Resolve Delinquent Debts With Empathy: 4 Tips for Credit Unions

Remember the scene from “To Kill a Mockingbird”?

Atticus tries to convince Scout that her teacher isn’t all bad – she is just in a different psychological situation. Atticus believes that before Scout condemns or criticizes Miss Caroline, she should practice a bit of empathy.

The same goes for resolving delinquent debts.

Empathy is feeling what other people are feeling and seeing things from their point of view. 

Oh, how much we would like to have a few people like Atticus, who understand our turmoil and extend their hand in times of need.

But when the role reverses, empathy often takes a back seat – especially when you are in a position of power, and your business and money are on the line.

The lack of empathy and compassion is apparent in financial institutions. In the Harvard Business Review’s list of “Most and (Least) Empathetic Companies,” financial institutions consistently ranked lower.

Although the institutions invest all their faculties in understanding a customer’s or member’s financial situation during the loan sales process, later, if they get delinquent, the same institutions assume the role of an aggressor. Why?

Why Do Debt Collectors Get Aggressive & Why Do You Need to Be Empathetic?

Because empathy is scary – to be empathetic and show compassion, collectors need to shed their position of power and understand their borrowers’ hardships. In short, they need to become vulnerable, which makes them scared.

Hence, compassion is often seen as a weakness in debt collection, and aggression comes naturally. After all, “if I start showing compassion to my delinquent members, how can I get them to pay off their outstanding debt?”

But this reading is wrong. Compassion doesn’t make you weak. It makes you intentional and solution-focused, placing you in a position to help your member while actively considering the various trade-offs – it is restorative rather than draining.

And friendly, approachable and understanding collectors are more likely to tell their debt collection success story. This is true, particularly for debts at the lower end of the scale. As soon as you assume a threatening voice, it doesn’t work because members can just put you to the bottom of the pile.

Here are four tips to resolve unpaid debts with empathy and compassion:

1. Be proactive. With economic uncertainty governing the lives of most American citizens, it’s not surprising that vulnerable members of your credit union will reach out to optimize and reconfigure their payment plans.

If your credit union receives such a request, you must proactively address their concerns. Responding with urgency will make your members look upon you favorably. It will also motivate them to take their repayment seriously and work harder to meet their financial obligations.

To be proactive efficiently, you should invest in maintaining standardized data that allows for quick segmentation of members based on their payment history and financial standing, and find candidates eligible for repayment modifications.

Instead of relying on manual labor, you can also invest in automated communication tools like email and text to make your response quick, allowing employees to focus on more complex tasks.

2. Enable self-service options. Typically, people fail to stick to their debt repayments because of unfortunate events that lead to financial distress. For example, they may have recently lost their job. In such situations, they are likely also dealing with shame and avoidance.

So, naturally, when people’s finances go topsy-turvy, they don’t want to or don’t know how to discuss these difficulties even with a person they’re close to, let alone a debt collector.

So, when your collector calls them up, delinquent members are likely to get defensive or over-emotional about their financial situation. This reduces the chances of finding a solution together.

Establishing self-service options can help address this concern.

For less delinquent severe accounts, before passing them onto a debt collection agency and instead of calling them up or sending letters, you can start your debt collection process by sending informational messages about self-service portals.

The members can use these portals to report hardship or work out payment plans with their credit union.

Members who are serious about paying their dues but are victims of dire circumstances do not deserve to receive harsh phone calls or angry letters. All they need is minimal assistance, and self-service options will provide them with that.

3. Develop empathy. No matter how efficiently you automate your collection process, for some accounts, you will have to get your collectors on the phone to talk. This phase can make or break your compassionate debt collection process.

Empathy is not a natural reaction; it comes from practice and is a skill. And, just like any other skill, it can be developed.

To help your collectors develop a compassionate and empathetic tone of communication, you can create a streamlined problem-solving script that collectors can follow and practice.

You can create a set of empathetic questions that collectors can ask members to get information along with answers that show you are here to help and not just collect.

These questions and answers need not be etched in stone to be sworn by but will act as a guideline. Gradually, the collectors will be able to assume a tone of empathy, and it will become second nature.

4. Create connection. Conflicts between debt collectors and members during conversations are common. The member gets frustrated and keeps retelling the same story over and over. And the collector gets annoyed hearing it.

But avoiding conflict is easier than you think.

Say your member is getting frustrated and aggressive because they feel embarrassed about their financial distress. Think about it – they may have rents to pay, groceries to buy and jobs to handle while dealing with late debt payments. Frustration is a natural reaction to such distress.  Once you realize this, avoiding conflict will become that much easier.

When you internalize that there may be reason or reasons behind their frustration, and that they are viable, remember how every human needs to feel heard and understood.

Listen to what they have to say with the utmost attention. Ask questions and try to understand their financial situation instead of reminding them of their obligation. If they ask you something, appreciate their question and answer politely.

Doing this will allow the member to view you as an ally, ultimately leading to connection.

Once you get to the connection zone, you can use your debt collection skill set to navigate the call toward a mutually agreed upon repayment solution.

The Bottom Line

Credit unions are community organizations and always have been. So, when a community member goes through a tough time, it’s the job of the ones in power to help them through it.

Credit unions should keep that in mind, not only when extending loans but also when collecting debt. Even if you take the help of debt collection agencies, you should make your compassionate attitude toward your members clear to the agency.

Loretta Kilday is an attorney and spokesperson for the online debt relief forum Debt Consolidation Care.