Debt collection’s not a dream job
Sometimes you just catch people on a bad day. And no one knows this better than debt collectors.
In one recorded phone call, the collection agent, a young woman, maintains a professional composure while the frustrated debtor complains about the medical account he has not paid.
“No one could tell me what was wrong with me”, he says.
Asked whether he would like to set up a debit order to assist in payment, he tells the agent twice: “Fuck you and fuck this account.Nobody must tell me what to do.”
Most of the calls are not that bad, says Douw Potgieter (not his real name), the managing director of one of the largest debt-collection agencies in the country, which employs 1 300 people who make a total of two million calls a month.
A behind-the-scenes look at the agency’s Johannesburg branch, housed in an inconspicuous building, reveals a slick operation. The agencies collect debt for clients, typically companies that have been unable to get their customers to pay what they owe.
Being a collector is not a dream job, Potgieter says. “Never has a child in grade one said: ‘When I grow up I want to be a debt collector.’ ”
Call-centre debt collection is largely a low-paid, entry-level job and the industry experiences a high staff turnover rate of 50%.
“You will find employees will leave to another company for as little as R100 a month,” says Melissa Lottering, the manager of the agency’s Johannesburg branch, who also chose not to use her real name.
Potgieter says the job is emotionally taxing. “They get abused a lot … that’s part of the high churn. People [debtors] can’t distinguish between the professional and personal.”
Collectors are also sometime upset by the debtors’ stories, Lottering says. “Especially when dealing with the older people. I have seen it where collectors get off the phone and are in tears.”
But Lottering and Potgieter are quick to remind their staff that it’s because of these debtors that they all have jobs. Times, and the law, have changed and debt collection is now about winning the trust of the debtor and helping to rehabilitate them, Potgieter explains.
Clients don’t want to lose their customers because of the manner in which debt is collected. Some provide the debt collector with instructions about how the collection should be conducted and sometimes even provide their own scripts.
“The goal is to rehabilitate the debtor so that they can pay the debt off quicker and at a lower cost,” Lottering says.
The commission a debt collector charges can differ from contract to contract and can depend on many factors, such as the type of debt.
The collection success rate can vary, says Potgieter. For example, the collection rate on medical debts, with an average of 50%, is better than that on retail debt, where the success rate is closer to 20%.
Older debt is also harder to collect. It also eventually “prescribes” — it becomes legally uncollectible and falls away — after three years. But if there is a judgment in relation to the debt, it prescribes only in 30 years.
The commission charged for collecting an older debt that is closer to prescription is about 35% but the commission for current debt is about 7%, says Potgieter. It is just not economically viable to charge less than that, given the scale of these operations and the confines of the law, he says.
One industry expert said, however, that commissions normally range from 18% to 25%.
For those who aspire to get into the industry, the barriers to entry are high and the law requires a great deal of compliance.
“The largest companies tend to be the oldest. It’s a difficult industry to get into, with shrinking margins … Operations need to be large-scale because you need to process a huge volume in light of the very small commissions,” Potgieter says.
Agencies use different strategies and charge different commission rates but they must all comply with a host of legislation, including the Debt Collectors Act. For example, the fees charged are set out by law (See “You’ll be billed — it’s the law”).
“If the debtor says, ‘I’m not going to pay you, stop phoning me,’ then we must stop,” Potgieter says.
But there is an onus on the collector to tell the debtor about the consequences of refusing to pay. For instance, a debt can end up with lawyers, who will use legal processes to collect the debt and the costs will be far higher. For example, going into debt review can be expensive because debt counsellors can levy a range of fees on the debtor and the legal costs must also be considered.
In the Johannesburg call centre, agents pull up the debtors’ profiles and study the case history before making the call. A “mini Miranda”, a legal warning debt collectors must recite before continuing a call with a debtor, is first read out to relay key information and consequences.
Thereafter, the collector follows various scripts depending on the direction the conversation takes.
If a debtor agrees to a debit order telephonically, a supervisor must listen in and approve it. If there is a dispute about whether there was a valid mandate to debit the account, the recording is key. All payments made go into a statutory trust account.
At this collection agency, employees are set targets but the amount collected is just one of many factors considered. Another is the number of people called.
But the number of complaints laid against the collector are also noted. Debtors who believe they are being harassed by a collector can report the matter to the Council for Debt Collectors or the Association of Debt Recovery Agents. If found guilty, collectors can be fined up to R100 000 per transgression.
It is a criminal offence to attempt to collect debt without being a registered debt collector and debtors should verify whoever has approached them is registered with the council.
Given the required registration and the need to comply with the letter of the law, debt collection call centre agents require intensive training. This is facilitated by the employer but the certification belongs to the individual.
Calls are recorded and routinely monitored. Managers conduct quality control procedures each day and listen in randomly to ensure procedures are being followed correctly. Agents must also listen in to other calls, incognito, and provide an assessment of their colleagues.
Some agencies put the calls in a queue, to be picked up by agents when they are available, but at this agency the collectors get a list of debtors and deal with them repeatedly. “We believe in building a relationship with the debtors,” Lottering says.
Debt collection staff here are also graded and assigned to areas best suited to their abilities. Medical account collections require a different approach to retail debt, for example. Some collectors are assigned to debtors with “challenging profiles”. Here, the centre’s agents make calls in English but the centre has collectors who speak all the national languages.
Lunch time is a good time to get hold of debtors, so the collectors take their lunch at 11am. Thursdays are typically good days to reach people. Friday afternoons tend to be the worst.
“December is a bad month for us,” Lottering says. “I suppose people are on the beach and don’t want to take calls.”
You’ll be billed – it’s the law
If a debt collector rings you up, you will probably be billed for the call. This is permitted by the Debt Collectors Act, which outlines what expenses and fees a debt collector can charge for, excluding value-added tax.
For example, a debt collector can charge R20 for a letter, a registered letter, a fax or an email. The registration fee for a registered letter can be added to this.
Electronic communication, other than a fax or an email (such as an SMS) can be charged for at R2.80, but the law allows for a maximum of 10 such electronic communications a month.
Necessary phone calls, which are not consultations, can be billed at R20 a call.
If original documents are delivered at the debtor’s house or place of work, the maximum fee is R198.
The law allows the debt collector to charge a fee of 10% of an instalment received from the debtor, but this cannot exceed R480. Some debt collectors waive this or use it as a negotiating tool to get the debtor to pay up sooner to avoid it.
Overall, however, the law stipulates that the total amount recovered from a debtor cannot exceed the capital amount of the debt, or R965, whichever is less.
In the case of one large collection agency, which did not want to be identified, it said fees hardly ever amounted to the maximum and they only make up 4% of the company income. Commissions on collections are the main source of revenue. — Lisa Steyn