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PART 5 – THE COLLECTION DEPARTMENT

When I was young, so much younger than today, I was impressed the first time I stepped into a Bank. Prior to that, the closest thing to the Bank that I have encountered was the Post Office Savings Bank with its cramped environment with various transactions such as stamps purchase, “Money Order”, “Postal Order” and savings account . When I was looking at the “Bank Tellers” at the counter with an “officer” or “manager” at the back who seemed so relaxed with nothing much to do except occasionally “signing” vouchers passed by the Bank Tellers, I said to myself “It would be great if I can work in the Bank, the job looks easy enough, not to mention “glamourous” and high self esteem”. It was fated that I got a job with a financial institution with the rank of an officer (necktie and all) but with a pay half of that of a clerk. Only then that I realised that behind the “facade” lies a “whole new world” of various departments one of which is the collection department and the job is far from “easy”

So, before we go into the collection procedures, it is also good to have a look at the people behind the collection department, the”bad guys” (the “unsung heroes depending on how you look at it) of banking apart from the “acceptable sorcery and evil” practice of Banking which creates money out of nothing and charging interest/USURY. These are the people whose job is to ensure that loans and interest are collected in order to keep the “Banking engine” running.

Don’t get me wrong though. I am not “demonizing” the collection gang. I have worked there before. I still have friends working in the Bank. If you know them, they are some of the nicest people around. If you happen to be their neighbour, you might only know them as working “in the bank” not knowing which department he or she is working in. They may even be the “model citizen” in their neighbourhood. The point is that they are just doing their job and it is the nature of the job that makes them look “bad” and in the negative light of things.If all debts are paid promptly, you don’t even need the collection department.

You may start to question why I am suddenly seem to be defending them. Well, as with the usurious Banking system, it is “by design” and it comes as a package of oppression due to Usury/RIBA. Human beings also come with different “packages” of traits and behaviours so there will be some collection personnel with sadistic tendencies and simply loves to make other people’s life miserable and some are known to make it  something personal. The borrowers too are of the same mix and sometimes it is the borrowers who make life miserable for the collection staff.    As I said before in the first article, I am just giving a level playing field though some of you (the Bankers of course) may cry foul on this “initiative” of mine.

In order to at least rationalise the “initiative”, have you seen some videos or read articles on a crime being committed in the hope of giving information and the “modus operandi” of the crime while at the same time giving some ideas for criminals or would be criminals to learn some new tricks? Well this is something similar but the similarity ends here. There are certain laws and guidelines to follow for the protection of both the creditors and the debtors. Both creditors and debtors have their fair share of abusers of the system but in the process, the innocents and gullible get victimized though it is not entirely their fault. This is the dilemma. To tell or not to tell but I feel “telling the story” would do a lot of good than not doing so. If you look at the graphic below, a well informed borrower will no longer be easily bullied by the debt collector:

 

BEZATAHUTAKTAHUENGLISH

 

In the entry level training for would be collection staff, one of the “facts” being taught are the traits and behaviours of borrowers and its relation to the potential of getting the loan payment. It is pretty straightforward as shown in the graphic below:

 

collectionratingENGLISH

 

We shall briefly look into each category as detailed below:

1) ABLE AND WILLING TO PAY – A creditors’ dream customer but that’s what it is, a dream as not every borrower is in this category. These are the people who “live within their means” and will always ensure payment is made promptly at least until some financial calamity disrupts this behaviour.

2) ABLE BUT UNWILLING TO PAY – (Type 1)  The type who typically “live beyond their means” but with some knowledge of collection procedures and “loves” being on the edge with “stuntman” mentality. They know the limit of default before legal action is taken. Most of the time they are juggling their expenses for other things other than the monthly loan commitment. Not much of a problem. Needs constant follow ups and “mild” legal action (Lawyer letter of demand)  when needed.

3) ABLE BUT UNWILLING TO PAY – (Type 2) A bit similar to the type 1 above but not really familiar with legal action and procedures maybe due to the pressures of juggling expenses leading to absent mindedness or simply being absent minded. Easily pressured to make payment with “mild” or “a bit heavy” threat of legal action.

4) UNABLE BUT WILLING TO PAY – The type who lives “well beyond their means” but with all the “good intention” to pay “in good time”. They believe that their economic well being will “improve” with yearly salary increment and “someday” will be able to make ends meet.   They don’t realise that the debt and usury/RIBA  based system will cause the devaluation and loss of purchasing power of paper money. Therefore their dream of “financial freedom” will never be realised and they will keep on accumulating debt. For these type of borrowers, not really a problem with threats of legal action or initiating the legal action itself.

