The role of negotiation in successful early arrears collections

Collecting outstanding arrears is a difficult process for both creditors and customers, with many factors influencing outcomes. Circumstances can change and people can find themselves in situations they never expected to be in. As a result, it’s so important to approach every collection on an individual basis, with a human-first, empathetic outlook.

After all, the experience of dealing with debt comes with not only financial implications, but psychological too – with research showing that 50% of adults who are struggling with debt also have a mental health issue. Clearly, an ill-directed approach to negotiating debt could cause an already vulnerable customer to slip into a worsened position. And while we know that no business can plan for every eventuality when it comes to collections, implementing an effective early arrears collection strategy can help to resolve the debt as quickly as possible.

That’s why, throughout this blog, we’ll be talking you through the role negotiation plays in managing a successful collections process – sharing key strategies and watchouts to help your team stay compliant and compassionate throughout every conversation.

What does debt collection negotiation involve?

While negotiating debt can be complex, in its simplest form, it’s a communication process that aims to find a mutually acceptable solution.

Communication, active listening, expectation management and patience are all examples of key negotiation skills, and these skills are also all essential in effective collections. That’s because at the centre of any collections situation is human conversation – as you look to engage the consumer, understand their circumstances, and work towards a resolution that suits you and them.

The benefits of early arrears collections

While you may assume negotiating debt collection is purely beneficial for the creditor, when done properly, there can be advantages for the people negotiating with debt collection agencies too. 

• Maintaining good business-customer relationships
  People become accustomed to working with brands they know and like, so if you take the time to listen and come to a resolution with that customer, they’re likely to return to you again and again. 
• Creating a customised solution
  The negotiation of debt allows for a solution to be found that suits that customer’s individual circumstances, rather than opting for a one-size-fits-all approach that potentially could push them into further debt. 
• Increasing the likelihood of payment
  When you take the time to understand a customer’s situation, you’re more likely to gain their trust and see them commit to payment plans or settlements, which drastically increases the likelihood of a resolution being found in the early stages of the arrears process.  

How to prepare for negotiation

Successful debt negotiation is all in the preparation. Ensure your teams follow these steps to increase the likelihood of earlier payment collection, while treating customers with empathy and respect.

1) Make sure training is up to date
Different industries come with different requirements when it comes to negotiating debt, so it’s vital that your teams are up to speed on the intricacies and specifics of the sector you’re working within. In addition, general training in navigating complex situations and spotting vulnerable customers will ensure every customer gets the right level of support.

2) Seek the advice of an expert if necessary and provide the right support for your team
If your team are dealing with a particularly vulnerable customer or someone with unique circumstances, it always helps they may need to get a second opinion. Challenging calls can be escalated to more senior team members, or even better, using skills-based call routing will mean that those best equipped to manage the negotiation will receive that call first time. 

3) Set realistic goals
Your team may not be able to establish a final outcome on the first call, or collect their full debt straight away – but that’s ok! Negotiating debt collections is a journey that can follow many paths, so your first goal could be simply to have a conversation with the customer and build rapport, laying the groundwork for future discussions. It’s important to not rush things and remember to maintain an empathetic approach at all times. 

Effective negotiation techniques and strategies

Some may ask the question: “can you negotiate a debt collection?” and the answer is yes: you just need a strategy for doing so. Here are some tried-and-tested debt settlement negotiation tips that your team can follow, designed to build rapport and establish that all-important mutual trust as you look to collect payment as early as possible. 

• Acknowledge their situation 
  People experiencing debt can be stressed, anxious or even embarrassed. That’s why it’s important to always acknowledge their situation and make it clear that you’re here to understand and help – not trigger further stress. 
• Make them feel comfortable 
  Taking the time to build some rapport, before communicating your intentions and expectations, will foster a cooperative atmosphere from the get-go. 
• Check your understanding
  Checking your understanding is an example of active listening that shows the customer you are taking their situation in, but it also gives you the chance to confirm any points and check your facts. 
• See it from their point of view
  Only when you fully understand the other person’s viewpoint can you establish a solution that suits both parties. This is about acknowledging their point of view, rather than accepting it as your own. 
• Be flexible
  As we’ve explored already in this blog, every customer’s situation is different, so it’s important to adapt your approach in the lead up to and during any conversations. Perhaps you could explore extended or restructured payment plans to increase the customer’s chances of being able to pay.
• Follow up
  Consistency goes a long way in establishing a good relationship with your customers and creating an ongoing dialogue. That’s why it’s really important for your team to follow up when you say you’re they say they’re going to. Not only will this make the customer more likely to trust you, it will also show that you’re serious about resolving the debt. 

Legal and regulatory considerations

The rules and regulations surrounding debt collections are designed to protect both customers and creditors and ensure fair and ethical treatment. While some industries have specific guidelines, here are a few examples when looking at debt collection as a whole:

• The Financial Conduct Authority (FCA) regulates most types of personal debt, including credit cards and loans. The Consumer Credit Sourcebook (CONC) states that a lender must have clear policies in place for customers who are in arrears and particularly vulnerable, including customers who have mental health issues. 
• Trade associations such as the Credit Services Association (CSA) also set out codes of practice for debt collection agency members, which members must adhere to when collecting debt in the UK.
• The Fair-Trading Act 1973, including The Office of Fair Trading (OFT) and The Consumer Credit Act 1974 (CCA), provide guidelines and legal parameters for collecting debts relating to agreements covered under the CCA. These guidelines cover communication, harassment, and unfair business practices.

Effective negotiation in action: improved collection rates and high ROI

The background: Sigma Connected has been providing collections service to a large UK energy retailer for 10 years, growing our partnership throughout that time. Our extensive experience in early arrears, coupled with energy industry knowledge, has enabled us to deliver expert services to this big-hitting energy client, always focusing on ensuring a positive customer experience.

The solution: As well as ensuring every member of our team is fully immersed in the intricacies of the energy sector, we’ve also added extra value with additional services. This includes intensive analytics to spot patterns, use of the latest technology, skill-based priority routing for inbound calls, and extended training in complex situations and identifying vulnerable customers.

The results: During our partnership, we have delivered a x25 ROI to the client, consistently exceeding SLAs. Additionally, thanks to our outstanding collections rates, we have been allocated the largest majority of the client’s calls over the other collection agencies they work with – which sits at around 80% for live inbound calls and 65% for live outbound. 

Trust Sigma Connected to negotiate successful collections

Debt collection negotiation is a key aspect of ensuring successful collections, and something every customer service operative should be trained in to deliver the best outcomes for all parties. But this training takes time, and with more and more customers struggling to pay their bills on time, you may not have the resource in place to cope.

That’s where a specialist like Sigma Connected comes in. With nearly 15 years’ experience in early arrears collections, we’ve built negotiation skills into our everyday. This means we understand how to navigate even the most complex debt situations in the right way, while ultimately speeding up repayments.

Above all, we approach negotiation in debt collection with empathy at our core. We’re focused on maintaining that human connection throughout every conversation, ensuring that debt is recovered not only successfully, but responsibly.

To find out more about our expertise in negotiating debt collection, and to see how we can support you next, get in touch today,