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Podcast: Confessions of a Debt Collector

June 3, 2020 Late payments happen – whether it’s due to a surprise medical bill, major life change or any other financial hardship. In this episode of Money Smarts, we sit down with a payment solutions specialist to debunk common myths, understand what a debt collector does and learn why it’s so important to work with them – without shame or embarrassment.
TRANSCRIPT
HOST: Welcome to Money Smarts, a podcast of Summit Credit Union, where we connect people and inspire action to create member and community wealth. As a not-for-profit financial cooperative, Summit Credit Union exists to improve our members’ lives and help them reach their dreams. Our Money Smarts podcast is just one way we engage members in the community in conversations about money that inspire you to spend smart, save more, and take action to build a richer life. AMY CROWE: Welcome to Money Smarts. I’m Amy Crowe, the financial education specialist at Summit Credit Union and your host for our time together today. We are delighted to welcome Katie Bartels, senior collections specialist at Summit Credit Union, to talk with us a little bit today. Welcome, Katie. KATIE BARTELS: Thanks for having me. AMY: So one of the reasons why you wanted to come in here was you kind of wanted to do a little “confessions of a collection specialist” here today. I think sometimes when we know that we’re late on our bills, and we see a Summit Credit Union or an unknown number pop up on our phone, maybe we’re a little leery to answer that phone call because we don’t know what’s on the other line. I think some of the myths out there with collections folks is that they’re in it for the money. They are going to bombard you with day-after-day phone calls. There’s even a movie called Confessions of a Shopaholic where, I think it’s Derek Smeath, harasses her for the money. Is that really what happens in a collections department? KATIE: No, not at all. I think there’s a couple parts to that. I think there’s some of those myths that we’re just in it for the money, and we’re just bad people. And I think that’s part of it, and I think the other part of it just the fear factor of knowing that you’re past due on something. So there’s the emotion part of it, and then there’s the myths part of it, that we just really don’t care about your situation, which is not true. I mean, we are in it for the money to an extent, because, you know, there’s money that we loan to you, and you signed the agreement that you’re going to pay it back. But that being said, I mean, things happen in life. Those unexpected expenses come up, and we are here to help you figure out the best option for you to get you back on track. You know, we’re mentors in a time of need. AMY: When you talk about being a mentor in a time of need, I think you’re absolutely right. What are some of those situations where somebody might get behind on their payments or maybe might be struggling a little bit with their finances? KATIE: Yeah, there’s many different life events and unexpected expenses. We see members call in because unfortunately, they’re going through a divorce, or sadly, they had a family member pass away. Job loss is a big one too, a big unexpected life event that happens. Retirement, people call in regarding retirement. And then illness, illness is another big one, another unexpected situation that kind of just… AMY: Kind of blows people out of the water. KATIE: Right, exactly. AMY: Yeah, I think I’ve heard a statistic out that says, you know, the average American can’t afford a $400 medical bill. KATIE: Mm-hmm, that’s true. AMY: Yeah, and then you have to juggle, am I going to pay my loan payment, my credit card bill, or am I going to pay the doctor? You don’t have to pay that entire bill at once. And that’s something you can work with your doctor on. But, even that little piece of information where they’re prioritizing their bills, that can really stress people out, and they don’t know what to do. And then, they don’t communicate when they’re falling behind in their bills. KATIE: Oh, right, yeah. And I can even speak to some of that as well. I know when I get stressed out, the last thing I want to do is sit here and talk about it. And so there’s a lot of emotion flying around, just with stress in general, but especially when you throw financial stress in there. But each of these life events could cause someone to have to completely change their outlook on their finances, like deciding, prioritizing what bills they’re going to pay over others, changing in their cash flow. Or I actually have had members call in and apologize because they completely forgot to pay their bill or set up the next payment because they have so many things going on in their life. AMY: Yeah, so even if it’s just that you’re busy, and you forgot, and you have a late payment, it’s completely okay to call into the credit union and be like, listen. I know I forgot. I just, I made a transfer in online banking. I made that payment, and it’s all good. KATIE: Yeah, exactly. I mean, we prefer that, actually. We appreciate when you call in and let us know what’s happening, even if it’s just a