A fair deal: responsiveness in debt collection

Tracey Swart

Is it always worth pursuing overdue debts?

Tracey Swart: It depends on the type and value of debt, and the period of time that the loan was granted for. There does come a stage where companies have to cut their losses, but this is generally quite far down the line in terms of level of arrears or delinquency.

When do you know to cut your losses?

Swart: There comes a time when the high cost of collection coupled with the low probability of recovery means that it is no longer prudent to continue to collect on an overdue debt. A decision then needs to be made on whether to write off or sell the debt.
Recent changes in legislation have made it illegal to sell or collect on prescribed debt. Credit providers will need to make a decision to sell non-performing loans earlier in the cycle to avoid prescription becoming a risk.

Should companies be prepared to compromise to keep loyal customers?

Swart: It depends on the level of debt. Non-paying customers do rectify themselves as their economic circumstances change. The level of investment to acquire a customer generally means it's not worth alienating them unless they are a very poor credit risk. In general, credit providers should find a suitable middle ground for a win/win scenario for both parties.

How does Blake recover debts without alienating valued customers?

Swart: We are specialists in early stage collections and institute measures to ensure they are efficient and effective. While we can go as hard or as soft as the credit provider requires, for the most part we adopt a conciliatory approach that focuses on rehabilitation of debtors. This could be anything from reducing the instalment that's due to extending overall terms or length of time of the loan to a full renegotiation.

When and how should companies negotiate with defaulting customers?

Swart: Right upfront. You need to try and correct bad habits before the situation enters the delinquency phase. As soon as the first arrears takes place is the time that companies need to be getting in touch with customers to negotiate a realistic payment plan. Outsourcing offers an opportunity to scale this initial contact.