New Zealand Credit Law Bulletin - Vol 10, No 3, July 2010
A free, plain English review of recent law and items of interest for creditors, produced by Hattaway & Associates Ltd, Credit Consultants. To subscribe, visit the New Zealand bulletin index and enter your details on the right
Plain language disclaimer:
This bulletin is not legal advice. Do not make decisions on legal matters based on a brief commentary. Instead, get professional legal advice.
In this issue:
- If you put me on stop, I’ll take my business elsewhere
How to deal with threats from customers you don't want to lose - Please don’t move your call centres to India!
Not your collection call centres, anyway! - Debt collector loads disputed debt with credit reporter
An insight into the practicalities of loading wrong information - A glimpse at the career of someone who collects debts by force
A history of debt collection and prison
1. If you put me on stop, I’ll take my business elsewhere
An amended version of this article first appeared in MG Business in March 2010.
This is a problem that a credit controller asked me about in a recent seminar. I don’t know the exact words that were used, but the essence of the situation is, I think, accurate.
Her job is to call overdue customers to get them to pay. She called an overdue business customer – a valuable customer who buys from her business on monthly terms. He was apparently unable to pay at that time. She has rules to follow about when businesses are put on ‘stop credit’. She pointed out that the next step would be that the account would go ‘on stop’. He said, rudely and aggressively, “Well if you put me on stop, I’ll take my business elsewhere.” Other suppliers sell the same products, so his threat could be real. She backed down.
It would be nice to be able to say to him, “OK, that’s fine,” and then find that he was bluffing. But he might not be bluffing. It’s not her job to lose valuable customers. That wouldn’t make her popular with her bosses or with the account manager who looks after this customer.
What should she have said? What should she have done?
The reality is that if he took his business elsewhere, he would probably find he was dealing with a similar set of rules; if he didn’t pay, he would be put on stop. I once had my credit card rejected by the bank I used, so the next day I filled in a pile of forms and changed bank. The new bank was, of course, no different. I’d spent a lot of time and energy to make no real gain.
If the business-owner in this case was a man who would respond to logic, the credit controller might have explained this to him and convinced him that carrying out his threat wouldn’t help him. If she’d told it as a story, like my bank tale, it would probably have had has the best chance of sinking in.
However, I suspect he may not have responded to logic. He had painted himself into a corner. There was no way out except to back down and admit that he was wrong, but as he was described to me, he may well have been the sort of person who would feel he had to carry out his threat even if it was to his disadvantage to do so.
In fact, most of us are that sort of person at times.
Everyone has “face” – their perception of their own self-esteem. In your dealings with another person, you risk damaging their face by, for example, correcting, criticising, making an offer or a request or a suggestion, or giving an order. Things like this are potentially “face-threatening acts”. Calling to ask for an account to be paid is certainly potentially face-threatening.
That’s why we sometimes hint at what we want, hoping our debtors will volunteer to do what we want without us having to come straight out and ask for it. ‘Just calling about your account.’ Or we soften requests in countless ways, with phrases like:
Sorry to bother you, but... Just wondering if you could...While you don’t want to build your request up to be a bigger deal than it really is (which is a problem in itself), generally people appreciate your efforts to save their face and respond politely.
At the harder end of the spectrum are ultimatums: ‘If you don’t pay, we will put you on stop credit.” In ‘politeness theory’, this is what’s called a ‘bald-on-record’ strategy. It’s brief, honest, relevant, and unambiguous, but it is also very face-threatening. It therefore carries a higher risk of a harsh response, and that’s what the credit controller at my seminar got when she used a version of this approach.
By saving their face, you reduce the chance that they will respond in a way that damages your face. If we sometimes pussyfoot around when asking someone to do something, it’s because it tends to pay off (as long as you don’t look too submissive, which can look weak and invite an aggressive response from some customers). In this case, the credit controller has had a big loss of face herself. She was ‘put in her place’ and she didn’t have a good comeback.
I suspect the credit controller has gone into this discussion with the assumption that everyone should understand that stop credit is reasonable, normal, business practice. In this case the business-owner is refusing to play reasonably and fairly. Maybe that’s because he’s an outlaw who thinks the rules shouldn’t apply to him and has found a trick that works. Maybe he was just having a really bad day. But it’s more likely that this is about his self-esteem. Or to put it another way, he saw her as rude so he trumped her rudeness with an even ruder threat.