quick, hey, I know I’m behind. I’m sorry. I completely forgot to pay it. Because then if we know what’s happening, we won’t have to call out to you to see what’s happening, because we’re not going to assume you don’t care about your bills. We’re going to assume that something happened, and so we’re going to have to start reaching out to you to figure out what happened and form a plan. So we actually really appreciate when members call in themselves ahead of time and just give us the notes and the rundown on what’s going on, so we can just get it noted. AMY: Well, let’s talk a little bit about that experience. How do you communicate with people once they have a late payment? KATIE: So first, we will send out automated emails or letters to your home address for early stage. And it’s really important that those notices are read. You know, open the mail. Open the email, and see what it says. You know, there’s a reason that those are coming, please don’t ignore those. If nothing is paid after we send out those early stage notices, that’s when we’ll start to reach out to you by phone and figure out, again, what happened with those payments, what caused you to run behind. And then after that, we’ll start looking into payment arrangements or figure out what’s the best option for you, based on your specific situation. AMY: Well, do you have any stories of maybe working with a member over the phone when they were late and helping them create a plan? KATIE: I had a woman call in about a month or two ago, and she was just completely distraught and crying because literally, as we were on the phone talking, the repo agent was there putting her car on a flatbed because it hadn’t been paid in so long. So we sent it out for repossession, and she wanted to know what to do. What do I do? And I felt bad because at that point, there’s literally nothing that I can do for her in that moment. She needed to call us ahead of time to avoid this from happening. Or it’s after the fact, when the car is already picked up, and now it’s going to be more expensive to pay to get it back, if that’s what she wants to do. And I was talking to her and talking her through this, and I asked her, “why didn’t you call us?” We sent you all these notices and try calling you and leaving messages. “Why didn’t you call us?” She screamed, “I was embarrassed. Don’t you understand?” And then I had another moment of just, I just felt terrible because I can imagine how that would probably feel and seem. And, I really don’t want members to feel that way when they’re going through a hardship because this experience that this member had is exactly what we’re trying to avoid. We want to help the members avoid that situation because after the fact, it’s so much harder to get back on track and get items back if that’s what happens. AMY: Yeah, it’s one of those things where the shame and the guilt and the embarrassment, and whether it was somebody who had lost their job or had a medical emergency, maybe had a divorce, and they had to completely change their finances around. They’re already in a huge amount of financial stress from that. And then, to be able to reach down deep and to call somebody and be like, you know what? I’m having trouble. It’s probably one of the biggest things that we see in the financial services industry, is people coming to us and having the bravery and the courage to say, I need help. I don’t know where to go. I know at Summit Credit Union, we’re all about the help. We’re all about the coaching. We’re all about the guidance. We have people in our branches who will help people create a budget plan, all of that. So when someone calls you and maybe they’re late on their payment, or maybe they’re even a little bit longer late on their payment, how do you make payment arrangements to help them get back on track so that awful thing of having something repossessed doesn’t happen? KATIE: Yeah, when we talk to our members, we do want to make what’s called a payment arrangement, which essentially is you making your minimum payment and then paying a little bit extra so that you can hit some of that past-due amount. And that almost seems kind of funny to say that because, you’re thinking, well, I already can’t make my payment now, so what makes you think I’m going to be able to make my normal payment plus extra? AMY: Plus extra. KATIE: Which is completely a legitimate question. And really, the only response to that is, that may have to result in you kind of just either reorganizing your cash flow, or reaching out to your resources. Sometimes there’s, you know, county or state resources, friends or family, just other things like that that can help you. AMY: But it’s important to be able to do originally that reach out, understand that you are going to have your regular payment, plus some extra to be able to get you back to where you need to be. How does that process work? Do you like write down when they’re going to make that payment and when they’ve promised to make that payment? Or is it just on the regular due date of their next payment? KATIE: We use the same due dates. Sometimes what we’ll do is, and it depends on the member too, because we want to make it as easy as we can, based on their