Collections- How BHPH is Different than Retail

“Never take your eyes off the cash flow because it’s the lifeblood of business.”
Sir Richard Branson

“If I had to run a company on three measures, those measures would be customer satisfaction, employee satisfaction, and cash flow.”
—Jack Welch

Hey, this is Jay Rose with Total Dealer Training. If you want to “live your lifestyle”, guaranteed, definitely make sure that you take notes and share this with others that are looking to take their career and their financial success to the next level. Now let's talk about collections. Collections has changed a lot since I first started in the business in 1989, working with collection customers. The biggest difference that I see that's really changed and needs to change in your culture or philosophy in working for customers. Old school culture has always been about the “transaction”. It was always managing the department, managing your portfolio, managing your customers. Like they're just a number, oh, wait, how many notes you have? How many accounts do you have? And again, on the surface, that's great. You know, you certainly need to look at reports and we certainly need to look at activities and what we do and how we do it to make sure that our team and our collections department is being efficient. The biggest difference is would you treat a customer as a transaction, they would actually pick up on it. The customer would know it, they can tell it and it really doesn't foster a great relationship long-term with that dealer. Now in the old days in the eighties, nineties, I mean, people were different. Customers actually responded differently. I remember customers in the late eighties, early nineties, they actually used to feel guilty about being 30 days late on a Sears card. They would have typical bad credit with one or two times late on their Fingerhut card, or you occasionally had that person that they didn't realize that when they broke up with their girlfriend, they still had to pay Kay jewelers for the ring they gave their ex-girlfriend. I mean, that used to be like bad credit nowadays, obviously a lot's changed, especially about 10 years ago when I noticed a huge difference in the culture of America, but also with our buy here, pay here poor credit customers, their whole attitudes change. It was like they developed a sense of entitlement, like what you're going to do for me, even though they have a 480 credit score. I get 2 repos, I don't pay anybody and practically, you shouldn't even give me money or a car. But un-fortunately around that time it was, you know, we had a bad economy. I remember 2009 really took out a lot of businesses. It affected almost everyone in the world and it was all driven by making poor choices in underwriting. in the example I'm giving and you can watch a great movie called the “Big Short”, it talks all about this. It was about underwriting subprime mortgages to bad credit customers. Well, we're in the high-risk lending business as well so you'd think that some of us would actually, or the industry would say, let's not do that again since it lost billions of dollars. Un-fortunately a lot of subprime banks continue to do that in the automotive space because they're getting almost free money with the stimulus bailout in 2009 and 10, pretty much it, it was just a free for all in making sure that anybody who fogged a mirror could pretty much get approved. Now, how did that affect us in Buy Here, Pay Here? Well, it was pretty easy. BHPH dealers got desperate just plain and simple. The sub-prime banks instead of staying in their nice little niche just below the prime credit unions and banks, they dip down and start approving our top half of our traditional buy here, pay here customers. So that left the buy here, pay here dealer, feeling it and needing to deliver or sell X amount of cars to stay in their growth covenant with their bank or just to stay in business. I saw a lot of dealers, unfortunately start dipping down, taking 200, 300, 500 down customers with bad attitudes. They started getting needy as an industry. I started hearing finance specialists acting like salespeople and doing anything to earn your business. Don't worry, we'll do anything to sell your car”. As we all know, when you start acting needy with a poor credit customer, they got a world series of poker and negotiating skills. They started taking advantage of the neediness and the buy here pay here industry, all of a sudden when they used to feel bad about having bad credit, they sort of walking around with kind of a swagger kind of basically, you know, thinking like what you got for me, I’ve got 500 down with only two or three repos. The last guy down the street, they didn't seem to mind. As an industry, we kind of brought on this problem due to an increased competition that started in 2009 and unfortunately has kind of lingered. A lot of it, those bad habits hadn't really changed. So with that said, it's not that the collectors did anything different per se. They just needed to change the way that they work with the customers. Obviously, you know, the number one thing that has changed is the way that you're underwriting and you shouldn't be hiring salespeople from the new car business, you should be hiring former collectors and bankers and people that have worked with our customers that are empathetic, but they don't act needy. They're not trying to sell something. We're trying to underwrite a customer, find out who's real, who has verifiable income and then of course, obviously you want to make sure that you have the right customer and they appreciate your program. Then we do, I just need to make sure that we focus on, you know, making sure that they're successful, that they can afford the program, the short-term program, advanced equity and also make sure that they know how to handle if there's a mechanical problem. A lot of times what's happened is the collector, or as I call them account managers, job even got harder. So instead of the customer being thankful, appreciative on delivery, you know, thanks for giving me a second chance. I'll do anything to make sure that I keep this vehicle. He we're coming in with an attitude, a complaint about the car, probably salespeople, once they're needy, they're needy everywhere. They started telling the customers, oh, don't worry, they'll work with you. If something comes up in your life, you know, if you need any payment extensions, they tell the customer that all the payment center cover everything because they have to keep the car going. I know this happens and you do too if you're in the payment center for any length of time. Number one, you may not be able to directly influence your general manager or your branch manager on the underwriting side of your business. You may call it sales but I call it underwriting, but you need to start letting your GM know what the salespeople are telling your customers before delivery. I can come in and help you fix this if you want support but in the meantime, you're a goalie, like in the analogy in sports, you're a goalie, that's getting a lot more shots from your sales team. You have to be more prepared and you have to come in with a different mindset. You know, when we look at how we used communicate with our customers in the past, it was based on what's more time effective. Most portfolio managers, including me, I was always taught, oh, make sure you manage by the numbers, which is you look at your portfolio.

