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At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.

Recording Payment Defaults

Thursday, June 29, 2017 - Posted by Michael McCulloch

It has now been 3 years since we covered the process involved in recording a payment default with a Credit Reporting Body ("CRB") such as Equifax.

While the process has not changed we believe that it would be an ideal time as a refresher for those that may not be familiar with the process.

Assuming that a clause exists in your Contract or Agreement to record a payment default with a CRB, any debt regulated by the National Consumer Credit Protection Act 2009 (Cth), must be issued with a series of code compliant Notices before a payment default can be recorded.


SECTION 88 DEFAULT NOTICE & FORM 12A

What Is It?
The s88 Default Notice advises the customer that their account is in arrears, the amount currently in arrears and the time in which they have to remedy the default. The Form 12A which is attached to the s88 Default Notice provides the customer with information about their rights including information about financial hardship and the dispute resolution options available.

When It Must Be Given
The s88 Default Notice must be issued 30 days prior to commencing enforcement action. This includes listing default information with a CRB. The CR Code recommends that an additional 5 days be added (35 days in total) for postage.

Can It Be Combined?
The s88 Default Notice can be combined with a s6Q Notice however it cannot be combined with a s21D Notice.


SECTION 6Q NOTICE (PRIVACY ACT)

What Is It?
The s6Q Notice informs the customer of the overdue payment amount and requests payment of that amount. This Notice indicates to the customer that the amount can be reported to a CRB once that amount is 60 days overdue.

When It Must Be Given
The s6Q Notice must be given prior to disclosing default information to a CRB.

Can It Be Combined?
The s6Q Notice can be combined with the s88 Default Notice however it cannot be combined with a s21D Notice.


SECTION 21D NOTICE (PRIVACY ACT)

What Is It?
The s21D Notice advises the customer that the credit providers intends to disclose default information to a CRB.

When It Must Be Given
The s21D Notice must be given at least 14 days prior to disclosing information to a CRB and not more than 3 months prior to disclosure.

Can It Be Combined?
The s21D Notice cannot be combined with a s88 Default Notice or s6Q Notice.


OTHER CONSIDERATIONS

  • If a s6Q Notice is combined with the s88 Default Notice once the s21D Notice has expired only the arrears can be listed with a CRB.
  • If a creditor provider intends to list the full outstanding debt with a CRB a separate s6Q Notice must be issued and allow 30 days for this Notice to expire.
  • To issue a s6Q Notice the amount in arrears under the Credit Contract must be in excess of $150.
  • Before a default can be listed with a CRB the default amount must have been outstanding for more than 60 days.
  • The payment default must be reported to the CRB within 90 days after issue of the s21D Notice.
  • A payment default cannot be reported with a CRB where the customer is claiming financial hardship.
  • A payment default cannot reported with a CRB where the matter is before an External Dispute Resolution ("EDR") board nor 14 days after the dispute is determined.

SUGGESTED FLOWCHART

You can download our suggested flowchart of this process here.


IMPORTANT NOTICE

This article does not constitute legal advice and should not be used as such. You should obtain your own independent legal advice before acting on or relying on the content of this article.

Five Tips for Collection Call Results

Monday, February 27, 2017 - Posted by Michael McCulloch

For some, picking up the phone to ask people for money doesn't come naturally and them out of their comfort zone. They don't feel confident with the process and fear embarrassment or failure.



If debt collection is part of your job responsibilities you can become more comfortable and successful by following a few basic tips.


1. Always Be Prepared

Take your time to read through any relevant notes that you may hold and make a quick summary before the call including details of the product / service provided, the amount owed, the current arrears, details of the last payment and / or the payment due date and any reasons for non-payment that have been offered up before. Having a very basic fact sheet allows you to control the call. You want the call to flow seamlessly so the conversation doesn't get sidetracked by a question you can't answer.

Also know exactly who you are calling, and we don't mean the customer personally as such;

  • What's their payment history like? 
  • Do they usually pay on time? 
  • Are payments getting later and later? 
  • Are late payments uncharacteristic? 

These little bits of information will generally allow you to create a quick mental profile of the account and the customer.


2. Think Positive
Your mental state has a strong impact upon how you handle a collection call and how the customer may respond to you. If you were frustrated by the last call take a moment to compose yourself and think the next call will be better and you'll get the result.


3. Speak Profesionally
We take our voices for granted but the tone, pitch, inflection and the speed at which we speak can be a powerful tool. Try to record a collection call and listen to yourself. Make the necessary adjustments and try again. This will not only improve as to how you come across to the customer but it will build your confidence.
Speak slowly and use a lower pitched voice and pause more often than you usually would.


