer’s appointed representative does not preclude them from contacting the debtor direct where, for example, the DMC has failed to provide income and expenditure details within a reasonable period of time.

Right to break the DMC contract

The second point refers to whether or not a client is allowed to break a contract once it has been signed.

The guidance is clear on this point, stipulating, for example, that the contract:

• Should set out the circumstances in which the consumer may withdraw and receive a refund of any monies paid to the DMC.

• Must not include any term which says or implies that there are no circumstances in which a client is entitled to a refund.

• Should allow the client to withdraw from the contract where, following signing of the contract, the total fee differs significantly from the estimate given prior to the contract.

At least two well-known DMCs mention on their website that a customer can cancel their plan at any time provided they give two weeks written notice of cancellation.

Retention of a customer’s first payment

Turning finally to the third point, there are several references in the guidance to the DMC’s obligations in respect of retaining the first payment as, for example, a deposit. Specifically:

• If an initial up-front fee or deposit is payable, the consumer must be given a clear explanation of what aspect of the service is covered by the fee or (as the case may be) what the deposit is held for, together with the manner in which it is calculated.

• Consumers must be clearly warned in writing where the first payment goes to the DMC and not to the creditors that they will miss a payment to their creditors and will therefore go into arrears or further into arrears.

DMCs are also obliged to respond to all complaints promptly and fairly.

Compliance reviews

In November 2003, the OFT published the results of its compliance review which was conducted, in part, to check how effective the guidance had been in removing problems from the DMC market.

The main finding of the review was that the guidance had led to a 70% reduction in complaints received by the OFT, and that was undoubtedly an outstanding result. A similarly positive conclusion was reached in the Debt Collection Guidance compliance review published in December 2006.

The goal now must be for both parties to maintain their commitment to conducting their business in a manner which adheres to both the letter and the spirit of the guidance notes and maximises the chance of 100% compliance each and every time a DMC is appointed.

It was an immediate relief to understand the subject on which I had been asked to speak - Making Successful Telephone Calls in Collections - rather than pretending to celebrate the cleverness of a modern whacky title, the meaning of which was entirely beyond me!

However, once the initial relief had passed, I suddenly panicked at the prospect of becoming the speaker from hell who starts their presentation on time, but continues in a vane that displays nothing but a blatant disregard for the timetable of the day believing, perhaps, their insights or sales pitch to be infinitely more important than anyone else's.

As a result, I was determined to convey my views within the allocated timescale, and it was important that I quickly separated the really key issues from a mountain of debating points, strategic and operational considerations.

My starting point was to define 'the successful collections call' - in my view, that which maximises the chance of the debt being repaid as quickly and as cheaply as possible, within the Law and all regulatory considerations.

I then determined what I believe to be the four pillars which need to be robustly in place in order for such success to be achieved, namely:

• Regulatory awareness
• Image
• Call structure
• Conversation strategy

Tactical excellence

Quite rightly, the regulatory side of debt collection has been very much under focus in recent years, and many articles have been written about the need to comply with, for example, the Data Protection Act and The Office of Fair Trading's Guidance Note on Debt Collection etc.

However, purely within the scope of this article, I am going to put aside the regulatory issues, and concentrate on the general area of tactical excellence within a collections call.

For many of us, our memories of school will have become somewhat clouded over the years, perhaps assisted by a desire to forget (certainly in my case!), or simply due to the passing of time.

Irrespective, however, I think everybody will acknowledge how quickly kids suss out the level of authority and discipline of a new teacher who walks into the classroom for the very first time. They know absolutely nothing about that teacher's qualifications, how long they've been qualified, whether they're teaching their preferred subject, or how well they have kept discipline in the past.

But they decide all of those things within a miniscule timeframe - a matter of seconds - based solely on the image, manner and voice tone of the teacher concerned.

Not surprisingly then, if anyone of us were to walk into a school today, we would see certain kids who run relative riot in the classroom with one teacher, and yet behave as good as gold one hour later, when another teacher is in charge.

Image

Similar to the good disciplinarian, the importance of a debt collector creating an immediate image of firm but polite control on the telephone cannot be underestimated.

