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A Kinder, Gentler Way to Collect

A friendly nudge can work better than a harsh ultimatum when persuading a customer to settle an overdue account.

Robert Paisola has become a successful practitioner in the art of debt collecting largely because of a lesson he learned as a collector in the 1980s. "I realized that a lot of people were terrified of getting a call from a collection company," he says, "so I tried to make the experience as painless as possible-even enjoyable."

A friendly, relaxed approach can work magic not only in soothing collection clients but also in getting a company's slow-paying customers to settle their debts quicker and for more money, Paisola says.

Though he had no experience in collections, Paisola began placing calls. Within two months, his collection rate was so high that the firm's other clients began asking him to collect their accounts as well.

Paisola's collection methods were so effective that some of the companies he was collecting from asked for his help in collecting their own overdue accounts.

For the past 12 years, Paisola has been a full-time collections specialist. He gives seminars around the country on effective collection methods, and he has written a book, Pay Now, Debt Collection Secrets Revealed.

The low-key approach that has worked for Paisola is also advocated by others in the field, including Don Tracy, a principal with Williams Associates, a collections consulting firm in Los Angeles.

"The majority of collections in the 1950s and 1960s involved contacting blue-collar workers," Tracy says. "The perception at the time was that in order to collect, you had to 'grind' people-be tough."

Most debtors today, however, are senior citizens, "aging yuppies," and Generation Xers, Tracy says. "People are much more educated and less accepting of criticism and pressure."


Despite changes in demographics and customer attitudes over the past 40 years, collections experts say, some practitioners still go about their work as if they were in the 1950s.

But an increasing number of them are finding that the old talk-tough approach to collections doesn't work as well as it did then.


To answer that question, Tracy's' firm has been using focus groups for almost a decade to conduct consumer-collections research. One of the most significant findings, Tracy says, is that "what happens during the first 30 seconds of a collection call determines whether that customer will pay you or not".

"The goal is to become the 'payment of choice' based on the way you treat your customers, especially during the first 30 seconds."

One company that understands and applies that notion is Western Capital of Salt Lake City, Utah. (www.mycollector.com) WC purchases charged-off credit-card accounts-typically those with small balances and no collateral, accounts that no one else has been able to collect.

"We operate under the philosophy that the majority of people are honest and want to do the right thing," says Justin Staub, managing director of credit for Western Capital. 'The people we call are just like us. The only difference is that they have fallen on hard times, such as divorces, medical problems, family deaths, and so on. As such, we treat them with respect, dignity, and politeness."

A visitor walking through the collections department at Western Capital would likely hear the account officers joking with customers and talking socially-not the sort of environment one might expect to find in a collections company

Using this customer-friendly approach, Western Capital collects a large amount of claims yearly, Staub says. The firm also receives many unsolicited letters from customers expressing their appreciation for the way they were treated, he says, and for the opportunity to resolve their debts and get back on track with their finances.

Gary Gammenthaler, owner of Mountain States Collections in Provo, Utah, is another collections specialist who advocates treating customers with respect. His hook, Customer-Inspired Quality: Looking Backward Through the Telescope, emphasizes the importance of looking at all business processes, including collections, from the customer's point of view.

"In the U.S. justice system, you're innocent until proven guilty," says Gammenthaler. "The same should be true in collections. Nine out of 10 times, customers want to pay you. If they do not, you need to start with the assumption that they have valid reasons."

For example, Gammenthaler says, maybe the customer withheld payment because of something your firm did or failed to do. Perhaps the shipment or the invoice never arrived, the product didn't work, or the service wasn't satisfactory

Like Gammenthaler, collections specialist Paisola assumes when he calls clients for the first time that there are valid explanations for nonpayment. For that reason, he prepares himself mentally for each call by making sure he has a positive attitude. "I visualize a positive encounter every time I pick up the phone," he says.

When Paisola reaches the person he's calling, his positive attitude-his concern and interest-get through to that person, he believes. The experience for the person being called, he says, is completely unlike that of someone called by a an old school collector who conveys resentment, anger, or frustration.

"Again," Paisola explains, "I want to make the experience as painless as possible. If defenses go up, rapport goes down."


One of the early practitioners of the customer-friendly approach to collections is Jack Renton. In the 1960s, Renton was the credit manager for a construction firm in Australia, where he found that applying friendly, colorful reminder stickers to customers invoices increased on-time payments substantially.

While he continued working for the company, Renton and his wife, Patience, began a part-time business printing and selling such stickers.

"By the late 1960s it had become a fulltime business," says Renton's son Peter, who is president of Renton's International Stationery Inc. in Denver,

The Denver-based company also sells other business-oriented stickers such as "Thank you for your business," "Thank you for your timely payments," and "20 years in business."

The firm is also expanding its line to include labels and holiday cards.

"Most billings lack any type of relationship-building," says Peter Renton. "Companies spend a lot of money getting new customers but never spend another dollar to keep them."

In fact, a firm's collection practices can send customers running in the opposite direction, collection experts say. "If I have been paying on time for a number of years and then, one month, I'm late by two or three days, I would really resent receiving a collection call," Renton says.

A company that decides to take a customer-friendly approach to collections might consider the following methods, which have worked for others:

Ward off collection problems with an early dose of thoughtful friendliness. Some firms that attach Renton's International Stationery's thank-you stickers to initial invoices find that it sharply cuts the need for subsequent collection calls.

Before you place a call, get yourself into a positive frame of mind. "Visualize yourself and the customer having a positive interaction," emphasizes Paisola. "See the customer wanting to pay you. This will definitely come across when you call."

Begin with questions, not demands. "Your first call should be to find out what the situation is," suggests Gammenthaler. Begin with something like: "We believe we shipped you these items and that there is payment due. Can you help us understand the discrepancy?"

Paisola's initial statement is often along the lines of: "We noticed that your invoice is X number of days old. We want to make sure that you received the invoice, that you are happy with the service you received, and if there is anything else we can help you with."

Emphasize listening skills. Once you pose your opening question to the customer, you should listen. "You have to be able to listen to and understand customers and be able to convey to them that you are listening and understanding," says Paisola, who refers to this technique as "bridging"--getting yourself on the customer's side of the issue.

Use communication and negotiation skills. Once you understand the situation and can offer a resolution, you need to state the resolution clearly to the customer, reach an agreement on payment terms, and sell the customer on the benefits of complying with the terms.

Western Capital is a Nationwide Debt Collection Company based in Salt Lake City, Utah and can be found on the internet at
www.mycollector.com They can also be reached at 1-800-373-8913.

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