Collection Agents: Trusted Advisors, or Creepy Hustlers?

Good salespeople, psychologists and counselors know one basic truth: people are influenced by (and buy from, and take advice from) those who listen empathetically to them before selling, advising, etc.  (This beats approaches like value propositions, for example.)

So what happens when these techniques are used by credit card collection agents seeking repayment from people who are seriously underwater with their credit card? See What Does Your Credit Card Company Know About You?

First, it works. Second, it’s hard to avoid feeling creeped out.

My question: how do we reconcile these two observations? Can you use “good” trust-building techniques for “bad” ends? Does it mean these techniques are manipulative? Or does it mean collection agents are getting a bad rap, and actually raising positive karma in the world?

I mean the question more seriously than you might think.  It has implications for how we try to restore trust by regulation in the financial sector. 

Therapist, or Credit Collections Agent?

Consider Donna Tiff, a 49-year-old Missouri woman who owned $40,000 on multiple cards. Tiff became adept at countering aggressive collection agents by threatening suicide.

And then Tracey came along. She worked for a company that today is a subsidiary of Bank of America. Tracey had talked to Tiff several times and noticed that there was a mistake on her account — an automatic payment was going to be deducted twice from her checking account. If that happened, Tiff’s other checks would bounce.

“I told her, thank you so much for catching that,” Tiff recalled. “And then we talked for over an hour about my problems and raising kids. She was amazing. She was so similar to me. She gave me her direct number and said that I should call her directly anytime I had any questions or just needed to talk about what was going on.”

Over the next three years, Tiff paid off the entire $28,000 she owed Bank of America and spoke regularly with Tracey, she said. And the $12,000 she owed on other cards? Well, those companies didn’t have a Tracey. They never got fully repaid.

It’s a heartwarming story. Unless you’ve seen how people like Tracey are schooled in the art of bonding. What are the odds that the random customer assistant who dealt with Tiff would have so much in common with her and manage to strike such a close bond? I tried to call Tracey myself, using the information Tiff provided. But I was told she didn’t work there anymore.

I asked Tiff if she ever asked Tracey to write off the late fees and the interest charges.

“Oh, no,” she told me. “She was so kind to me. How could I ask her for something like that?”

I remember when Bill Clinton was first running for president in New Hampshire, and his nickname “slick Willy” was brought up. He reportedly asked a friend, with all the sincerity he could muster, ‘am I really a slick Willy?’

I took that story to mean that someone as smart and as good at empathy as he was ultimately had to wonder about his own motives, and whether he himself could tell the difference.

Or, take Bernie Madoff. He flawlessly imitated nearly every aspect of the trust equation. Does that mean that being credible, reliable, intimate and other-oriented are bad things?

Take the classic Turing test.  If you communicate, via a computer keyboard and screen, with two closed boxes—one with a real person inside, and one with a computer—just how do you tell the difference?

And if you can’t, does that mean the computer is human? We want to say of course not—but try explaining just why.

Trusted Behaviors Without Intentions are Empty

In this case, most of us would say the difference has to do with motives.  Does Bank of America intend to help raise the psychic health of credit-battered Americans, and get paid in the process? Or is it in the business of extracting wealth from people to whom BofA sold their credit cards in the first place, cynically using Maslow’s hierarchy as a tool to get there?

It isn’t just hypothetically relevant. It goes to how we regulate trust in society. It shows the bankruptcy of ever and ever-greater reliance on purely behavioral and metrics-based approaches to trust.  Trust without motives is the computer in the box.

If legislators and regulators cannot figure out a way to put integrity into regulation instead of dealing solely with procedural “compliance,” there will always be a Madoff who figures out how to mimic acceptable behavior.  (See Harry Markopolis’ congressional testimony for a far more workable approach).

You can’t strip trust down to behaviors alone without squeezing the soul out of it. When it comes to trust, intent is relevant.

Customer Loyalty Meets Rate Tarts

To the American ear, the British occasionally come up with the most delightfully curious expressions (I suppose it works both ways).

Some of my favorites: a “cheeky pint,” and “chuffed,” as in, “I was bored to tears at the ballet—but then I caught Prince Charles’ eye, and he motioned to me to sneak outside and join him for a cheeky pint of Guinness. We had a blast—I was really chuffed about it!”

Add a new one (new to me, anyway). The BBC TV breakfast show recently introduced a story on credit cards by saying, “There’s no point in being loyal anymore—it only pays to be a rate tart.”

A rate tart. So that’s what it’s come down to.

It shouldn’t really be surprising.

Fred Reichheld’s 1991 book The Loyalty Effect summarized work in the 80s by himself, Bain & Company, and several thoughtful Harvard Business School faculty. Re-reading the preface 15 years later later is enlightening:

We found we could not progress beyond a superficial treatment of customer loyalty without delving into employee loyalty. We found there was a cause and effect relationship between the two; that it was impossible to maintain a loyal customer base without a base of loyal employees; and that the best employees prefer to work for companies that deliver the kind of superior value that builds customer loyalty.

We then found that our concern with employee loyalty entangled us in the thorny issue of investor loyalty, because it is very hard to earn the loyalty of employees if the owners of the business are short-sighted and unreliable.

Finally, predictably, we found that investor loyalty was heavily dependent on customer and employee loyalty, and we understood that we were dealing not with tactical issues but with a strategic system.

The credit card industry was a prime example for early loyalty research (MBNA in particular, if I recall), and “loyalty” is a term used heavily in financial services these days.

How, then, did a focus on “loyalty” yield today’s “rate tarts?”

Very simply, the case of “loyalty” is Exhibit One in a lemming-like rush by business to over-stress three simple concepts:

1. Profit is a measure of business activity effectiveness

2. Measurement is a valuable tool for management

3 . Activities can be disaggregated into smaller, measurable activities.

Those reasonable beliefs have metastasized into these distorted versions:

1a. Every business activity has value only insofar as it increases profit

2a. If you can’t measure something, you can’t manage it

3a. Anything worth measuring is even better measured in shorter durations and smaller units.

This extreme thinking has meant that the management of business these days is centered on short-term profit manipulation—not on long-term value creation.

Ironically, this is an area where political “liberals” and “conservatives” agree—their only difference is whether they consider it a sin or a virtue.

It was only in 1991—just 17 years ago—that we saw a different view entirely, a view that “we were dealing not with tactical issues but with a strategic system.” In only 17 years, that viewpoint is nearly gone.

In that time, almost every major strain of business thinking has moved in the direction of shorter measurements, more separation between employees, customers and investors, and more emphasis on reducing everything to its impact on the bottom line. Think CRM, collateralized debt obligations, outsourced recruiting, private equity, synthetic hedges, flipping companies, IPOs.

Most ironic of all: go back to the creators, the originators of loyalty programs—the airlines’ frequent flyer programs. Since frequent flyer programs’ profitability is measurable and separable, profit-challenged airlines are now thinking of selling their own frequent flyer programs to third party buyers.

This is the end-game; not just to outsource the management of “loyalty,” but to literally put a price on it and sell it. The buying and selling of “relationships”—it’s beyond absurd metaphors.

A Rumanian expat in the 70s explained to me the difference between the Russian KGB and the Rumanian Secret Police: “The Rumanians think they can corrupt you with sex, blackmail and money. The Russians are more experienced; they just cut to the chase and lead with money—it trumps the others.”

As credit card and other companies give customers more experience in the cynical management of "loyalty," why should anyone be surprised that the result is "rate tarts?"