So ideally, when you are talking to important customers about sensitive issues such as stopping supply for non-payment, you take your time and don’t take shortcuts. There will be times when a straightforward, blunt approach is appropriate, but in this case perhaps a slower, more tactful method would have worked better. In a collection call to a prickly customer, you need to be particularly charming.
There are a couple of related issues. A credit controller may, sadly, be perceived to be a low status individual. A business owner may see himself as a high-status individual. If so, that makes her call more face-threatening. We are more likely to take offence at a request from a junior person with (in our eyes) no right to make such a request, than from a senior person. Similarly, some men see women generally as lower status and are therefore more threatened by a woman in this sort of situation. (Women respond by generally being more careful and tactful, particularly when dealing with men.) These factors may have contributed to his response.
Without being there and hearing every word, it’s hard to give confident advice about how the credit controller should have dealt with the business-owner’s threat. However, involving a higher status person – the account manager or someone higher up – may well smooth the customer’s ruffled feathers.
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2. Please don’t move your call centres to India!
One of the interesting things about overseas call centres is that they can upset the most reasonable, liberal-minded people so much that they can start to sound racist. Frustration with poor service melds into hating foreigners who can’t speak our language properly. I was talking to someone yesterday about Indian call centres and she said that the first time a call centre person says something unintelligible she says, “I’m sorry, I don’t understand you.” If, when they repeat it, she still can’t understand, she just hangs up.
Someone else told me that her parents are scared to call customer service numbers because they can’t face the aggravation. What’s going on here? Why are business decision makers doing this to us?
Talk to people about this and you’ll hear tales of frustration and confusion, and long periods spent on the phone. Often they end with, “and then finally I spoke to someone in Auckland/Sydney who knew exactly what I was talking about and sorted it out in 30 seconds.” More and more, the problems are being discussed in the media.
“Like most horror stories, this one begins with an everyday setting where the familiar gradually gives way to the sinister,” wrote Sydney Morning Herald business columnist, Paul Sheehan recently (“Your call is important to us” November 23, 2009). He wasn’t impressed with the experience of talking to 8 people in call centres around the world trying to get his overdue Telstra phone bill paid and his services reconnected and his article prompted 435 comments on the SMH website.
My perspective is a little different and, I think, worth sharing. Some years ago, I went to India to try to fix the collection call centre of a client which had closed down its Australian operation and set up in India a couple of months before.
They did this because the wage cost in India is generally about 80% less than in Australia. This is clearly the driving force. It’s not about improving customer service. However, businesses will obviously try to tie down the call centre operators to customer service agreements. Presumably the operators face penalties if those service levels are breached. The reason I went to India (at great expense) was that my Australian client wasn’t happy with the service and the Indian joint venture partner was footing the bill for my involvement.
Whatever service level agreements and performance measures they had in place weren’t catching all the important issues. I was brought in because the collection call centre wasn’t collecting successfully, but it was a surprise to the business to learn that, based on the sample calls I listened to, nearly 15% of callers ended up very angry with the collector – that’s three out of every 20 customers shouting at the collector. I don’t recall seeing another big collection operation where the angry customer rate was that high.
There are perhaps some jobs which are transferred off-shore – back office accounting, for example – where telephone communication skills are not vital. However, it’s a given that communication skills are essential in any telephone collection role. You have to be able to listen and understand, and talk and be understood.
Listening skills in the Indian call centre were particularly poor. When an Australian customer gave a detailed explanation of what was going wrong, the Indian collector would often lose track. We’ve all had this happen when we’ve been listening to someone. It’s easy to do when you are trying to do something else (like look at a computer screen) at the same time. You have two options: either you interrupt and ask them to repeat what they’ve said, or you stay silent and hope that you can catch up.
The Indian collectors almost always picked the second option, perhaps because it was seen as more polite in their culture, but it led to unhappy customers. The customer would finish their story and there would be a pause. Then the collector would say, “so when will you be paying this?” The customer would take offence.
Another problem was that the collectors had little understanding of life in Australia. If you can’t understand them, you can’t empathise, and if you can’t empathise, you can’t build rapport. It was similar to putting a bunch of teenage school boys on phones in a collection call centre and having them try to collect money off people with families and businesses and responsibilities which they had no conception of; they were simply out of their depth.
