The recent implementation of the National Credit Amendment Act and the fact that it deems the collection of prescribed debts, which fall within the ambit of the National Credit Act, “prohibited conduct”, with heavy penalties in place, has many creditors questioning how they can secure their “bad debts” and ensure that they do not prescribe.
The knee jerk reaction by some creditors has been to start the legal process as soon as they deem a debt “bad”. The intention being to secure a judgement over the debt. If they manage to do this effectively, it buys the creditor more time to collect.
In addition, the value of debts marked for the legal collection process has decreased. However, Mark Essey, CEO of Debt-IN believes that now more than ever, Debt Collection Call Centres have a significant role to play in facilitating a successful collections process.
There are a number very effective collection strategies that can be implemented by a Debt Collection Call Centre before “going legal”. Call Centre Collections remain the fastest, easiest and least hostile route for collections, and the key to successful implementation, is having a clear strategy and planning. The ideal collections policy should combine both Call Centre and Legal Collections.
How long creditors need to wait before handing over their debt is dependent on the type of debt and the industry norms. The Legal Collections process should only commence once it is clear that the Call Centre route is not yielding any results. This should be balanced with allowing enough time to ensure that the legal process can be taken to its completion without the debt prescribing. Even in this case, if the Collections Call Centre has executed its mandate correctly, their process will in some cases result in the extension of the date when the debt prescribes.
The cost of the Legal Collections process needs to be balanced against the value of the debt being handed over. Debt Collection Call Centres collect on a contingency basis so there is no cost to the Creditor in handing over their debt if it is not collected. So with a debtors book, which is comprised mainly of small value debts it does not make sense to go and incur legal costs that could potentially be larger than the amount being collected on, even if the legal costs are ultimately borne by the debtor and securing the judgement interrupts prescription. Securing a judgment on every matter is never guaranteed and legal costs have to be paid in advance.
Creditors should, with the help of their Collections Agency set-up and identify key trigger points in the collections process that will result in a debt being handed over to a firm of Attorneys. A good strategy will include testing and measuring each approach and its results over time. For example: Was the collections process more successful when the debt was handed over earlier? Should it have stayed in-house longer? Or should the creditor have gone the legal route immediately?
Collection is all about finding the best solution for both the creditor and the lender. The most important thing is finding the right balance between the hard and soft approach. In no way am I discounting the merit and value of the Legal Collection route, I am merely saying that a balance needs to be struck.
You need to move quickly and carefully, giving yourself enough room to manoeuvre without scaring off individuals who might still remain future clients. Always follow through with your decisions and the debtor will soon realise that you mean business. The crucial goal of the Call Centre should be to collect the debt as cost effectively and timeously as possible, while at the same time ensuring that the creditor’s reputation and brand are not negatively impacted.
At Debt-IN we strive to change people’s perceptions of how a Debt Collector should operate. We do this by keeping the creditor’s best interests at heart, upholding their brand values, and demonstrating respect to the debtor (your customer) at all times.