Debt Collecting - A Psychological Approach

Debt collecting is a frustrating Endeavour, because it is so inconsistent in nature.  While one borrower pays, the other doesn’t.  Collecting debt is not easy, however there are a few things that should be taken in mind when it comes to bank debt collection. 

Recent studies have shown that bank debt collectors are starting to take a psychological approach to collecting their debt.  After all, psychology is the study of the mind, so wouldn’t it make sense to want to get into the heads of the borrower? 

In previous years, debt collectors have taken an aggressive approach.  When one was attempting to collect they would do so by calling the borrower’s phone constantly.  This is not the approach that is psychologically sound.  Studies show that people in debt are more likely to pay when they receive a letter vs. a phone call.  This is contrary to what has been previously thought.  The reason for this is because when someone has a piece of paper sitting in front of them they feel more contractually obligated than if they had received a phone call.  The piece of paper also is a constant reminder of the debt, whereas a phone call is brief and soon forgotten.

 

Another psychological strategy that bank debt collectors are taking is to be friendlier to those they are attempting to collect from.  Studies have shown that people are more likely to pay to companies that are kind to them.  It’s also important to offer flexible paying options.  If a collector were to start a conversation with demanding an absurd amount of money for a monthly payment, chances are the borrower will get overwhelmed, and instead of paying little by little, they will pay nothing at all.

When it comes to debt collecting, don’t neglect the aspects of psychological science in your strategies.  By understanding the mind, and how it works, you are better equipped to handle the task of debt collecting.