You'll look at how many delinquencies are there for the day. You're looking at your, um, your telephony report. Uh, how many of your account managers, how many calls have you made today? Uh, how many attempts, how many contacts? What's the average call time, uh, looking at recency, uh, and how, what percentage of recency to contractually current, they are all those things are important, but the one thing that we're missing is making sure that do they still like us. We just put a ring on this customer for three years and we're treating them like, what, like just a number. So that's where watching this and dealing with most of the upset customers at my dealers I work at, I started realizing that we needed to change our approach. The number one thing just as we discuss in our online training or workshops is we make sure that we change the perception that we are no longer a salesperson or a collector, but someone who cares about our customer’s success. We should be a trusted financial specialist or financial fitness coach. You know, just like you go to a mortgage broker, even though they're getting a commission, it doesn't feel they're commission breath on you. The other person that they need to like, and trust and respect is the account manager. Don't use the word collector it's as bad as sales. It makes people just conjure up this image of, oh my God, how can you live with yourself? You repoed my uncle's car? I introduce myself as an account manager. I'm assigned to your account. I'll be working with you over the next three years until graduation day when you get your title and you know, it's pretty exciting. It's a short-term program. It's not like the crispy cream diet, where they have a seven or eight year financing with a typical new car dealership, this is going to get you a title and equity in three years or less. So it's like PX 90 fitness program. We're going to get you in shape and it's going to be fast. So we want to make sure we set up that relationship where instead of the old, old way, which is the collector was a decision maker with a customer and they were barking at the customer, sounded like a boss, a drill Sergeant, you know, you need to pay us because you signed a document. It's pay me or otherwise I'll pick up your car. They use the word I, and, and we, and then you can't do that anymore. When you say I, you become the decision maker, the negotiator. If they don't like the answer, guess what happens? Yeah. They stopped picking up the phone and you tell me, cause I'm sure it's no different everywhere I worked in the country, if the notes in your queue say left message, left message, left message left, as such no contact whatsoever. Is it going to happen? Yeah, you put it out for a repo and we have an $8,000 charge off, but let’s go to the root of the problem. It's not refused to pay. They don't want to even speak to you because your team can't even get them on the phone. The first rule of negotiation or in hostage negotiation is to get the person on the phone, then you can go through some options. Of course, people who hold up places, they want to negotiate of course. They're emotional so you can't be, you need to make sure that you manage your emotions. You want to make sure you use your voice tone, inflection, go over the different options. Make sure they feel comfortable that, Hey, I'm just representing you. I'm not the decision maker, but I can certainly give you those options in probably the best way. You can be happy with those solutions. Okay, great. The negotiator never says they're the ultimate decision maker. You need to set it up that there's a corporate decisionmaker that is not the account manager, just like the judge in a court of law. A lot of our customers, whether we like it or not, they've been to court a few times. They understand that there's a good cop, bad cop. There's a prosecuting attorney and a defense attorney. And your job as an account manager, formerly known as collector, is to be their defense attorney, maybe parole officer, if that analogy works for you and you need to be the one that goes over the different options with them. So number one, treat the focus on the relationship, not the transaction. Second thing, make sure you manage your role. Your role should not be your, the decision maker but working for the customer. It's my way or the highway that worked 15, 20 years ago. It doesn't work anymore. Why not your fault? Those techniques worked for me. But as soon as the car industry, the buy here pay here, industry started getting needy. The customers started getting more options. Now with a thousand dollars or sometimes even $500 down payment, they don't want to listen to you. You're not even nice. They're just going to throw the keys at you, come pick it up or they'll beat it up and then he can pick it up and they're going down the street to find somebody who will give them a loan despite how many repossessions they've had. It's kind of like the analogy of you're a person that fishes and you're trying to reel in a 10 pound fish with a five pound test line. That means that that either pull or line is going to snap, if you don't use the right hook and the right techniques, you, if it's pulling too hard and the polls bending, you need to let up a little bit, same thing happens in conversations. If they're getting emotional, don't match, don't mirror their bad emotions. You need to stay nice and relaxed. Listen to them. Take notes, use those notes back with a customer, a good way to guide them to what you want to do, which hopefully is pay the full payment due today or most of the payment or some of the payments, but definitely not none of the payment, or if you do set up a promise to pay or set, whatever you call it, make sure you lock it in and make sure that they can afford it. And you know that they're getting money when they set that promise to pay. These are all little tweaks. It sounds easy, but it makes a huge difference. But it's changing your behavior in your culture, in your mindset. You need to say, Hey, it's not up to me, but let me just let you know. I'm like your defense attorney. I'm going to go with corporate and submit your request for a payment extension or deferral. But I do know as I'm writing this request out, I have to let them know that the what's happened to you financially. What's impacted you negatively. That can't, that you can't make this payment and that needs to be verified. So the good news is with cell phones, they can take a picture of their previous paycheck, that was a full paycheck and they can take a picture of the current one that shows their story said that they lost some hours. There's always somebody in the hospital that they had to go visit. It doesn't mean that you have to be off work for a week, just cause someone was in the hospital, but here to there, the key is that you're not going to be confrontational. You're not going to challenge the customer and say, oh yeah, really well, you need to prove that story to me.

