Debt Collecting and the Corona Virus Epidemic
Debt collecting suffers from a bad reputation as it is the real oldest profession and was around even before the plagues of medieval times. The fact that a person becomes indebted to another is indeed a situation that can be abused. In ancient times debts could plunge a debtor into a life of enslavement. During the Great Depression, when a debt could not be returned, banks used foreclosure which led many into homelessness. It is no wonder the lender, seen as a savior when offering the money, becomes the villain when the debt repayment does not go according to plan. There are many strict rules restricting the attempt to collect money and many times the lender is the one left with the monetary loss.
These days are an example of how lenders are given the short end of the stick. The Covid-19 epidemic is still very much an ongoing occurrence. Yet, already, several states have come out with laws restricting lenders from attempting to receive payment on unpaid loans. In truth, the lending sphere is just like any other field with employees that must make a living in order to survive, just like every profession. Alternative lenders, like many in the lending world, are in a “catch-22” situation. While they offer assistance that small businesses could not have gotten from the bank, they are presently merely seen as the looming threat to the business’s financial survival. Even if online sellers can somehow weather the pandemic storm, the money owed, supposedly, will be the thing that pulls them under.
A Shared Struggle
In all fairness, there are all kinds of people from every walk of life in the lending profession. Some lenders might lose all faith in debtors completely. At the same time, loan recipients might be trying to abuse the situation and use the global crisis to avoid returning their loan. In reality, there are two sides to every story and prejudice and fear do nothing but widen the gap. Usually, there are ways to make this situation easier and find equilibrium. This way, both parties do not feel like they were wronged. It simply requires setting a few ground rules and sticking to a mindset that is realistic and not emotional. Collecting money in a pandemic might be complicated, but it doesn’t have to be a negative experience. Especially, if lenders consider the following points.
First of all, remember that these are difficult times for everyone in many unique ways. Financial struggles are extremely scary and much more difficult when loan recipients feel alone and unseen. It is better to discuss the issues with a debtor and show understanding. Usually, even if right now returning the money is difficult, it doesn’t mean a new payment plan wont work in the near future. For this reason, keeping an open line of communication is very important. It not only shows the loan recipient that the lender sees them, but takes off the pressure that they are going to create a much bigger problem for themselves. Most would be surprised at how far personal contact goes in terms of making this process work. A humanizing process, built on mutual respect works much better.
The Person Behind the Debt
As a matter of fact, this strategy is based on police officers’ work with hard criminals. A recent article discusses how FBI agents and police detectives get suspects’ cooperation in difficult unsolved cases. Basically, the premise was that the better someone is treated, the more respect they are given, the better the communication and assistance becomes. As opposed to Hollywood’s presentation of law enforcement putting pressure on criminals under investigation, befriending someone is much more productive. The relationship could be analogous to the lender and the debtor. Threats and ultimatums usually mean reaching a dead end. Empathy leads to communication which leads to a sense of commitment. From here on out it is much easier to establish a solution that both sides can agree to.
One of the biggest benefits alternative lenders have over financial establishments and banks is the humane aspect. A lender, once reaching a path of communication with the debtor, can offer different conditions and terms that might alleviate the pressure. For instance, deciding that the next three months can go without payment and more money will be returned later, according to the financial state of the debtor, could help. Perhaps, setting up a plan that the debtor gives the lender a certain amount of their future earnings could work for some. All in all, each business is different and the pandemic effect is different. Why not specialize the service to make sure the debt can be returned? As long as things are set in writing, the lender has some guarantee that the loan will return eventually.
The Humane Approach
One of the best tips for collecting a loan during a global crisis is finding a way to determine who is truly incapable of returning the loan. As lenders strive to maintain a good relationship with the debtor, this could be difficult. With the havoc caused by this new situation, some debtors might not be able to accurately determine their own financial state of affairs. Delving into the debtor’s financial status can be done externally, through the capabilities of machine learning and other unique advanced methods. The computerized age can actually allow the lender to appreciate the true standing of their clients in a discreet, non-offensive manner. Obtaining a real overview of the financial status opens new options for the lender, knowing exactly what they are up against.
The one thing both debtors and lenders have in common is the attempt to figure out what the next step should be. Many are facing fear of the future, not just in the financial realm. It is best to keep in mind that most people want to avoid criminal behavior, and most are acting out of uncertainty and caution. The attempt to settle the debt, to return the loan, can be done in many ways. Still, trying to make it as easy as possible for both sides, without portraying the debtor as devious, will actually hurry along the process. Luckily, this crisis happened when technology was advanced enough to offer real help. Using it, we can overcome even the hardest situations and still maintain our empathy and our compassion for our fellow men.