Oct. 18, 2013
Reykjavik, Iceland (debitum.biz) — Have you ever wondered how somebody might end up in debt collection? Or about the most important qualities of an effective debt collector? How debt collectors view creditors and debtors, or their own work? Are you eager to know about some of the most important challenges faced by South African debt collectors in the year ahead?
In a recent email interview, South African debt collector Shaun Duncan gave us his views on these issues and more. Duncan founded Pinaar Sithole & Associates (PTY) Ltd. in 2008, a leading name in domestic and international debt recovery services on the South African market.
DEBITUM.BIZ: How did you end up in debt collection?
DUNCAN: I worked for one of the major banks in South Africa, and one of my clients had a debt collection company in his group of companies that formed part of my client portfolio. Having worked closely with this client for two years, the client offered me a job as general manager of his debt collection company, which I accepted in March 1997, and resigned from the bank to go into debt collections.
DEBITUM.BIZ: What are the three most important qualities of a debt collector?
DUNCAN: I would say that a debt collector must have an understanding of the market that he or she is working in; be able to analyze the data provided by a creditor on a debtor handed over for collection; and have a strong personality and be able to negotiate well in order to get a win-win result in each negotiation with a debtor, and be able to deal with those who have the ability to pay but do not.
DEBITUM.BIZ: How do your family and friends view your job?
DUNCAN: Initially, they were concerned about the negative perception of the debt collection industry, as it was seen at the time as a nasty, violent industry with little or no controls governing the actions of debt collectors, and thought that I was making a mistake in leaving the banking industry, which was perceived in a very positive light.
However, once they realized that the company I moved to worked out of call centres and made contact with a debtor either by phone or by letter, they started to realize that there was a difference between such a call centre operation and a debt collection operation that called door to door and collected money by means of intimidation.
Since I have joined the profession, the debt collection industry in South Africa has gone through some major changes in terms of legislation, and is now viewed as a vital link to the economy and treated as a worthy profession.
DEBITUM.BIZ: Why do you like your work?
DUNCAN: It is great to see how you can make a difference in the life of an individual who has gotten into financial difficulties for whatever reason. Via your intervention and guidance, you have enabled the individual to repay their debt and have their payment profile at the credit bureau updated. Allowing this individual to become credit worthy again is thus very rewarding.
It is also great to assist in educating debtors on how important it is to understand legislation and how to manage their financial affairs.
DEBITUM.BIZ: How do you view creditors and debtors?
DUNCAN: Credit is vital in our environment because it allows individuals to improve the quality of their lives as only the few are able to pay cash for the life styles they lead. So creditors play a vital role in the lives of individuals, assisting them in planning and budgeting how to save for a deposit on an item and thereafter to pay off the item over a period of time, which in turn allows them to acquire an asset base.
Debtors unfortunately have to rely on creditors to assist them in acquiring assets and basic lifestyle items by way of credit. The problem debtors are often faced with is twofold:
1) They underestimate their ability to service future debt from their current income and get into a situation where they are suddenly overindebted and are unable to meet their monthly commitments, particularly in periods where interest rates increase; and
2) Unforeseen incidents in debtors’ families like an illness requiring unbudgeted-for medical payments or a death in the family resulting in additional expenses can force families into retrenchments that end in a significant loss of monthly income.
So in the majority of cases a delinquent debtor does not get into debt by design, but simply due to circumstances or possibly as a result of reckless lending on the part of a creditor.
DEBITUM.BIZ: Can you describe your job in a few sentences?
DUNCAN: The job of running a debt collection company is very challenging as you are dealing with people all day, and people are all different. Some aspects of the job can be frustrating, such as when you are unable to trace a debtor. On the other hand, it is very rewarding when debtors that you have guided through the process of repayment indicate their appreciation.
The biggest reward is from seeing the growth and development of our staff and being able to promote a staff member from a junior to senior position.
DEBITUM.BIZ: What is the most striking debt collection story you have come across in time as a collector?
DUNCAN: We were attempting to contact a debtor and the person that we were in contact with advised us that the debtor was no longer in the country. We were sure that the person we were talking to was in fact the debtor, but could not prove it. We decided to get a female staff member to phone the individual from a private cell phone so that it would not reflect as a call from our company and the same person answered the phone. We were able to confirm with the person that he was in fact the debtor, and were able to arrange a repayment plan.
