Negotiations: Seven Rules for Successful Collections
Any time you to want someone to do something for you — buy your product, pay their bill, whatever – you have to negotiate. Regardless of which side of a negotiation you are on, each party to a transaction has a chance to strategically challenge the other, to make an offer or a counteroffer, and to whine and moan, all in order to get the other party to give a little. The collections business is nothing but constant negotiations.
If you are like most people, the very word negotiation probably makes you think “pain in the neck,” more than “opportunity to excel.” After all, merely exchanging pleasantries and taking less or paying more than you want is far more pleasant than dickering at length with the other party. Nonetheless, if you know what you’re doing and approach things correctly, you might actually begin to relish the constant parry and thrust of the collections business. Negotiating is not only satisfying; it can also make you money.
Working a collections queue isn’t only a great time to conjure your inner Donald and paint your rendition of the “Art of the Deal.” The negotiating-skills that you practice on the job can also come in handy in other roles at work and even around the house. (Ever haggle with a teenager about cleaning the kitchen?)
To help you through your next collection transaction, here are seven rules for successful negotiating. They won’t tell you what you’re going to settle your next account for –that’s what collections negotiating is all about — but they will put you on an equal footing with the person on the other end of the line.
1. Stake your claim, but be willing to shave it if you have to.
Few things are ever an either/or proposition. Good negotiating isn’t about playing hardball by making your first offer and then sticking to it. It’s about making an offer and compromising when you have to. Effective negotiating requires many things to do well. Two of the most important things it takes to succeed in negotiations are a strong desire to reach a mutually satisfactory solution and the creativity to find one.
The things that a debt collector has to give and take in a collection effort are fairly limited. All that is present is time, money, a possible and possibly adverse credit report, a possible lawsuit, and the debt collector’s nagging efforts. Creatively mixing and matching the pluses and minuses of those five things is what successful collection negotiations is all about.
Good negotiators never bid against themselves. They stake their claim and then wait for a counteroffer before shaving their own position. Therefore, an effective debt collector should stake a claim by requesting payment in full (PIF) for the client’s just debt and then wait silently for the debtor’s response. A debt collector knows that he or she may have to give just a little in order to keep the negations moving (“I can give you two percent off for payment today or a two month payment plan. That would help you, right?”), but he or she should not give it too willingly.
2. Know what you can part with,-then part with it hard.
A debt collector should always keep in mind that he or she is looking to recover the most money in the shortest amount of time. Collectors should never give anything up for free. So whenever one gives up either time or money, two of the very limited commodities available in a collection transaction, he or she had better be getting some of the other commodity back in return.
One thing that most debt collection agencies let collectors give away for an instant payment in full is a ten percent discount. That does not mean, however, that a good debt collector gives up the ten percent as his first offer. In fact, its should be the last arrow in her quiver that she shoots just as the debtor is about to begrudgingly agree to a one-year PIF payment plan.
A crafty collector may convert a mid-term plan into an immediate settlement in full by saying, “You know, I can give you a ten percent discount on this if you agree to pay it all today instead of stretching it out for a year with us. A ten percent discount would help you, right? Maybe you can put it on a credit card and pay the credit card off over the year instead of us.? Which credit card would you like to use for that?”
If the debtor is initiating a contact with a collection agency, then that consumer usually has something pushing him to get his credit report or title to an asset cleared up. He has a reason to proceed speedily, so use his pressure to your advantage. If a consumer wants to move on with his life or a homeowner wants to sell fast because she already closed on another house, then-that person will pay to get things resolved quickly in order to sell his home. Use this leverage to push for a payment in full offer, because time being of the essence is now on your side for a change.
3. Know what’s pushing the other side.
It is important for a debt collector to know what, if anything, is pushing a consumer to want to settle an account. Knowing what is pushing the otherside will help the debt collector control the negotiations.
4. A little empathy goes a long way.
Being a debt collector puts you in a reluctant relationship with a consumer. You each obviously arrive at your meeting point in life with differing viewpoints about the debtor’s account, but that doesn’t mean you have to be enemies. You have to build a rapport with the consumer. The key is to make sure the person views you as an ally.