The ability to create that image is not about the collector's age, sex or experience level but requires an understanding that 'we are our voice' on the telephone.

Speaking slightly more slowly than we would in social interaction is a great way to exude confidence and convey authority.

I often speak to collectors who are genuinely worried about slowing down and saying less for fear that they will miss a pre-set target on calls per hour, or forget to ask the customer something required for them to pass their call monitoring.

It is the manager's job to allay those fears and push home the fact that speaking slightly more slowly is an important contributory factor towards controlling the call and, paradoxically, shortening the time it takes to complete the call effectively.

Less is most certainly more in the world of debt collection.

How easy it is for a collector's voice to get louder and louder as their attitude to the debtor becomes more negative, or they start to disbelieve the reasons being given for non payment.

Regrettably, however, as soon as the volume of the debt collector increases, so their call control plummets to a level where a satisfactory conclusion to the call is as likely as the debtor selling their dog to pay off our debt.

Call structure

Turning now then to the area of Call Structure - of which I am a tremendous fan - which I believe should never be confused with call scripting, which, with one exception, I detest. Although every call is different, there are three fundamental components of a debt collection call.

Firstly, the introduction - required not only to identify the parties involved, but also to afford the collector the opportunity to gain respect and attention as soon as the call begins.

The main body of the call then follows where everything said by the collector should be designed to generate a controlled response from the debtor (not always the same as agreement to what is being said).

It is also important to deal, motivate and obligate the debtor wherever possible, and adopt assertive 'Account Manager' behaviour rather than robotic non-personalised jargon.

And finally, closing the call needs to be executed in a way which summarises the specifics of the call - in particular, dates - Thursday 14th December rather than 'the next seven days') - amounts, responsibilities, and the consequences of non payment or the benefits of paying on time.

Conversation strategy

Conversation Strategy is also vital:

• Acceptance
• More information
• Polite ultimatum

These three basic strategies can be used in combination with each other, for example, 'more information' followed by 'acceptance' or 'ultimatum', or as stand-alone choices, for example, 'acceptance' straight away where the payment history is good and the debtor has made proactive contact to notify a small delay in payment.

Statement and silence

A 'more information' strategy does not necessarily mean asking the debtors a whole series of questions.

The tactic to make a statement of fact, followed by deliberate silence and effective listening, can be an excellent way of ascertaining a clear picture of circumstances without the collector making dangerous assumptions about the situation, putting words into the debtor's mouth or inadvertently encouraging the debtor to give an answer that they think the collector wants to hear.

Setting the hurdle of expectation high, particularly in early contact, is an effective way to control the call from the start, and the statement and silence technique is an important tool in achieving this.

As a general rule, human beings dislike the feeling of silence and this discomfort can easily entice them into filling the very gap they have powerfully created. In debt recovery terms, collectors need to be encouraged to resist this temptation to optimise the impact of saying nothing at all and putting the ball confidently into the customer's court for reply.

Statements which begin 'I need' are not as commonly included in debt collection conversations as I would like - but such sentences must be delivered calmly and politely to avoid unacceptable and unnecessary aggression.

Questions and negotiation

Questions clearly have their place in debt collection, however, provided there is a good chance of the question moving the conversation forward, unlike many questions which begin 'why' and which often encourage debate about the past or sound aggressive and judgemental.

Questions which help the debtor to take control of the call, for example, 'are you able to make a payment today?' should be avoided. Asking questions one at a time is also key in maximising the chance of an honest reply, and gaining invaluable insight into the debtor's intent and ability to pay - another crucial element of adopting the right conversation strategy.

In my opinion, the decision whether or not to negotiate with a debtor should also be made by the collector as part of the Conversation Strategy.

Used effectively, negotiation is an invaluable tool to support genuine debtors who are trying to recover their financial position.

However, attempting negotiation with someone who has shown minimal intent to pay will result in nothing other than a protracted telephone conversation which wastes valuable time, talent and energy.

Summary

In summary, then, making a successful collections call is about image, rather than just experience; call structure, rather than an over reliance on scripts; and a tailored conversation strategy, rather than a one-size-fits-all approach.