5) UNABLE AND UNWILLING TO PAY – (Type 1) The type that has “graduated” to living “way above their means” but somehow or rather still being given loan based on “good previous track record” (not badly tainted yet) or based on the technology of “whom you know” or through careless loan processing. Some of them are “well experienced” in legal action being taken against them. May need full fledge legal action and judgment execution to get payment.

6) UNABLE AND UNWILLING TO PAY – (Type 2) This type (not all, some are ok) normally use “non standard” (by “standard” we mean payslips, income tax form, etc) loan documents such as savings passbook, “investment” portfolios (ASB,ASN, MLM statements) and other “supporting” documents. Some are “seasonal’ income earners like padi farmers. Some may use the services of “document producers” (they are good, may well be more adanced now) to get the loan or in other words, fraudulent application. At the point of loan application, it is hard to guess who they really are based on the subdued, polite, angelic and innocent looks in their faces. You will only realise their true colours when the loan turns bad and when you try to take legal action, to repossess the car  for example, suddenly a few names will come up. The nicknames of your previously “angelic” borrower become known with names with”dragons” in it, “Taiko” (Big Brother), “Pak Long” (also loosely translated to “Big Brother”) and other names indicating their “positions” in society. A pain in the ass, sometimes not worth pursuing. Banks can always write new loans, creating “new money” in the process and charge interest to cover for this bad loans many times over. Please take note that the above list is just a sample taken from a myriad of combinations. Just a few main samples to give you the general idea. So, the collection clerks and officers have their work cut out for them or so it seems. Collection is not easy and very few people really enjoy it. Well, maybe some really enjoy arguing with people all the time to release stress. Everyday there will be a lot of “opportunities” to have arguments with customers, some minor, some may be full blown confrontations especially during car repossessions and legal actions being taken. Sometimes the “whole village” mob can turn up wreaking havoc at the Bank. Therefore debating and oratory skills are very important for the collection guys and gals. The skills of “passing the buck” is also vital, for example in the event of a car repossession. The officer in charge may pretend to be as shocked as the borrower when the car got repossessed since he/she “did not issue” the repossession order and quickly pointed the finger to “Head Office” (very rarely the borrower will call “Head Office” since he/she would not know who to call anyway), the “main suspect” who printed the order. If only the office printer can speak, he/she will be in hot soup. This requires a lot of practice and it goes with experience.

Typical example of “shocked as a monkey” expression is shown below:

shockedENGLISH

 

Therefore, collection is an art, there is no rigid rule or script to follow, it is more of adapting one’s particular “behavioural style” to a set of standard procedures. Two collection personnel may achieve their objective by using two entirely different approaches. Sometimes you have to combine together to make it work and that requires great acting skills as demonstrated above. The “Good Guy Bad Guy Routine” ala “Good Cop Bad Cop Routine” and other “scenes” worthy of an Oscar are routinely used especially by those who has been working together for a long time and some “scenes” are simply spontaneous which makes it more realistic. Sometimes you wish those scenes were recorded and can be viewed again and again for entertainment or even for training purposes.

Collection also involves investigative work so you have to have a sharp mind and eyes for detail. You have to examine clues and leads you gather yourself or gathered by your colleagues which sometimes may not be up to your “high standards”. If you have the ability to change the pitch or tone of your voice, it is a great advantage in doing some “telephonic investigation” to gather information. The ability to master different languages and local dialects is also a definite advantage. In short, this job is not for a cry baby and not everybody are cut out to be a collection man or woman. Maybe we will recreate some of these “scenes” and “CSI stuffs” in future postings.

Apart from the above, collection staffs also need to be good listeners doubling up as “marriage counselors” or “motivational expert”. This is due to the fact that sometimes problematic borrowers will come to pour their sorrows and sad stories as to why they defaulted the monthly payment. Some will come alone and some with their spouse (It is hard to tell whether they are pulling a fast one. They also can play the “game”).  Sympathy aside, it is the monthly report that matters so with a “heavy heart” and with words like “there is nothing much that I can do but this decision comes from Head Office” the matter is handled professionally (swept aside). Sometimes I feel that loan application forms should also include questions regarding the overall health especially the mental health of the borrowers like the one found in Health Insurance forms. It will save you a whole lot of trouble in identifying problematic borrowers.