I need to see the verification don't do that. You didn't say I understand. I'm so sorry that your, your pudding count was up in the tree. Uh, but I do know I'm going to send us in that they just need some type of verification. Uh, I'm sure you have a copy of the fire department that came to rescue cat from the tree, whatever the story is, get it to verify, but not for you, but just for corporate, just like a judge would the way an attorney speaks on your behalf. No problem. Wish me luck. I'm going to submit this and try to get you the best outcome and the best choices. The key is never say I, or we, when it comes to something that they want to negotiate with, which is usually the amount they're paying and when they're paying same thing applies. When it comes to Service Advisors, they deal with two objections from every customer, “Who's paying for it and who's going to pay for me to get back and forth to work because this is my only car I have a for my whole family?” Yeah. I know if you didn't realize that everybody in their family's driving your car, so change your role in the perceptions of the customer. You have to be the good cop if you want them to call, or if you want them to pick up the phone when you call them. But if you don't manage that role, you just going to keep getting left messages and increases repos. The other thing to understand is when you dial customers, effective communication is obviously most effective as in person. You may open up Monday with 80 delinquent accounts but you got to get through them and then follow up with them. Okay? The old way of doing it is using a robo dialer or predictive dialer, whatever it is. This technique just hammers the customer throughout the day. No, obviously, because of the different federal laws that have changed, we could only make one contact a day. The thing is don't rely on the computer to make a phone call. Number one, development a relationship. Number two is for you to have fun. You don't sound like a traditional collector. You don't want to come across if you leave a message and say, Mr. Smith, this is Jay rose at TDT finance. It's really important that you call me right away and you sound like nine other collectors. You want to be fun. “Hey Craig, this is Jay at TDT. I get some great news. Give me a quick call. All right. What's the great news. Yeah. What gets you on the phone? That's a great news.” Then you can talk about their account. So making sure your voice tone inflection has a little range in it. Make sure that you sound fun, create a hook too, so they can call you back. You only have 7% of your effectiveness work and view. If you only text or email them. Now of course doing a text blast is maybe time effective, but it's not relationship effective. So always try to get people on the phone and that if you have to have them come in and talk to you in person. So, and then also what you say, what you say is important. Use better words in our online training or workshops. We give different ways to get the customer, to like you, to see you in a different light, to want to talk to you. To literally their life is like a country song.

Everything went bad and they just can't wait to call you to tell you all about how bad it is. So if they call you, even if they didn't improve their financial situation, you won because now they trust you. They like you enough to call you. They're not calling every other collector, but you as the account manager, as their financial fitness coach have fun with that and say that to a customer and see if you can't even stop laughing. Yeah. I'm your financial fitness coach. My only goal is to graduate with you. Be there when you're holding the title and we're taking a picture together, go into every relationship like that. How often do I call customers? Depends. Depends on how they're paying us. If they make their promise to pay. If I give them respect in the relationship, they'll give it back. If I don't and just hammer them every day with old methodology of: call this day to do this day three, do this, call their references, beat them up and barest them. Oh no, you blow up all their references. You, you come in with a mindset that I'm going to embarrass you to just so you can make a payment, oh, you'll get a payment or two out of them. But trust me, the second, something better comes along. They're out of there just like any other abusive relationship. So again, I'm not being mean. I'm saying as I used to use the old techniques, just like you, they just stopped working. So if you want the most effective ways to get your customers to pay you, The dealerships I work with the buy here, pay here portfolios, collection departments, they're running, 90 to 95% contractually current. They didn't get there from actually repossessing more cars. Our repos are cut by 30 to 40%. We did it with hard work and better techniques in the collection and payment process. So make sure that you understand that you got to do some things differently if you want better results. Give us a call, call the number below. If you liked this video, forward it to some other people who are dealing with the challenges you are too. And this way you can live your lifestyle guaranteed as well.