No More Mr. Bad Guy: In a Switch, Collection Agents Soften Approach
Fickenscher, Lisa, American Banker
Collections departments, traditionally bastions of gruff and sneering telephone calls, are going kinder and gentler at more banks, accelerating a trend that began about five years ago.
Fast disappearing are the days when bill collectors used heavy-handed threats to coerce debtors. Today's collection agents may be called "relationship managers" or "financial counselors," and their job is not only to collect payments, but also to cross-sell products to delinquent customers.
Several companies pioneered this approach in the early 1990s -- including Integratec, a collections firm founded by card industry veteran Wayne Johnson, and Commercial Financial Services, the defunct purchaser of charged-off card debt once owned by William Bartmann. But this year, traditional banks started embracing the practice in a widespread way. Bank of America Corp., for instance, has begun a lengthy renovation of its collections department, aimed at building relationships between collectors and specific customers.
The new, more professional image of in-house recovery departments was clearly on display this week during the Consumer Bankers Association's first conference on collections, which drew about 230 bankers and vendors.
Bankers at the gathering in Vienna, Va., described their painstaking efforts to recruit and retain tactful employees whose roles, they said, will grow in importance in the event of an economic downturn.
"Never in the history of our company has (the collections) department been more important," said Harold Perkins, senior vice president and manager of consumer collections at Amsouth Bank, Birmingham, Ala.
Joe Belew, president of the Arlington, Va.-based Consumer Bankers Association, said the collections conference was organized in response to rising levels of consumer debt.
"There is more credit out there than ever before, and more people are slipping into the subprime category," he said.
Traditionally, bill collecting has been regarded as one of banking's more reviled practices.
But the picture painted by conference speakers showed that collections departments have begun adopting the softer marketing touch of other bank operations.
Executives said they saw Bank of America as a front-runner. Its collection associates are dubbed financial counselors, while debtors are known as "potentially profitable customers," said Michael O. Radesky, senior vice president of Bank of America in Brea, Calif."We are not looking (to hire) people with collections training," Mr. Radesky said, but rather people with sales skills who can market products while they remind debtors of their obligations. (See related story below.)
"In most cases, I wish that customers didn't know they are talking to a collector," Mr. Radesky said.
At most banks, collectors are paid bonuses for reaching individual and departmental objectives.
Some banks are experimenting with further incentives. Wells Fargo & Co., for example, has begun awarding bonuses to automobile-debt collectors monthly rather than quarterly.
The promptness of the reward contributed to their success, said Peter J. Patrick, vice president and division manager of Wells Fargo Bank in Walnut Creek, Calif.
Wells employees can earn up to $1,500 a month, or $500 more than last year's cap.
Wells collectors earn about $36,000 a year, but they could earn up to $54,000 with incentive bonuses, Mr. Patrick said.
The program has lit a fire under the staff, Mr. Patrick said, and Wells Fargo now recovers on average more than 50% of its losses.
In 1998 it charged off $102 million in auto loans, but its collections department recovered $48 million. …