Train and support your collectors in building and maintaining these fundamental pillars of strength, and you will guarantee to optimise your organisation's telephone collections performance.

Another day done,
All targets met,
All systems operational,
All customers fully satisfied,
All staff keen and well motivated,
All pigs fed and ready to fly!

I first came across these words, beautifully painted and framed, on the desk of a team leader in a busy collections department in a large high street bank. The team leader explained that it was a gift from her predecessor to congratulate her on achieving promotion from collector to team leader. Clearly genuine and well-received though the present certainly was, it seemed somewhat paradoxical to me that a gesture of congratulations should convey such a pessimistic message!

However, anyone who has ever undertaken the role of collections supervisor or team leader (defined as having the same scope within this article) will readily, I am sure, associate with both these words and the proverb, 'many a true word spoken in jest', which summarises their sentiment so accurately.

The key objective

Before exploring the issues behind effective collections supervision in more detail, it may be useful to establish the key objective of any collections team - namely, to collect as much money as possible, as cheaply as possible, as quickly as possible, within the law and regulatory requirements.

Ideally, to achieve and sustain that objective, the collections team needs to consist of motivated, well-trained individuals who are supported by sound collection procedures and policies, and fully functional technology. The supervisor needs to understand these key components, analyse the gaps within their team, identify that which cannot be changed and prioritise the challenges which remain.

Motivation

In terms of motivation, a supervisor, as indeed all human beings, should understand the value of praise, enthusiasm, fairness, clear and realistic objectives, empowerment, success, recognition and reward.

Specific to the collections arena, they should be alert to how demotivating it can be for a collector to be told, for example, 'you need to be more assertive' or 'your calls take too long', without at the same time being supplied with the tools required to cultivate and nurture the change.

Similarly, the experienced collector is unlikely to feel inspired to build further on their experience and expertise if, for example, their mandate level for agreeing concessionary payment arrangements is practically identical to the newly appointed novice.

My final example of demotivation describes the undoubtedly studious supervisor who gets lost in a mire of meetings, absentee reports and management information that all too easily steal focus from the collector who has just obtained a debit card payment from a debtor eight months in arrears, and who deserves an immediate and vocal 'pat on the back'.

Time consuming? No. Cost hungry? No. A vital part of collector supervision? Yes!

Incentives

Thankfully, the historic reluctance in the UK to provide collectors with monetary incentives has begun to change, and it is exciting to watch the gradual but steady replacement of ill thought out schemes which encourage the wrong collections behaviour (for example, rewarding promises to pay rather than kept promises) by more rational methods of monetary reward. However, it would be dangerous to dismiss entirely non-financial rewards as boring or meaningless in the context of motivation, when they rely on nothing more than genuineness and a little extra thought on the part of the giver, and, most importantly, they undoubtedly work.

Specific, timely and formal recognition of a job well done is so much more powerful than a 'cheers, thanks for your help' delivered with zero eye contact in a half-empty office. Measuring motivation within a collections team can be enlightening and need not take a large amount of time. I have known a number of top class supervisors who have put together a simple, user friendly questionnaire on the subject, encouraged anonymous completion, ensured quick publication of the results and successfully used the information (in conjunction with, for example, absenteeism and sickness levels) to quickly improve team motivation and, consequently, team performance.

The collections department also provides the ideal environment for the supervisor to increase motivation via the use of eyecatching visuals used to identify teams, illustrate targets and incentives, and recognise top performance.

Coaching and feedback

In the area of collector competence, I believe that it is essential for the supervisor to conduct or manage the execution of regular call monitoring, coaching and feedback sessions with each and every debt collector in their team, irrespective of that individual's experience, skill level and previous performance record. Call monitoring should identify regulatory breaches and areas where policy is not being followed, but fundamentally provide the opportunity for collectors to improve their results and level of satisfaction within a sometimes tedious but always challenging job.