The Indian call centre operator was no novice at debt collection; in the same building they ran an apparently successful collection call centre for a huge UK business (which I could only assume had no conception of treating customers well), but it seems that the training (up to 8 weeks) for collecting these Australian arrears only taught them how to collect very simple debts. If the customer said, “whoops, sorry about that! I’ll pay it this afternoon,” they could cope. Beyond that...
Eventually, training and experience should be able to fix these problems. I was in India for a week. I worked on listening skills, conversation skills, understanding of Australian life, and general confidence. In the months that followed, my client professed to be delighted with the improvement. There were certainly a lot fewer angry customers, but they were also keeping the harder collection cases away from India. A year later when I spoke to the manager concerned (who had made himself redundant) he said that the improvements didn’t really stick. The problem was staff churn, (and arguably the fact that they didn’t want to pay me to set up ongoing training).
The Indian call centre industry has been growing at about 35% per year this decade. It follows that turnover of staff is very high. The call centre operator I was working with grew from 5000 people to 30,000 over 7 years. Once people have been in a call centre for six months, they leave and get a team leader’s role elsewhere. When executives from this part of the world are flown to India to be wined and dined and sold on the idea of Indian call centres, I think this might not be mentioned.
I have experience with only one Indian call centre, but from what I understand, this is the bottom line. Yes, you can save some money by moving your call centre to India, but it hurts your customers. The more complex the calls, the more unhappy the customers. So if you must outsource off-shore, send only the simplest processes, not credit management.
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3. Debt collector loads disputed debt with credit reporter
(Case Note 205558) [2010] NZPrivCmr 1 (1 March 2010)
A woman incurred a small debt which was given to a debt collector for collection. The woman contacted the debt collector and disputed the debt. Ten days later, the debt collector transferred the debt to a credit reporter via an automated process. The credit reporter loaded it as a default on the woman’s credit report. The woman ultimately paid the debt but complained to the Privacy Commissioner.
Those who supply information to credit reporters promise in their contracts to provide accurate information relating to unpaid debts.
Principle 8 of the Privacy Act provides that an agency must not use personal information without taking reasonable steps to ensure that it is accurate, up-to-date, complete and not misleading. In this case, the debt collector was clearly put on notice that the debt was disputed, but transferred it to the credit reporter anyway. No manual notation to flag the debt as disputed was added to the record, so the information was inaccurate, in breach of principle 8.
However, the woman was unable to show that the default on her credit report had caused her any harm in this case, so no there was no penalty negotiated with the debt collector. Instead, the debt collector agreed to review and improve its processes in terms of principle 8 and provide training to its staff to ensure that this type of situation did not recur. The Privacy Commissioner closed the file.
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4. A glimpse at the career of someone who collects debts by force
R V WILSON HC AK CRI 2006-092-016632 [2009] NZHC 1077 (19 August 2009)
In 1997, Nicholas Wilson was convicted for an offence which involved bursting into a house and using standover tactics to collect a debt. Due to his size and perceived physical prowess he was often used as an enforcer or debt collector by criminal associates. In a more recent case it was not entirely clear to the judge whether he were collecting a debt for someone else, or merely committing a robbery. Wilson consumed approximately .5 of a gram of methamphetamine and burst into the home of a Mr Boon, his partner Ms Brussow, and their infant. Ms Brussow fled upstairs, grabbed the child, locked herself in the bathroom, and called the police.
Boon was a fit young man who was experienced in martial arts. In subduing him, Wilson applied pressure to his neck. He was bound up with duct tape, with his arms behind his back. His eyes and mouth were taped with duct tape. Boon died. The police arrived and caught Wilson and his two co-offenders red-handed, and Wilson was convicted of murder.
Wilson had either been in boys' homes or adult prison continuously from when he was about 12 or 13 he, with 2 years being the longest he had managed to stay out of prison. His serious offending began when he was 16. By that time he was a patched member of the Mongrel Mob, and although he says he left the mob some years later, nevertheless most of his friends are in gangs or associated with them. He has not had paid employment as an adult, no doubt because he has spent most of his adult life in prison.
He was sentenced to life imprisonment with a minimum non-parole period of 17 years for the murder, and preventive detention, with a minimum non-parole period of 17 years on the count of assault with intent to rob. Now 38-years-old, he will presumably not be out of prison until he is 55.
