It might seem that debt collection process is a result of the modern civilization. However the practice is as old as time, long before money ever existed, when people used bartering, exchanging goods or services for other goods or services. In case of an unpaid barter, debtors and their families were forced to provide physical labor until repayment.
In some cases, debts could take years to be repaid and sometimes, they could be passed on to the next generation of the debtor’s family. This practice ensured that debt slavery became common throughout many ancient civilizations, being an easy solution to more violent alternatives that could be imposed on debtors. In some Ancient societies, debts were cancelled, reaching a time limit or during special events.
By the late Middle Ages, laws were created in order to deal with debt situations: meeting certain conditions, creditors could summit debtors to court in order to take their assets, for loss covering. This sounds similar to the present legal procedures, still with different tactics. Prison was also a possible alternative for many types of ordinary unpaid debts.
In the past, as history has shown us, debt collection processes had mostly physical repercussions on the debtor and his family (loss of possessions, lack of freedom, violence and in the worst case scenario, even death). Despite all these pressures, the debt recovery rate was very low. At the same time, those engaged in this process (“the collectors”) were often associated with extortion, greed and abuse of power.
Nowadays, the laws governing the relationship between a creditor and a debtor are more complex and the collection process was shaped by economical, political and civil changes which occurred in the last century. People became more aware of their rights as debtors and, as a consequence, the collectors’ profile changed in order for them to obtain results.
Today, the collector has to collect more and faster, having a better cost control, while maintaining a good relationship with debtors. The collector has to deal with different types of debts: credit cards debts, personal loans, auto loans, cell phone bills, medical debts, student loan debts, utility bills and so on. For each type of debt, specific approaches are applied.
Taking all these in consideration, a good collector has to have a set of abilities, like:
- Good spoken and written communication skills in order to have an assertive but tactful approach;
- Problem solving skills to be used in dealing with any challenging customer requests;
- Attention to details which is critical for gathering information and ability to translate nonverbal communication signs during negotiation;
- Knowledge of both legal requirements in debt collection practices and company’s internal policies and procedures;
- Ability to stay calm under pressure and work under strict deadlines;
- Interpersonal skills to build a fast rapport and earn the debtor’s trust which will allow them to open up and discuss sensitive financial issues they might be facing;
- Emotional intelligence allows collectors to manage themselves and their reactions during the tough negotiations to build the repayment plan;
- Creativity might be used in collection to find proper solutions for any specific debtor issues;
- Seeing the big picture is critical in the attempt to maximize collection results.
These skills apply in all negotiation processes. A good negotiator has to understand all information related to the debtor and adapt his negotiation techniques accordingly. The more skillful a collector is, the better the results are .
A very important aspect in debt negotiation is played by the cultural environment. As manners and customs vary from country to country, the debt collection also should include some specifics for each culture.
Perception is influenced by cultural differences therefore, all communication elements (verbal and non verbal) should be adapted accordingly. For instance, in Northern and Western Europe people are more orientated towards written communication, while the South and East of Europe appreciate more the oral communication.
According to the American Management Association website, in cultures like the Mediterranean, Slav, Central European, Latin American, African, Arab, Asian, American-Indian, the message is understood more through context and through nonverbal cues: representatives of these cultures are more attentive to what is not said (body-language, silences and pauses in conversation). By contrast, in most Germanic and English-speaking countries, people pay more attention to sending and receiving an accurate message directly, by being explicit in both oral and written communication.
The same association mentions the importance of time perception: some cultures like North American, English, German, Swedish, and Dutch give full attention to every item on the discussion agenda. For other cultures, like South America, Southern Europe and Asia, the flow of time is viewed as a sort of circle, with the past, present, and future all interrelated. Setting deadlines, strategic thinking and long term planning are dictated by these perceptions.
Our thinking and emotions also influence the way we interact with the others by showing or not our feelings. Some cultures consider that the emotional part should be controlled and not exposed in business. Others go on the opposite, expressing their emotional reactions.
A successful dialogue is based on paying attention, understanding and respecting all cultural differences, because what is considered to be right in a culture can have no meaning or be offensive in another.
This shows that one size fits all does not apply when it comes to communication and especially debt collection negotiation.
Today, we are focused on adapting our behavior and interactions according to our interlocutor. Considering the existing trend in the market to automate everything and be more efficient in a digitalized age by using different tools (artificial intelligence, chat bots, online platforms, etc.), a question arises: HOW WILL THE DEBT COLLECTOR PROFILE LOOK LIKE IN THE FUTURE?