The Credit Solution Copyright 2012 by Mike Roberts

Transcription

1 Settle Your Debts (For a Fraction of What You Owe) Bonus #1 An Interview with a Collections Agent: A Look behind the Curtain Into the Hidden World of Debt Collection! By Mike Roberts The Credit Solution Copyright 2012 by Mike Roberts

2 Copyright Information: Copyright 2011, 2012 by Mike Roberts All rights reserved. No part of this book may be reproduced, distributed, transmitted, stored in a retrieval system or used in any form or by any means, whether electronic, mechanical or digital, except as may be expressly permitted by applicable copyright laws or as expressly allowed by the publisher or the author in writing. Publisher Information: Published by Smart Consumer Solutions, LLC, 601 Van Ness Ave., STE E869, San Francisco, CA Disclaimer: All of the information contained in this publication is true and accurate according to the best information available to me at the time of publication. Please understand, however, that laws and credit industry practices and procedures are constantly evolving; so you should independently update laws, practices and facts before you take action. I do not accept any responsibility for errors or mistakes of any kind, or for any damages or losses that might result from the use of any information provided. Also, I am not a lender, a collection agent or a credit reporting agency. I am not an accountant or an attorney, and nothing in these materials is intended as professional advice. It is personal opinion only. I am providing it to you without any warranties or guarantees whatsoever. To obtain advice as to the tax or legal consequences of any action covered in these materials, or any action that you might consider based on these materials, you should consult an attorney, an accountant, or both. What I have tried to do here is simply offer solid, useful information that I have obtained through my own personal and business experience. Any action you choose to take based on any information that I provide, including forms and other attachments, is entirely your responsibility. 1

3 An Interview with a Debt Collector This is an interview that I did with Ms. X she lives in the Philippines and has been working in a call center handling calls for US debt collection for about 5 years. She has worked on behalf of many different creditors and has a lot of insider experience to share about how collection agencies work. The interview will give you a better understanding about what is going on at the other end of the line when you get called from a collection agency. I ve left any errors in grammar as-is in her answers. My comments are always with the blue background. Mike: What companies have you worked for? Ms X: I worked for NCO Group for about 4 years. Technically, we are a third party collections agency. We work for clients (banks) who supply us with accounts to work on monthly. These are credit cards, store cards, or loan accounts. The accounts that I have worked are tertiary and quad accounts. Meaning, they are more than a year past due, and have been worked by at least 3 other collection agencies prior to our office. We are given 60 days to liquidate such accounts. Aside from the fee that the client pays for liquidating the accounts, collection agencies such as NCO work for commissions. The commission is based on the total amount we collect for each account. We call this commission our fee. Depending on the age of the account, and the client, the fee may vary from 30 percent to 45 percent of the amount collected. Currently, I am working for [Law Firm], LLC, a Chicago based law firm. I work on pre- lawsuit accounts, which means that if they are not resolved they may be turned over to our local attorneys for possible legal action. This law firm is a third party collection agency. NCO Group is a huge billion dollar company. One piece of their business is outsourced call centers that handle many different clients (creditors) collection efforts. 2

4 Mike: Can you explain a little more about how the fees are structured? Ms X: Normally, the client pays the collections agency a certain amount before any money is collected. I am not really sure how much. But as I have mentioned, aside from the payment they make upon hiring a collections agency, the client pays the collections agency a portion of whatever amount they collect. So there is typically a base fee to begin work on the account and then the creditor pays a percentage fee on the amount collected also. Mike: Please describe the typical work day for you. Ms X: Since we are calling US accounts, I have to wake up at a time when almost everyone around me is asleep. The Philippines are at least 12 hours ahead of the United States, depending on the time zone. If it s 8am EST, it s 8pm here. Our shifts are 8pm-5am, 12am to 9am, or 3am to 12pm Manila. We start our day by setting up dialing strategies, loading up dialer campaigns and setting up IVR (where we call consumers with a local number reflecting on the caller id, instead of our toll free number, thus increasing contacts). We call consumers, make arrangements, send letters and tag accounts accordingly, and then generate a daily report of numbers at the end of each shift. We send validation notices, settlement letters, payment reminders, and satisfaction letters. Mike: How are you paid for the work? Are there any performance incentives? Ms X: The basic salary for a collector here in the Philippines is pretty high, and that is why even degree holders prefer to be a collector. The basic salary of a collector can be as high as three times that of the minimum wage earner here the Philippines. Plus, we can earn 20 percent night differential pay if we work the night shift. There is also a performance incentive that varies for each employer. NCO, depending on the tier level of the agent, gives as high as 25 percent commission on amounts collected. The client (bank) also gives extra incentives to top performing agents. Like Capital One Bank, for example, which gives out flat screen LCD TVs to be raffled off at Christmas. 3