If a consumer appears angry that you are contacting her, let her know that you recognize she’s upset. Then the lady says, “You’re darned tootin’ I’m upset!” and all of a sudden you’ve got her agreeing with you. Then you can slip some “Feel, Felt, Found” in on her, “Look, I know how you feel. I would be angry too. In fact, someone called me once on an old piece of business and I thought it was a real pain in the neck and I let her know about it. But, you know what I found out. She wasn’t calling me because she wanted to. She was just doing her job so that she could feed her family. Just like you probably doand
just like I am doing right now. So, your account is for a hundred and twenty bucks, what method of payment do you want to use to take care of this balance right now?”
By empathizing with her, you will (one hopes) reduce any vituperative tendencies on her part. Once she’s not out to get you, you stand a better chance of preserving an amicable atmosphere-although you should always still ask for all of the money.
5. Emotions kill negotiations.
A collections attempt is so fraught with tension that it can easily escalate into a shouting match. Problems that have nothing to do with how a debt collector is handling an account negotiation have a way of stirring emotions to the point where a productive conversation escalates into a heated argument. One person starts sniping at the other and then it becomes a free for all. Suddenly everyone is arguing about personalities rather than issues.
Force yourself to maintain a certain level of detachment. You don’t want to become so emotionally involved in a negotiation that it hurts your ability to see it clearly. When you sense that feeling coming on, briefly disengage. “How, exactly?” you may ask: You literally have to say, “Hold on a second while I look something up that may help us settle your account.”
Then shut up for a moment, close your eyes for a five second breather and offer to give up something to push the negotiations back on to an even keel. For example, “Mister Debtor, I see that your account is three years old, I can give you a one-time only one percent discount for each of those years that would bring this $1,200 account down
thirty-six bucks, which is a good steak dinner for you and your wife. That would help you, right? What form of payment do you want to use for the eleven sixty-four that’s left?”
6. Negotiations are like poker, everyone’s assumed to be lying and no one seems to mind.
As in any negotiation, both sides of a collection relationship often recognize that they are, in fact, playing each other.Playing anything or anyone usually involves two things: strategy and, sometimes, a good deal of acting. If you don’t recognize that, you could be tripped up when a consumer tells a white lie, which, let’s face it, he probably will. Just like the other player in poker, consumers tend to act strongest when they are weakest.
When a consumer says, “I can’t pay more than ten dollars a month early in the call,” it’s probably not true. Meet that statement by asking the person to let you help figure out a way to get around it. You’re not calling him a liar; you’re simply telling him that you recognize he is playing the same game you are-and you’re not going to accept “no” without pushing back a little.
If a consumer quotes a ridiculously low settlement figure or payment plan and says it’s the best she can do, say something like “That’s just not acceptable, Mrs. Debtor, before I have to give this account up to my supervisor for him to handle, maybe we should take one more walk around the block here to make sure we’re not underestimating how good
your resources are.” You’ll be gently sending the message that you want a better payment plan without accusing her of trying to Welch on her debt.
7. Devise a backup plan that you could live with.
Always enter a negotiation with optimism, believing a deal will be struck. But what happens if you can’t convince someone to accept a decent payment plan? Devise what is your “best alternative” to a negotiated agreement, which is usually going to be passing the file up to your supervisor for further review and further collection activities. When the debtor asks what “further review and collection activities” means, simply say “I don’t know what they will ultimately decide to do with your account, Mister Debtor, but usually it’s not as good for you as coming to some mutually acceptable payment terms withme.”
The “best alternative” is essentially a backup plan that allows you at least to give the impression that you have other options. If you haven’t thought through your best alternative to an agreement and if you don’t let the debtor know early on that there are other less pleasant options than dealing with you, you’ll give the impression that even though you’re unhappy with a bad offer from the debtor you are not so unhappy that you’ll walk away. Let the debtor know you’re prepared to proceed with your backup plan, but stop short of actually giving up on your preferred choice. That should get your opponent back to the table, and then you can go back to Principle No. 1: Stake your claim, but be willing to shave it a little if you have to.