So there you go. Some of the things the collection guys and gals do day in and day out. Imagine having to do all this while taking care not to “tarnish” the reputation of their beloved employers (the Banks, of course) and then go back home being exemplary mothers and fathers and repeat the whole thing all over again. Sometimes in the minds of the collection people, how they wish they are doing the loan processing because working at the loans department is more “fun” because they can hang out with the car and machineries dealer (for Industrial Hire Purchase Loan and Term Loan), can have “happy hour” chats and sometimes in order to “please” the dealers in giving “more business” and create “good rapport” they will spend more time together which may include watching football games and some “karaoke” sessions. Customers also are a happy bunch, not to mention having “angelic” traits as described above.

However, the loan processing staffs have targets to meet in terms of loan disbursements every month and sometimes in their eagerness to reach their target and their “closeness” with the dealers may prove to be their downfall. Being “too close” and “buddy buddy” with the dealers and suppliers may “soften” their hearts or blur their judgment resulting in recommending a loan or putting a “good write up” to get the “borderline” or “extremely borderline”  loan approved which may turn “bad” and this has been a “bone of contention” between the collection staff and the loan processing staffs.Sometimes their roles will be switched to have a taste of “the other side” and to the satisfaction of the collection guys, the loan processing staff will have to collect from their own “portfolios” that have turned bad and had gone drown the drain to the cesspool.

On the other side of the fence, the “collection” gang will usually hang out with repossessors and occasionally with lawyers but it is the repossessors and lawyers who are “buying”. Repossessors will hope to get more repossession orders be it the “easy” ones but with the standard price tag as well as the high priced “wanted” vehicles so they will be the first to choose the “easy” and “juicy” ones.

As for the lawyers, either they want more cases or hoping to get paid for work done in the past which has been left unpaid, sometimes for years which is the “norm” in the Banking industry. Normally it is the boss who gets the treat from lawyers, and as for the officers or clerks, they may be invited to tag along if they are lucky.

Before we go into detailed breakdown of the collection process for each type of loan in the next section, it is good to have an overview of the similarities and differences between the legal actions taken to get you mentally prepared for things to come. For those with 1 to 3 months overdue, it is pretty straightforward. No need to move from the office, just pick up the phone and use their “communication skills”. The task is usually given to new clerks or officers under supervision to hone their skills in the techniques of persuasion, soft threats and utter bullshit.

For car and property loans, organized and scheduled actions are provided for by existing laws such as The Hire Purchase Act 1967 (latest amendment 2012) and the National Land Code as well as the normal legal recovery procedures of issuing Letter of Demand, filing summons and execution of judgments obtained from the court. These loans are categorized as “secured” loans where the “subject matter” of the loan being the car or property is normally used as collateral. The main problem or the added “burden” is the “unsecured” loan such as personal loan or credit card loan where the “collateral” is the “belief” that the borrower shall be able to meet the loan commitments based on the supporting documents of his/her  income submitted during loan application. Some may have additional “collateral” in the form of guarantors (which is “easy meat” for threatening borrowers), but with the increasing number of guarantors being made bankrupts for loans that they had little or any benefit at all, that is hard to come by nowadays.

For the “badly impaired” and “severely impaired” loans, it will take more than phone calls or letters to make them “tick”. Field visit is necessary as an investigative or additional tool to pressure the borrower to pay. The main aim of personal visits is to bring “realism” to the threats as opposed to phone calls which is designed for the “weak” and to bring about embarrassment to the borrower be it to co-workers or neighbours up to a point of the borrower would have no choice but to find some funds to “quieten” things up.

Now who is the most suitable for this job? Different Banks may have different policies with regards to the field visit personnel. Some may have special units for this purpose. Some might just require the same collection personnel to do everything from making phone calls, print letters, argue (er.. discuss) with customers and making personal visits. Some might “sub contract” the job to debt collection agencies with the promise of a certain percentage of the collection. Some Banks may “sell” the debt outright with a discounted amount usually those they have already written off and may be too “busy” (or the staff has become “weak”  or it has become too hot to go out nowadays due to global warming or too preoccupied with existing borrowers) to handle since the account has been declared “dead” or has turned into “zombies”. They may want to concentrate on the “living” loans with  higher chances of recovery.

So there you are. Some snippets about the collection team at the Bank. The same cannot be said about the Debt Collection agencies where they do not have the same kind of training the Bankers guys and gals do. They are not lawyer firms (although they have “lawyer sounding” companies like “Mafia Goons Partners & Co, “Max Pain & Associates” and other “professional sounding” names) and they do not have the legal power to do litigation. All they can do is intimidate and harass the borrower to pay and they are very persistent.