5 Mike: How does the bonus work for the agents? Ms X: Agents have a set goal for each month, let us say, $10,000 gross cash. He will get a bonus for hitting the goal, plus if he exceeds the goal, he will get a percentage of the excess. For example, if he collects $15,000 by the end of the month, he might earn another 25 percent of the $5,000 excess. The amount of these bonuses depends on the tier (experience rating) that the agent is on. This is an extremely high rate of pay for someone in the Philippines. Typically the rate of pay there is about 1/6 th the US. A $1250 monthly bonus would be equivalent to about $7500 in the US. The creditors get highly motivated collection agents for relatively little expense by outsourcing to the Philippines. Mike: Are past due debts usually sold to collections agencies or does the original creditor try to collect themselves? Ms X: When a creditor tries to collect a debt on their own, that is called First Party Collections. There are some clients who have their own collection agency. Usually, the debt is around 0 to 60 days old. If still not collected, the client will outsource the accounts to third party collection agencies, such as NCO. The debt just gets passed on from one collection agency to another until the client decides to sell the account. NCO for example, purchases debts in bulk from clients and has its own Accounts Receivable Management (ARM) Team to work on these purchased accounts. Mike: Are there any differences that a consumer should be aware of between debts that are still with the original creditor vs. debts that have been sold? Ms X: Not really. However, with accounts that are owned by the collections agency, settlements are significantly lowered, because the agency has paid much less for the account. 4

6 This is important to understand when you are negotiating to settle a debt. Each time a debt is sold, the new buyer pays less than the last. So in general, the older a debt and the more times it has been sold, the less you can pay in a settlement agreement. Mike: If a debt has been turned over to a collections agency can the consumer request to deal with the original creditor instead? Ms X: The answer is no. Even if you try to contact the original creditor, they will just refer you to the collection agency since the collections agency has already been paid for that job. This is often what will happen, and it will be familiar to you if you ve ever called a creditor to check on a past due debt once it has been referred to collections. Generally, the regular customer service rep will not talk to you and will transfer your call directly to the collection agency or give you the appropriate contact number. Mike: You have ever seen a debt get passed back to the creditor? What if the consumer sends a complete cease and desist request? Ms X: Yes, I ve seen debts that have been returned to the creditor. When that happens the creditor just sends the account out to be worked by a new collection agency. The cease and desist letter only applies to the current collection agency handling the account. The account eventually goes back to the creditor and then the creditor sends it out to a new collection agency. That is the reason why even if a consumer has sent a cease and desist, they still receive collection calls as soon as the account is handled by a new company. 5

7 It s true that the C&D only applies to the CA that you send it to. It s not always the case though that you have no chance at dealing with the original creditor. If you send a C&D, sometimes this will get your debt returned to the OC and there may be a period of time where you can deal with the creditor directly. You should try to get the debt returned to the OC and deal with them directly you ll have the best chance at a positive outcome regarding your credit report when this can be done. Mike: What training did you receive to prepare you for your work as a collections agent? Ms X: Since we are not from US, we had US 101 training for a week to familiarize us with the American culture. Then we get a week of training about the client s product, or the debt itself. Lastly, we study the Fair Debt Collections Practices Act (FDCPA) and specific state laws before getting a collector s license online. The FDCPA Examination is required to be taken biannually. Mike: What were the most important points they tested you on? Ms X: The state laws. Without proper knowledge, a mistake can lead to a possible lawsuit. NCO probably has much better training in place than most CA s. You may encounter collection agents that blatantly violate the FDCPA as well as CA s that do everything by the book. Everything in the FDCPA and FCRA is federal law. Statute of Limitations is state law, and there are other state laws that can apply. Mike: Can a consumer settle debt for less than the full amount? How does this agreement take place? How does the negotiation work? Please give a few examples. Ms X: Depending on the client parameters, and for how long an account has been delinquent, a consumer always has the option to settle for less than the 6

