The Pros and Cons of the “Personal Visit” Approach to Collections

Last week multiple news outlets reported on language in a letter sent by a major credit card issuer to it’s customers.

That letter suggested that the card issuer might contact their debtors at any time in any manner they choose. The examples listed included phone calls, emails, text messages and even personal visits.

As you can imagine the thoughts of your lender showing up at your door during dinnertime has many consumers and consumer advocates up in arms.

The possibility of strong-armed and intimidating collectors asking for loan payments, in person rather than over a phone or in a letter, seems to be quite offensive to some.

Here are my thoughts on this issues, sort of a pros and cons of the possibilities of lenders showing up at your door.

New News is Actually Old News

First, this is hardly the first lender to say they may show up in your personal space in order to collect debts or reclaim their property.

What happens when you don’t make your car payments? What happens when you don’t make your mortgage payments?

What happens when you don’t make your motorcycle, boat, or RV payments?

In every single scenario the lender comes to your home, place of work, or wherever they can find you and takes back their property.

It may have different names (foreclosure, repossession) but it’s still a lender leaving the comfort of their brick and mortar branch network into “your” world in order to take back their property.

And yes, it is in fact their property that you’re using or in which you’re living.

The Grass Isn’t Greener

From a public relations perspective this may have caused a bit of a mess, sending letters to customers letting them know they may make personal visits.

And some people believe the company will lose customers because of this. I don’t agree that there’s going to be a widespread migration elsewhere because of the letter.

This particular card issuer has tens of millions of cardholders and most of them pay their bills on time.

As such, those customers will never ever have the pleasure of meeting the lender’s representative on their front porch.

They’re not going anywhere and they are probably like me, perfectly fine with a lender collecting money they’re rightfully due.

However, if some of their customers believe that they’ve gone too far and want to take their business elsewhere, so be it.

But let me caution you…the grass isn’t greener on the other side.

If you miss payments or default on loans with ANY other lender they’re going to come take back their loan “security” (a fancy word for the asset that is being borrowed against, like a car or some other physical asset).

Of course there’s a very easy way to prevent ever seeing any of your lender’s representatives in your private time, pay your bills on time!

Lenders don’t show up at your house extorting you out of money you don’t actually owe.

This type of in person collection activity is reserved for deadbeats who don’t pay their bills, don’t respond to collection phone calls, and don’t respond to collection letters.

This Might Actually Be a Good Thing

If this whole issue of lenders showing up at your home or place or work has you all twisted up with anger, let me explain why you should actually be happy about this.

Lenders subsidize their losses from deadbeats who don’t pay their bills by charging us that DO pay our bills higher rates and fees.

So, when someone chooses to not pay their bill and takes a lender for hundreds or thousands of dollars, which comes out of your pocket in some form or fashion.

I would much rather do business with a lender who collects directly from problem borrowers rather than charging me more to subsidize their loss.

John Ulzheimer is the Credit Expert at CreditSesame.com, and a credit blogger at SmartCredit.com, Mint.com, and the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. You can follow John on Twitter here.