Call monitoring needs to differentiate between that which is pre-determined, for example, opening scripts and security checks, and that which is determined by individual tactical choice, for example, asking a question or stating a fact, choosing which 'levers' to use during the conversation and whether or not these should emphasise the benefits of paying on time or the consequences of continued default. Properly conducted one-to-one coaching sessions, which guide and encourage team members towards greater collections performance, will guarantee a decrease in the number of escalated calls, an increase in the value and stickability of promises to pay and a decrease in the average length of the more difficult calls.

Technology can offer a positive contribution to live agent coaching, with systems now available to provide the supervisor with, at the touch of a button, the ability to monitor conversations and view computer screens, coach collectors by whispering instructions which only the collector can hear, and intervene and speak directly with the debtor to resolve difficult issues.

Effective feedback on the collector's performance and case decisions is also, I believe, a crucial part of effective supervision. Such feedback must encourage interactive discussion between collector and supervisor, recognise the positive characteristics of the collector's performance and offer specific and constructive ideas on potential areas of improvement.

If the collector is lacking in confidence, they may be encouraged to try replacing phrases like 'would it be possible�' and 'is there any way that you could…' with 'I need' statements that calmly and politely state what is required. Alternatively, a collector may be struggling to complete their calls within the required timeframe, and could benefit from reducing the number of 'why?' questions in their conversations, which often encourage discussion about the past, and divert attention away from the key goals on the intent and ability to pay.

Company profile

It would be quite wrong to suggest in any way that the role of the collections supervisor is easy. Understanding their key objectives at a high level may well be straightforward, but the real skill is in achieving the objectives whilst encountering a range of potentially conflicting issues on the way. The ability to motivate the team can be extremely difficult unless the supervisor is given proper access to the discussions on policy, targets and incentives.

The historically 'poor relation' profile of the collections department in certain organisations has to be superseded in order to encourage the collections supervisor to enthusiastically seek opportunities for their department to improve, and put ideas forward to management in the knowledge they will be properly considered.

Similarly, the common supervisory pressure to 'collect more money' has to be embedded within a strong back-up culture which acknowledges complaints may occasionally occur as a result of well-meant but over-zealous collections behaviour, rather than necessarily a malicious intent to upset the debtor.

Summary

In summary then, the collections supervisor provides an integral link between those who make the policies and those who are required to implement them. The role requires a unique combination of people skills, collections knowledge and regulatory awareness but, if properly rewarded and supported, will unquestionably lead to a significant and sustainable uplift in collections performance.

Historically, this was not nearly so important, as most companies chose not to adopt a set of strict call monitoring criteria other than, understandably, in the area of regulatory compliance. Instead they took the view that a collector should be allowed to use their individual style and intuition during a conversation with a debtor, making their own decision on when to adopt a strategy of acceptance, questioning, or polite ultimatum.

A new form of monitoring

In recent months, however, I have seen a marked trend in the industry towards the adoption of a more complex call monitoring system which, for example, seeks to sub-divide the telephone call into a very high number of different elements, apply weightings to each of the elements, and ultimately calculate a collector's monetary monthly bonus based on the overall results of the evaluations conducted. Much thought and time has been put into these call monitoring systems, and this effort should undoubtedly be applauded.

The rationale of such systems seems to be to focus the collector's mind on every individual aspect of their call, reminding them of the need to give the appropriate greeting, gain information, probe, challenge, negotiate, overcome objections, create a sense of urgency, control the call, actively listen, empathise, build rapport, state the consequences of non-payment and the benefits of paying on time, close the call effectively and, oh yes, use their time efficiently.

However, I feel there is a real danger that such systems end up being documented and applied in a way which encourages robotic collector behaviour, whereby collectors are inadvertently encouraged to always go through the same set of probing questions, irrespective of the attitude of the customer, the timing and content of the last call or the history of the account to date.

Recently, I have seen more than a few call monitoring systems which end up being driven by ease of form completion rather than by collection effectiveness - it is easy to tick boxes to confirm something was said or done, but does that always reflect the level of tactical excellence within the call? My view is categorically 'no'.

