With hardship being an increasing reality, for every business who provides credit to customers, it is important to take the time to fully understand the spectrum of circumstances and situations people find themselves in when they experience financial hardship. Hardship has recently been defined as "a customer who wants to pay but is unable to".

The core problem with hardship accounts is they don't match the fundamental collection objective of achieving successful payment arrangements linked to individual and team targets. The optimal starting point should be "can they pay anything and when are their current circumstances going to change?"

One critical fact which should never be overlooked is that hardship can happen to any of us and the old adage of treat others how you want to be treated is never more applicable. Unpaid 90+ debt is usually less than 5% of most portfolios and the customer numbers are usually less than 3% so the fact we are dealing with very small minorities should always be kept in perspective when managing and supporting customers in hardship. Today, compassion and understanding are two key behaviours we should embrace when working with customers who are experiencing financial hardship. Collection techniques with a distorted moral compass and distrust of most customers in providing facts about personal circumstances or financial positions are counterproductive and will not solve any problems. Our role in collecting is not to judge but more to understand and empathise. Looking at and managing each account constructively and objectively will achieve better outcomes for everyone concerned.

Financial counselors do not always receive the recognition they deserve. Working closely with FCA(Financial Counsellors Australia) to ensure the right level of synergy between customers and collection teams has never been more important in achieving best outcomes. Financial counselors should be acknowledged and supported for their tireless work on hardship cases as their caseload far outweighs their available time and are often the brunt of misplaced frustration when trying to establish the current financial position of a customer. There are numerous reasons as to why someone may experience hardship and to appreciate and work with the facts of each case is the starting point towards a realistic conclusion. Helping someone through the hardship process can be rewarding and shows us there are other ways to collect money than applying moral pressure on customers to ensure we are front of mind for that next payment.

In any group the vast majority of people are honest and any disbelief is centered more around the answers not complying with the required arrangement outcome than accepting what the customer is saying. If we put ourselves in their position how thoroughly would we expect to be believed?

Collections management needs to incorporate hardship accounts when setting individual and team targets to avoid unrealistic outcomes. Have we asked the question "how can we make a hardship portfolio profitable?" More than ever these types of focus are required to produce the right result for everyone concerned. Time is the big issue for hardship accounts and patience combined with efficient ongoing contact are among the best-placed approaches.

Although inconsistent awareness about understanding and providing support for customers in hardship is gradually improving across credit providers as larger organisations appreciate stronger links with their communities and the importance of helping those less fortunate. Hardship is often not a permanent situation and customer retention is should always be in mind when collecting an overdue account. Throughout a lifetime someone might experience a number of hardship situations so supporting them through as much as possible makes good sense.

Author: Michael Blonk
Principal Consultant
Herringbone Consulting

July 2018 - FNSMCA301 - Collect debts - FNS30415 Cert III in Mercantile Agents

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