income like payroll checks typically… AMY: Oh, so you talk about when you get paid and different things like that? KATIE: Definitely, yep. AMY: Does that help them kind of relieve some of the stress when you start talking about things? Like, hey, when is your next paycheck? What does that look like? KATIE: I think it does, just talking to our members. And obviously, I mean, it’s going to be a monthly payment, but a lot of times, you know, people will get paid bi‑weekly. So maybe we’ll split that payment arrangement up half and half, bi-weekly. AMY: …between the two paychecks. KATIE: Right, or even weekly. You know, we try to make it as easy for the member as possible. AMY: Well, it’s really interesting that you say that too because it shows the flexibility and options in that, right? I think one of the biggest problems that a lot of people have is that they get paid every two weeks, or maybe they get paid once a month, and it’s figuring out when their bills are due and when they have cash. And unbelievably, people have unexpected expenses that kind of drains that cash flow between paychecks, especially when people don’t have a savings account. And so being able to have that conversation with them, about like, when are you paid? How much are you paid? Could you pay us every time you get paid? Because that evens out the amount of money in your checkbook so that you have a more realistic idea of how much you can budget, because you’ve already made half that payment for the month… KATIE: Exactly. AMY: …instead of having to have even more in your checkbook…not remembering the cable bill and the mortgage bill and the car payment, plus the other payment and a half that you’re trying to make, plus the groceries and the kids’ sports fees and the kids’ lunches and… KATIE: Everything, exactly. And that’s part of it, is just, you know, getting it taken care of right away so that it’s not even there. AMY: Yeah. So it’s so great that we can make payment arrangements, that we can help people budget by helping them out in the branches, that you can have conversations with them to give them little tips, tools, and advice about making those payment arrangements so that they can become kind of whole in their payment moving forward. But I think one of the other myths that we hear out there too is who am I really talking to? Am I talking to my bank? Am I talking to my credit union? Am I talking to my credit card company? Or am I talking to, like in the movie Confessions of a Shopaholic, they have a real debt collector. You know, is it that third-party collections agency? And I’m not saying that everybody is, you know, the myth, right, because there are some amazing, wonderful people out there. But how do you know who you’re really talking to? KATIE: Well, first, here at Summit, the majority of the time, you’re going to be speaking to one of us. You’re going to be talking to, I mean, we’re in the buildings. We’re on the Summit payroll. So you are talking to Summit when we’re calling you and sending you notices. The only time that you’re really going to be speaking to a third‑party agency is like way down the road, if you don’t respond to any of our emails, our letters our calls, and your debt ends up getting what we called charged off. And then it’s sent to a third-party collection agency. At that point is when that company is going to be calling you asking for money. AMY: And then it’s whatever is their policies and procedures in terms of how they operate and their philosophy in collecting the money back. KATIE: Correct. AMY: You know, and so it’s really advantageous to be working with your financial institution or with whoever you actually have the money that you owe to. You don’t want to have that other thing happen. You don’t want it to go to a third party because you’re more likely going to be able to resolve it quicker, more efficiently, and less stressfully when you work with the person that you have actually gotten the account from. KATIE: Right. Yeah, there’s that one, and then there’s also you could be talking to an attorney at one point as well, getting correspondence from our attorneys if we decide to do something else than charge off the debt. AMY: Okay. So we talked a little bit about whether or not it’s talking to Summit or talking to a third-party collection agency. How late is late? KATIE: Well, I mean, a late payment, you know, after the… AMY: We all want to know where the squishy part is, right? KATIE: Right. So, I mean, you have your due date. And that really is, that’s the due date. You have your, you know, squishy, fluid part, which is called your grace period, before any late fee will start to accrue. So we have that here at Summit. Typically, it’s between 10 and 15 days. So after that is when you really kind of are running behind, because then you’re going to accrue those late fees. After 30 days past due is when you can take that hit to your credit reporting. AMY: Oh. Okay. So it’s not actually going to affect my credit report until like 30, 31 days after it’s late. KATIE: Well, technically, yes, that hard hit of a late payment. That being said, if you continuously play that, quote, unquote, game of paying just late enough but not getting the 