Keep things relevant

It is of course inherently difficult in life to evaluate an art rather than a science. Two plus two will (despite what the accountants say!) always equal four, but asking a customer 'why haven't you paid?' may be relevant for some calls, and yet a waste of time in any others. Similarly, asking a debtor if they have a mobile phone number may gain call monitoring points for a collector, but few would argue that a more effective tactic would be to ask: "Just before we finish, I need to update my records with your mobile number. What is your current number?"

I have worked in companies where collectors have been marked down for not stating to a customer the consequence of continued non-payment. At one level, this policy seems entirely sensible, but in the context of a customer who has already been given that consequence in a conversation two hours earlier, the lack of basic common sense risks playing into the hands of many customers who will start to see the collections function as no more than a 'one size fits all' factory line operation, which is blind to the intricacies of each individual case.

An increasing number of organisations seem keen to introduce a standard call opening for outbound contact, after the mandatory security checks have been completed, which insists on bombarding the debtor with numerous different facts about their debt - the amount of the arrears, the date since last payment, the need for a debit card payment and the possible consequences of failing to pay on time - all in the opening paragraph, with the debtor barely having time to register the identity of the caller.

In my opinion, such a strategy misses a vital opportunity to achieve 'eye contact' over the telephone by the use of single statements of fact, followed by silence, which encourage the debtor to reply accurately with the reason for non-payment without them feeling under pressure to give the 'right' answer in response to a more overt form of collector probing.

Effective call monitoring

So, what is the answer to effective call monitoring which encourages best practice collections behaviour, without drowning the collector's individual style and personality in a sea of standard 'must ask' questions and statements?

Well, like so many things, I believe the answer lies in quality not quantity. In my opinion, the list of 'must haves' in a debt collection conversation need consist of nothing more than:

• Compliance with the law - the Data Protection Act, the Administration of Justice Act and so on.
• Compliance with all regulatory requirements - for example the Office of Fair Trading Guidance Note on Debt Collection and Financial Services Authority requirements.
• Compliance with all internal company policies, such as length of payment arrangements, method of payment and amount of concessionary arrangements.

The rest of the call evaluation should focus around the key role of any debt collector - namely, to collect as much money as possible as quickly as possible as cheaply as possible, giving equal value to the rights of the creditor and the rights of the debtor.

Standard scripts can undoubtedly be helpful for inexperienced collectors whose confidence will build via the support of a structured framework. Once their confidence is established, however, I believe they should be encouraged to try alternatives, play with words, and develop their own unique style of debt collecting, consisting of both well-established, proven collection tactics, as well as fresh approaches, insights and tactics designed to increase the likelihood of payment being made on time.

There will never be agreement across the board as to the quality of any art, and debt collection is no exception. Would the collector have collected more by stating that, or asking this? Did they accept the minimum payment too early when the customer may well have been able to afford the full amount? The reality is that we will probably never know. However, by conducting regular workshops with those that evaluate calls, a level of fair consistency in call evaluation is achievable.

Such workshops should also involve the collectors themselves so that they too are party to the healthy debates which inevitably arise from the question, 'what is the best collections approach?'

Whatever your company policy on the evaluation of your collectors, I believe that a system of regular call monitoring has a vital part to play in identifying and rewarding top collections performance, acknowledging and encouraging improved performance and assisting and supporting collectors in their drive
to optimise the results for both themselves and their company overall.

The key, however, lies in ensuring such a system is not overly complex, does not rely on a 'tick box' mentality and ensures that your company is employing a dynamic team of spirited individuals, rather than an unimaginative squad of robots whose key deliverable is nothing more than predictable and mundane consistency.

The telephone has put the collector where the debtor is, however uncomfortable that may be for the debtor, and the likelihood of future contact has increased together with the prospect of a positive, moneybased result.

Assess intent to pay

If a customer's intent to pay has been assessed as weak, the first-class collector will avoid asking too many questions, but use verbal statements instead such as, 'I'm afraid that doesn't alter your obligation to pay', or 'in view of the arrears already on the account, I must press for payment today'. Although the appropriateness of questions cannot be dismissed completely, I believe they can be dangerous, as the low-intent customer has a greater likelihood of responding to questions inaccurately and diverting attention away from the key goals on intent and ability to pay.