4. Take Control
Calls can be managed in such a way that you can control the customers response. Some tips we've come across over the years include:
Addressing the customer by their name. This personalises the call and shows on your part respect and commands their attention. Don't overuse their name though as this starts to sound contrived and annoying.
Ask open-ended questions to try and get as much information as you can from the customer. If the customer has promised a payment ask how the payment is being made, which bank is the payment being made through, etc
Listen carefully to how the customer responds to those open-ended questions. As you gain more and more experience you'll be able to pick up small clues as to whether or not the customer is serious about making the payment.
Using silence can really control a call. Take you time to respond to a question or statement from the customer. Those silent moments will often prompt a customer to fill the void which leads to more information being obtained.
Stay focused on the purpose of the call. Some customers will try and avoid payment by complaining about the product or service they've received. This is purely a tactic. Be polite and even validate their opinion but always steer the conversation back to the purpose of the call which was their unpaid account. Don't let the customer manipulate you through their anger or use of derogatory language. This can be a ploy as well to upset you and end the conversation. It can be difficult however stay calm and try and remind the customer that you can't resolve the situation if they're yelling. If this tactic doesn't work indicate to the customer that it may not be a good time for them to continue the conversation and arrange an alternate time to call back to discuss the debt. Alternatively place the customer on hold for several moments. A few moments of silence can often calm the customer and you can return to the call to work toward a resolution.


5. Get A Commitment
A call that doesn't obtain payment in full or a repayment arrangement is often a wasted call. Why did you call in the first place? To obtain payment of the account.
If the customer can't commit to payment and needs more time make sure you control the timing. Instead of asking, "When can you get back to me?" ask, "Will you call me back by Friday?"
Also don't hang up the phone without summarising the result of the call: Reiterate their commitment, your expectations and the consequences if your expectations aren't met. Place an emphasis on urgency and stress the importance of the customer calling when they said they would or making the payment on or before the due date.
Finally if the customer doesn't follow through on their commitment make sure you follow through on the consequences or it's unlikely that the customer will take you seriously the next time you make contact.


Following our advice will help improve the effectiveness of your collection calls. Every customer is different and what works for one may not work for another but if you focus on the facts and listen to the customer you'll be a debt collection expert in no time at all.

A Debt Collectors Psychology

Monday, July 27, 2015 - Posted by Michael McCulloch

Often we are asked how do you get results in debt collection.

The answer is a fairly easy one. Discover the problem and resolve the issue. This is where communication skills are the key to your success. Treat each debtor with a level of respect and dignity and find positive ways in which to obtain payment.

Think of the human brain as a tape recorder. While we as people may forget certain events the brain remembers and will still react to a situation, often attaching a feeling, to this event. This is the way their brain has been trained and unfortunately for us often the debt collection event is attached to an emotive feeling. Feelings of despair, anger or frustration, etc

Our role as debt collectors is often to re-train the debtor and attach a positive feeling to our communication. So how do we do this? We need to look at Transactional Analysis.

Everyone has 3 ego states:

Parent Ego State
This is a nurturing and judgemental state. The parent ego state corrects us and guides us. They tell us what to do, when to do it and how to do it. The parent ego state can be critical.

Adult Ego State
This is objective and logical thinking. This is where information is sorted, decisions made and problems solved.

Child Ego State
This is our emotional side. All of our emotional responses develop from this state including anger, revenge, happiness, love, hate, etc

So how do we re-train the debtor?

We communicate with words that come from the adult ego state. We are logical, ask questions that start with WHO, WHERE, WHAT, HOW and WHY. These information gathering questions solve problems. The more we stay in the adult ego state the better chance we have of getting the debtor into the same ego state and getting a positive result and payment.

If we communicate with the debtor where we take an parent ego state the debtor will immediately go into a child ego state. The result is one where the debtor will typically lose control and your account remains unpaid, complaints made and generally no progress is made.

How can we get the debtor back from the child ego state?

Place the Call on Hold: Re-evaluate the conversation. Return to an adult ego state and start asking the right type of questions.

Discontinue the Call: Re-evaluate where we went wrong and how we can improve the next time we speak to the debtor or on the next account.

Transfer the Call: The debtor will go immediately back into the adult ego state. You've allowed the debtor to calm down and they will look forward to speaking with another person.

By utilising these tools you will collect more debts, reduce complaints and make the debtors experience with you a positive one.


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