8 amount owed. A tertiary account may get as low as a 60% balance settlement, compared to a secondary account where 80% of the balance settlement is available. JP Morgan Chase is very generous to its consumers, giving as low as 10% settlement to big balance accounts. Since the recession started in United States, the clients have been more lenient with consumers. Provided that a consumer can provide full and complete information on his finances, and can justify his financial situation, the client usually approves below blanket settlement. This fact has never been known to consumers, because most consumers refuse to provide current financial information to collection agencies. They fear being ripped off, or they re simply paranoid and defensive. Mike: What is a below blanket settlement? Ms X: A Blanket Settlement is a settlement that is at or below the approved settlement amount that the client sets. Mike: What are the guidelines for settling for less than the amount owed? How do the guidelines relate to amount of debt or age of debt? Please give some examples for specific creditors and also provide a range based on your overall experience. Ms X: As I have discussed a while ago, the overall parameters really depend on how generous the clients are. But yes, the age of the debt and the amount may be taken into consideration for settlement offers. It just makes sense for a client to lower the settlement amount for a consumer who has been delinquent for years. Because, if not, what else would motivate them to finally pay? Their credit has been damaged already. The same goes for accounts with big balances. Most likely, these consumers have more delinquent big balance accounts to pay off. And it would be more beneficial for the credit providers to lower the settlement and get something from the consumer than to have the account tagged uncollectable because the consumer opted to file bankruptcy. An account delinquent for over one year, for example, can get a settlement with at least 20 percent off the balance, compared to 50 cents on a dollar settlement of a two year old account. Lower settlements can be approved for accounts that are almost reaching the statute of limitation. Regardless of the age of the debt, a below blanket settlement can be requested for approval, and it is more likely 7

9 it will be approved if the consumer can provide proper financial information, or hardship status. Example of Settlement Parameters for Some Credit Providers Debt Age Capital One JP Morgan Chase GE Money Bank Less than One Year Old One to Three Years Old 20% off the balance 30% off the balance 30% off the balance 40% off the balance 50% off the balance 40% off the balance Four Years or Older 50% off the balance Up to 90% off the balance 50% off the balance Mike: How low (percentage of the amount owed) can a debt settlement go? Ms X: Well, in some special cases, as mentioned above, collection agencies can request for below blanket settlement. But if you want a really low settlement, settle by the tax season, where credit providers aim to get the consumer s tax refund. When talking about credit card debt specifically, it s pretty common for settlements to end up as low as 20-40% on the dollar, especially if you can show hardship. I ve talked to quite a few people recently with settlements in that range. Mike: Do clients tell you to accept lower settlements during tax refund time specifically for this reason? Ms X: Yes. They tell us that. During our training, we study money sources or sources of funds where a debtor/consumer can get funds to pay an account. Examples are unemployment checks, tax refunds, SSI, disability checks, child support. So, we don t have to really believe consumers when they say they don t have money. 8

10 In general unemployment, SSI, and disability income are going to be exempt from a judgment if the creditor/ca was to ever sue successfully and win a judgment. However, if the CA can get you to willingly hand over that income to pay the debt then there is nothing stopping them from doing that. I m not a lawyer, so seek the advice of an attorney if you have questions on this. It s interesting that she mentions tax refund season as a time that you can get a lower settlement more easily. The end of month is also a good time based on the quota/bonus structure mentioned in a previous question you will often find that the agent is more willing to negotiate when trying to make their numbers the last few days of the month. Mike: Do some creditors or collections agencies view lump sum settlements differently from payment plan settlements? Ms X: Yes. As long as the lump sum payment is within the credit provider s settlement parameters, the collection agencies prefer to take lump sum payment. This is because we are not certain of the future. A lot of people stop their payments later due to unforeseen expenses. So when a consumer offers a lump sum, we most likely accept it. Mike: Has anything changed about the debt collection business over the last 4 years? Ms X: Yes. Though most consumers think that collection agencies and credit providers would only want to rip them off, we take into consideration the consumer s financial situation. Since the recession, some creditors have been offering hardship program to qualified consumers. We are supposed to offer payment options that go by the financial situation of the consumer. Mike: What is the best attitude for a consumer to take in order to get the lowest settlement or best response for the collector? Ms X: Of course, be honest, and be cooperative with the collections agency. Tell them your current situation, explain why you got delinquent. And if possible, provide paper work that supports your claims. 9