DEBITUM.BIZ: What do you see as the most challenging issue for your business in the next year?
DUNCAN: The major challenge our business will face over the next year is the unfortunate fact that the majority of our debtors are overindebted, a situation which is putting pressure on us to
1) deal with the activation of new debtor debt resulting from debtors’ insufficient cash flow at the end of the month to pay off existing debts;
2) maintain monthly payments at existing levels, given the decline in our average receipt values as debtors that could afford to repay, for example, R300 per month last year can only afford to repay R250 per month this year; and lastly
3) ensure that once debtors have entered into a repayment arrangement they pay this monthly instalment every month and do not default every second month.
Unfortunately, there are some issues that we have no control over like interest rate and petrol price increases and the increase of unemployment figures as a result of companies closing down. These issues affect our ability to collect from debtors and extend the period over which debtors take to repay their debt, which in turn delays their ability to have their credit bureau profile updated and get back into a credit-worthy position.
DEBITUM.BIZ: What is needed in your country to improve the situation of creditors?
DUNCAN: The National Credit Act needs strict monitoring to ensure that
- All lenders provide proper credit analysis on a debtor prior to advancing credit;
- The credit is granted at fair and reasonable interest rates that will not overburden the debtor; and
- After repayment of all accounts, the debtor is left with sufficient funds to live on.
What is also needed in our country is the eradication of unscrupulous credit grantors preying on desperate individuals who do not fully understand the short-term implications of taking on a bad load at very high interest rates or of signing a consent to judgement form at the time of the application of the loan.
DEBITUM.BIZ: How do interest rate changes influence debtors’ behaviour?
DUNCAN: Increases in interest rates have a negative impact on debtors as the interest burden and their monthly repayment on credit obtained increases and their monthly disposal income decreases, putting more pressure on the debtor to service their debt.
A reduction in interest rates has a positive impact on debtors in that their monthly instalments go down, thus giving them additional disposable income at the end of the month. However, if debtors are not careful, they may be tempted in times of low interest rates to take on more credit, and when interest rates climb again, they find themselves stuck in a debt trap—they are unable to meet their monthly commitments and thus default on their contractual commitments to creditors.
DEBITUM.BIZ: What forms of technology will influence the way your company operates going forward?
DUNCAN: Computerization will have a positive influence on our business going forward. However, we see the biggest influence on our business in technology that makes it possible for us to communicate with debtors via text messaging and email because such technology allows a debtor to respond without being confronted over the telephone.
We are finding more and more that debtors prefer communication by email and not by telephone as this allows them to reply in their own time and prevents the confrontation that occurs in voice-to-voice communication. Statements can be emailed or sent as a text message to the debtor, and as most debtors now have Internet access via their cellphones, we see this technology as the largest growth area in terms of communication with debtors going forward.
The old method of telephone contact is clearly on the decline, and communication through text messaging and email is clearly on the rise. The posting of letters has dropped off substantially because a posted letter takes time to reach the debtor, while an email reaches a debtor almost immediately and costs substantially less to send.
DEBITUM.BIZ: How easy is it to find employees with the right profile for debt collection?
DUNCAN: We actually find it relatively easy to find the right staff. Because the unemployment rate in our country is fairly high, we can hand pick our new employees from a broad base of applicants and are able to train them up within two weeks of joining the company. They are usually proficient in their job within three months of starting from fresh.
DEBITUM.BIZ: What role do on-site debtor visits play in your country?
DUNCAN: We have found over the past years that fewer and fewer debtors are actually visiting our offices in person to discuss their debt. Debtors are aware of their outstanding debts and are usually happy to discuss the matter over the telephone or by email or text message. It is our experience these days that it is more a case of debtors preferring to make arrangements for repayment by phone, email, or text message instead of making such arrangements in one-on-one interviews.
With the benefit of being able to repay the debt via any ATM machine, through our bank account, electronic transfers, or via our retailer network, debtors no longer need to call on our office to make a payment. In fact, in the last four years, we have only had two debtors call on our office to make a payment, and have not had such an event in the past two years.
This is very positive as it relieves us of the risk of handling cash on premises and gives the debtor the comfort of knowing that his payment is immediately recorded either in our bank account at our client’s stores or via the major retailers in the country, providing the debtor with multiple payment points and the benefits and convenience that go with having these options.