Whatever they collect is their livelihood and that is understandable but the way some of them go about their methods are highly questionable. A lot of complaints has been lodged on these agencies but the abuses continues. This is a multi BILLION Ringgit industry and it is highly unlikely that these agencies will fully toe the line because it is their most potent weapon for gullible borrowers. The older the loan the better because the interest on the bad loan would be astronomical sometimes running into hundreds of thousands especially for credit card where the actual balance are normally less than 10,000. The normal trick is to offer unbelievable “discounts” of up to 90% (of course if the interest is 100,000 and the actual loan is 2,000, a “discount” of 90,000 would still give a hefty profit  with just a few phone calls)

That is why the masses need to be informed of their rights and at the same time should be equally responsible for what they have borrowed unless the collection staffs of the Banks didn’t do their job properly and have absolved their legal rights to collect the loan within the allowable time limit and simply “pass the buck” (again) to the Debt Collection Agencies hoping to “get lucky” with some of the “old” borrowers which they somehow managed to trace with the advent of technology and “informers” (more on that later) and maybe, just maybe some gullible and ignorant ones not knowing the law of limitation would crumble under their pressure to pay under a few textbook “threats” of legal action and personal visits aimed at embarrassing the borrower to submit payment.

It is also “good” for the Banks to maintain their “clean and professional” image because if the Debt Collection Agency staffs “misbehaved” or went overboard in their collection methods, it is easy to switch to another one and say the previous one did not follow their guidelines to show “utmost professionalism” (some borrowers will testify that this is utter rubbish) in handling such cases  and has since been terminated. This statement will be accompanied by the usual face of “utter shock and disbelief” and the customer may feel “vindicated” before being harassed by another collection agency a few months later. “Lifes goes on” as they normally say. We shall discuss the Limitation Act in more detail with regards to loan recovery in the later part of this article as it needs a special space of its own.

END OF PART 5

NEXT – COLLECTION PROCEDURES: PERSONAL LOAN

PREVIOUS SECTIONS

Part 4 – TYPE OF LOAN DEFAULTS

https://debttalesthebankandyou.wordpress.com/2014/06/29/part-4-type-of-loan-defaults/

Part 3 – TYPE OF LOANS IN THE HOUSEHOLD DEBT PORTFOLIO

https://debttalesthebankandyou.wordpress.com/2014/06/29/part-3-type-of-loans-in-the-household-debt-portfolio/

Part 2 – QUALITY OF BORROWERS

https://debttalesthebankandyou.wordpress.com/2014/06/27/part-2-quality-of-borrowers/

Part 1 – BANKS AND DEBT COLECTION AGENCY

https://debttalesthebankandyou.wordpress.com/2014/06/26/banks-and-debt-collection-agency-current-and-bad-debt-collection/

 

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PART 2 – QUALITY OF BORROWERS

Another factor that we need to understand is that Banks give loan to a diverse group of people in terms of their “financial strength”, “credit worthiness” or simply the ability to service the loan. Of course Banks are always prudent in giving out loans and screening their borrowers but in some cases, “borderline” and “a bit above borderline” borrowers do exist where loans are given with the assumption that their economic well being might improve over the years with yearly increment of their salary. Factors like recession cycles and global financial instability are not really taken into greater context as the economy is always expected to “grow” indefinitely with inflation being the unavoidable side effect. On the other hand, you may also get loan based on the “know who”  technology inside the Bank even though your credit standing is not so good. The “bigger” the person in the hierarchy that you know, the “bigger” and the higher risk loan and lower interest rate you may get and this sometimes happens in the banking circles.

BANKTYPEENGLISH

Therefore, in “normal” circumstances where everybody is “chasing” money to pay for their loans, there are bound to be people who will fall on the wayside and normally most of them are the “borderline” cases while there may also be those from the “prime” category due to business failure or some other factors.