30-day hit, it can still negatively impact your credit because you are consistently making late payments. AMY: Ah. And you’re still getting hit with the late fee… KATIE: Right. AMY: …within, you know, when you’re making that monthly payment. You know, what about people who are two months late? By that time, you’re working with them, but hopefully on a repayment plan. But if they’re not actually doing their payment plan, then they start becoming 60 days late, and that’s reflecting on their credit report. KATIE: Yeah, exactly. I mean, the goal is to get people, contact people before the 30-day hit. But sometimes that doesn’t always happen for one reason or another. But if there continues to be no payments or late payments, sporadic payments, rather, you can get 30-day hits, 60-day hits, 90-day hits, 120… AMY: So that’s why… KATIE: …it keeps going. AMY: So it keeps going. So it’s actually really important for you to be contacting the financial institution because, although you’re going to pay that late fee, you’re probably not going to have a hit to your credit report if you catch it, you start responding to the emails, you start responding to the phone calls, you set up that payment arrangement, or you just make that extra payment that you need to. And that’s going to help you not get that hit to your credit report. KATIE: Right. And that’s the big piece of it because I would much rather have people take the late fees than get that hit to credit. And the big part of that is that we can work with the late fees. What we can’t be flexible is with the credit reporting. We, by law, per the FCRA, Fair Credit Reporting Act, we cannot repair any credit if it’s not a credit union error. AMY: Oh, all right. That makes sense. So let’s talk about credit reports for a second. If I know that I’m late, and maybe I’ve had some hard times. I’ve had a divorce. I know that things have gone into collections. You know, how do I find out and clean up some of this stuff? Like I know that I’ve had some things happen. Where’s the best place for me to get a credit report to be able to see what might be out there? KATIE: Everyone can download or print off a copy of their credit report for free each year at annualcreditreport.com. So you can print that off and look down at collections line. It’ll show the name of the collection agency. You can look up the information to that agency. AMY: Oh, like you can google it? KATIE: Right. So you can, yeah, you can just research it yourself and get the contact information to call them and find out who you owe, how much, and work with them to pay, make those payments. But you can also work with us as well, if you know that it’s through Summit Credit Union. So there’s...there is always light at the end of the tunnel. It’s, if something ends up on the collection line of your credit report, you can always come back to us and work with us for it. AMY: Well, I’m assuming that when you have medical collections and things like that, those are going to be also showing up under that collections line, and then you can just call whatever clinic might be out there and try to make payments to make that whole then. KATIE: Right. AMY: All right. So I’m just going to give that website out one more time, Katie, for folks who want to go and see if there’s anything out there that might be reflecting on their credit report. It’s annualcreditreport.com, and they can just see if anything is in their collections trade line. They can Google it. They can do some research and try and clean that up to increase their credit score. KATIE: Absolutely. AMY: Okay. Katie, as we wrap up our time together today, we’ve talked a little bit about confessions of a collections specialist. What’s one last tip or tool that you have for everyone today? KATIE: I think the biggest things for me are just to remember, we’re not the bad guys. We’re here to help you in your time of need, and to, you know, always respond to our contact attempts. AMY: Katie, thank you so much for your time today. I really appreciate you spending some time with us, sharing with us a little bit about, how the collections department works at the credit union and how we want to make sure to help you if you are late on your payments. If anything ever happens, please just give us a call and share with us what’s going on in our life because ultimately, we just want to help you make those payments and live a happy, healthy life. KATIE: Yeah, that’s exactly what we’re here for, is to help. AMY: Thank you so much, Katie. KATIE: Thank you. AMY: Join us next time for our Money Smarts podcast to get more tips, tools, and advice on how you can own your money. Discover more money smarts at summitcreditunion.com. Like us on our Facebook page, Tweet us, or Pin something from our Pinterest boards. That’s all for today. Thanks for listening, and remember, it’s your money. Own it. You might also be interested in Q: Our daughter was just born. What should we be thinking about financially? A: Your question around what to think about money-wise shows great parental wisdom. A good start is to envision what you hope she will feel in her own relationship with money in her lifetime. 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