11 Don t be excessively honest. The collection agent is not your friend if you let them know that you have access to money somehow then they are going to be far less likely to negotiate a decent settlement offer. Mike: What are some of the things that a consumer can do or say that will hurt their chances of getting the best results when dealing with the collection? Ms X: Of course, personally, I don t like to deal with arrogant consumers. I get paid whether the consumer pays or not. So don t be rude and belligerent on the phone. This is good advice. I can t think of any case where being rude or belligerent is going to increase your chances for a favorable outcome. Mike: What do you think are the most important things for a consumer to know when dealing with a collections agency? Ms X: Of course, the first thing to do when a collection agency starts to collect a debt from you is to request verification of the debt. Make sure that they are collecting a valid debt. Make sure as well that they are calling the right person; verify the social security that they have and make sure it is really yours. Also, make sure that all arrangements are in writing. When paying a debt, always ask for a letter of satisfaction and keep all bank statements as proof of payment. Mike: What differences do you see working for an attorney vs. a collection agency? Ms X: Not that much. We are still under the same law, FDCPA. Technically, we re both third party collections agency. But working with a law firm is stricter when it comes to FDCPA compliance compared to a normal collections agency. Accounts are to be handled with the utmost care and 101 percent compliance. 10

12 Mike: Is the statute of limitations important to a collection agency? Do they pay attention to this or behave any differently if a debt is out of the SOL? Ms X: The statute of limitation only dictates how long a credit provider can take legal action against a consumer. Remember that even an account that is past the statute of limitation is still a debt. It is still collectible and it still can be shown on the credit bureau report Mike: So NCO would typically continue collection calls even when the debt was known to be outside the SOL? Ms X: Any collection agency would. As I mentioned, statute of limitations only controls the deadline for bringing suit. Yes, after the statute of limitation is past a consumer can no longer be sued, but the debt is still valid, and collectible, and may still appear on the CBR. Mike: What if a consumer talks to a debt collector who seems unwilling to negotiate? Ms X: It is very seldom that a credit provider will sue a consumer over a past due debt. If the debt is large enough then you can expect to get sued. Some creditors will be more likely to sue than others and it s really a case by case basis. Mike: If a consumer receives a collection letter from a law firm, does that mean they are likely to be sued? Ms X: Not really. Like in my case, all the accounts that we handle are pre-legal accounts. We try to give the consumer the chance to resolve the debt voluntarily. Mike: What should a consumer do if they don t think they owe the debt they are contacted about? 11

13 Ms X: They should request validation. Even after 30 days after first contact, the consumer can still request a validation of debt, or an itemized bill. As soon as the client provides the information, the collection agency will send you the information. Mike: How do debt collectors deal with letters from consumers asking them to stop contacting them? Ms X: By law, the moment a consumer asks us to stop all communication with them we are no longer allowed to communicate. We do advise them that the collection efforts will stop, and we tell them about other options that they may have to resolve the debt. Mike: Do these accounts then get turned back to the client? How long does that usually take after you receive the letter? Ms X: No, these accounts sit in our office untouched until the scheduled recall, which is around 3 months after we get the account. If the validation request letter is faxed, we get it in minutes. And we automatically cease communication. As soon as we receive the letter, we mark the account accordingly and stop communication. From her answer here, it sounds like it s unpredictable how long it will take for a creditor to take back control of the account after a C&D is received. It could be anywhere from 0 to 90 days based on how this particular agency worked. This means that you will need to make a lot of regular calls to the creditor if you are trying to catch the account for negotiation before it goes out to another 3 rd party collection agency. Mike: What else should consumers know about debt collectors? Ms X: In these hard times, you have to be very careful with whom you re dealing. Yes, there are legit debt collection agencies, but there are also those who are not. Also, always ask for an arrangement and satisfaction letter so you have proof in writing of the terms you agreed to. The writing should state the 12

14 amount you will pay, at what dates of each month, and the total amount you are paying. That s it! I hope this was helpful to you and that you keep this interview in mind when you are dealing with debt collectors and debt settlement. 13