Things will go haywire when there is an economic crisis like what happened during the Asian Financial Crisis due to currency manipulation in 1997 where “good” and “consistent” paymasters suddenly become “bad” borrowers. This situation may happen again with a greater impact given the current state of the global economy and the potential of a global scale war breaking out The after effects of the financial crisis of 2008 is still upon us where we were exposed to major frauds in the financial sectors particularly in the US and Europe. It is said that the US Dollar has lost 98% of its value and even if that is a correct estimate (probably it is a negative figure already), will only be worth RM0.06 sen and this is the value where oil is sold and this is the RESERVE currency of the majority of countries in the world. Now that is really living on the edge! “Owing” money created out of nothing and paying interest on it and having reserves which is basically worthless! Whatever the case may be, default will always occur due to the added value of interest or USURY and much more so in the current state of the economy where inflation has reared its ugly head and more and more people are finding hard to make ends meet and some are plunging deeper into debt just to survive and end up paying more interest in the form of  late charges for missing their scheduled payments. If we are to take the above RM755,000,000,000 figure, a default ratio (now with a more subtle name of “impaired” loan) of even 5% will give a figure of about RM38 billion. Ok, maybe some people will say that is too “high” so we will take the “accepted” industry standard of 2% as being “normal” and the figure should be around RM15,000,000,000 (billion)  which is also a lot of “money” (mostly in computers) and that is not including normal and compounded interest and late charges (also in the computer, not “released” yet)

END OF PART 2

NEXT: PART 3 – TYPE OF LOANS IN THE HOUSEHOLD DEBT PORTFOLIO

https://debttalesthebankandyou.wordpress.com/2014/06/29/part-3-type-of-loans-in-the-household-debt-portfolio/

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Banks and Debt Collection Agency – Current and Bad Debt Collection

THIS IS NOT AN ADVERTISEMENT ON GET RICH QUICK SCHEME. THIS IS INFORMATION AND TIPS ON HOW TO HANDLE COLLECTION AGENTS.

Are you currently behind in your loan payment and currently sitting on a pile of debt? Being harassed by Banks lately or by people hired by the Banks called Debt Collection agencies where some of them are masquerading as lawyers? Feeling hopeless, scared and embarrassed by the threats of losing your job, your car or your house? Please choose your answer below:

A: Yes, definitely

B: Not yet, but coming soon

C: Maybe, but I think I’m okay (for now)

D: No, I am super rich, I don’t have a problem

E: No, I or my father or my grandfather owns the Banks and too big to go to jail. Muah! Ha! Ha! Ha!

F: I work for the Bank or Collection Agency. Why are you doing this? You are destroying our “weapons”

G: If this is a get rich quick scheme, I’m sorry, I’m not interested.

If your answer is D and E, you can skip reading this article. If your answer is G, no this is not a get rich quick scheme. If your answer is F, don’t worry, I understand your problem. There are some borrowers who simply do not want to pay unless sufficiently “pressured” and there are some who are simply a pain in the ass. I may highlight the predicaments of the collection guys in another article.

I just want to give a level playing field in this area since there are guidelines and procedures to follow and sometimes it has been abused by the Banks’ personnel and Collection Agencies’ staffs taking advantage of some gullible borrowers even if they “deserved” it. Enough of that and if I need to repeat myself, it is just giving some basic understanding and a level playing field and by the way, I am no angel either.

If your answer is A, B or C, don’t fret, help is on the way. No, I am going to help you pay your debts, but I would like to share some information that may alleviate your fears and may help you handle the situation in a more subdued or calm manner.

MALAYSIA’S HOUSEHOLD DEBT REACHING ALARMING LEVELS

According to the Central Bank of Malaysia’s recent report, Malaysia’s household debt has reached 86% of GDP, the highest in Asia (congratulations, we are number 1!) which works out to roughly around RM755++ billion (RM755,000,000,000). This figure changes everyday but we have reach a very worrying figure. GDP by the way is subjective and is also financed by debt but we shall discuss that in another post.

Let’s concentrate on the household debt and by looking at the figure, it is alarming indeed and it may well be close to or already reached RM1 trillion (RM1,000,000,000,000) if we take the “illegal” loans given by loan sharks into consideration.

bubble2english

 

WHEN THERE’S DEBT, THERE WILL BE DEFAULT

In order to understand “default” in loans, we need to understand the loan creation process. When loans are given, money are created out of thin air digitally as book keeping entries in the Bank’s computer. Interest charged are not created as money but is designed to eat up or steal the numbers from the newly created loan so that in order to service the loan in full, the borrowers would have to take from the existing money supply which incidentally are created in the same manner (with interest) so there will not be enough money unless “new” digital money are created through loans. Confused? Perhaps the diagrams below can give you some understanding.

bankanginenglish

bankanginenglish2

For more details, you can view the slideshare presentation of the “Facts of Paper and Digital Money” here:

 END OF PART 1.

NEXT: PART 2 – QUALITY OF BORROWERS

https://debttalesthebankandyou.wordpress.com/2014/06/27/part-2-quality-of-borrowers/

 

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