The use of 'confident silence' after each and every statement that is made is then imperative in putting the ball firmly in the customer's court for some form of reply. To optimise the power of the verbal statement and silence tool, the tone of voice of the collector must be confident and exude authority, otherwise the low-intent customer is likely to reclaim the initiative and start to control the arrears negotiation themselves.

Ask the right questions

When approached by a collector who is polite, confident and prepared to listen actively, the genuine low-ability customer is likely to open up, provided they are asked questions one at a time which are designed to encourage a fuller answer than just yes or no. In encouraging the customer to talk honestly about their situation, the top-rate collector will avoid asking more than one question at a time - such as, 'what money does your partner bring in or doesn't he work?' - and eliminate questions which can spoon-feed the customer an easy answer - such as 'does your partner not work?', or 'do you not have a debit card, no?'.

There are of course many situations which should prompt an empathetic response from a collector, in tone as well as words, but it is vital to ensure that in these cases the conversation remains professional and does not assume the characteristics of an informal friendly chat between mates.

In summary, therefore, the telephone provides an invaluable opportunity for the collector to create an almost instant image of fair but firm control, exerting their rights to collect the debt whilst giving equal validity to the rights of the debtor to explain the reasons for non-payment. But the telephone is only as good as the collectors who use it, and skilled use of silence, active listening, questions, verbal statements and tone of voice are imperative in ensuring the telephone remains one of the most efficient and effective ways to recover outstanding debt.

However, despite these common scenarios, I believe it is important to define exactly what is meant by the term 'negotiation', to avoid it being used inaccurately to reflect purely a telephone contact with a customer or an assertive demand for full payment.

Negotiation is the ability to talk or consult together with someone for the purpose of mutual arrangement; to bargain; to arrange by agreement.

Fair and supportive treatment

The role of effective negotiation cannot be underestimated in the debt collection environment. The ability for a collector to tailor an organisation's standard demand for the contractual obligations to be met is vital in ensuring that customers in genuine financial difficulties are treated fairly and supported where they are making a genuine effort to recover their financial position.

In many instances negotiation will identify the most commercially viable option for a creditor, prompting, for example, a policy of interest rate reduction, concessionary repayment plans or full and final settlements. Entering into negotiation with a customer can also provide an excellent opportunity for a collector to build up a true picture of a customer's profile and circumstances with regards their intent and ability to repay the debt in full.

However, despite the undoubted advantages of negotiating in many cases, it is also important to acknowledge the potential disadvantages of, for example, negotiating too early on an account and, in doing so, risking the fact that a customer's true willingness and ability to pay may never be established.

It is important to bear in mind that, in the twenty-first century, which is characterised by the relative ease with which credit can be obtained and the increasing European focus on human rights and regulatory controls, the average customer is more credit aware than at anytime in the past. Terms like 'financial difficulties', 'write-off' and 'payment arrangement' - once the exclusive language of the creditor - are now introduced into conversation just as regularly by the customer themselves. There is always a risk, therefore, that a collector may too readily assume that negotiation is required and, in doing so, pass over control of that negotiation to the customer, and with it the rights of the creditor.

Should you negotiate?

Deciding if, when and how to negotiate with a customer is an integral part of effective debt collection and proper thought needs to be given to these questions from both a strategic and operational view point.

There are strong arguments in favour of allowing different levels of negotiation flexibility on different 'types' of account - for example a customer who has never paid would rarely attract the same level of concessionary options as a customer who is experiencing short-term financial difficulties after a sustained period of regular payment. Similarly, on accounts where litigation is deemed uneconomical, and the bad debt provision is high, a one-off full and final settlement may provide the most sensible 'win-win' solution.

An organisation's policy on collector rewards and incentives should also be taken into account when deciding the 'rules' on negotiation, to ensure proper alignment of the two. There is little point, for example, in expecting collectors to negotiate with customers if they are then rewarded on the number, rather than the monetary value, of 'kept promises to pay'. Similarly, the targets set for calls per hour, for example, need to take proper account of the level and type of negotiation a collector is expected to apply to the particular type of account being worked. This is likely to vary dramatically between early collection cases where rehabilitation and customer retention may form a much greater focus than in later arrears cases where the relationship with the customer (in addition to the account itself) has been terminated, and loss recovery is the clear priority.

