Kinder, Gentler Way to Collect
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."
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
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
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
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
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
"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
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
"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
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
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.