The differing business dynamics and profitability models of, say, a mortgage lender conducting in-house collections versus a debt purchase company, are also likely to influence what type of negotiation policy needs to exist. Training debt collectors in effective negotiation techniques is key in optimising the return from those customers who are unable to meet their contractual obligations. Such training will minimise the risk of under confident collectors entering into concessionary arrangements too quickly, but also equip the overzealous collector to listen to what the customer has to say before automatically assuming that negotiation is unwarranted.

Encouraging collectors to obtain relevant information from the customer (which is not always the same as the information which the customer wishes to give) is also vital in ensuring a fair balance between the rights of the creditor and the rights of the debtor.

Training should be undertaken to assist collectors in encompassing the following six general rules of negotiation within their own individual style of collection:

• Establish the minimum and maximum requirements, but do not disclose them.
• Encourage the customer to make the first proposal.
• Do not consider concessions immediately. Wait!
• Apply marginal conditions wherever possible.
• Do not be afraid of stalemates.
• Close the call effectively and set the customer's expectations for what may be required after the concessionary period.

A regulatory requirement

As well as making sound economic and ethical sense, the willingness of a creditor to negotiate is also required by the regulatory authorities, as illustrated by Section 13 of the Financial Services Authority's Mortgage conduct of business, and the Office of Fair Trading's (OFT) Guidance note on debt collection. In terms of negotiation with authorised third parties the sentiment is similar, and the OFT guidance note states it is an unfair business practice to "operate a policy, without reason, of refusing to negotiate with debt management companies". I am sure it would be fair to say that debt collectors do not always agree with the reasonability of the offers put forward by such third parties, but this is no defence for refusing to negotiate on the proposal being made.

Some companies - depending on the nature and value of the debt - may, however, take the view that automatic acceptance of these third party offers is a more cost effective policy than entering into protracted communication with no guarantee of a proportionate increase in the offer being made.

Gauging the customer's intent

A collector's ability to accurately evaluate a customer's intent and ability to pay, as quickly as possible, is paramount in understanding when and when not to negotiate. Answers to the following four questions must therefore be sought:

• What is the customer's intent to pay?
• What is the customer's ability to pay?
• What are the timescales over which the customer's intent and ability might change?
• What is the degree of likely change?

Unlike ability to pay, intent to pay has nothing to do with financial capability, but focuses solely on responsibility. The high intent customer accepts that the debt is something that should be repaid in full, and that they may need to consider reasonable lifestyle changes in order to repay the debt.

In my opinion, collectors should be careful in entering into negotiation with customers who do not display a reasonable intent to pay, as these cases often result in them paying considerably less to their creditors than they can reasonably afford. Such customers of course have every right to be treated fairly, but should not be openly encouraged to exercise their rights over and above those of the creditor.

In terms of low ability, both the Banking Code and mortgage regulations unambiguously state that the lender will consider cases of financial difficulty sympathetically and positively. That includes treating cases fairly, judging them on an individual basis, considering all reasonable options taking into account the previous payment history, and suggesting free advice agencies from which the customer can seek help.

I believe the best way for most firms to comply with these regulations is to identify specialist individuals or teams who negotiate solely on financial difficulty cases. They can be trained to become experts on the complexities of the benefit system and should be afforded the necessary time to allow the difficulties of direct contact with appointed third parties to be overcome.

Such specialists should be empowered to consider what options exist, and negotiate with all relevant parties, explaining the responsibilities and consequences of each option.

To summarise, there is, and always will be, a variety of different reasons why customers do not pay their debts. A customer's attitude to their debt, and their financial ability to repay that debt, can be affected by a number of factors. However, the bottom line remains that, irrespective of circumstance, the lender and the customer will have options, and the art of negotiation is key in ensuring those options are properly and fairly applied.