The Great Recession took its toll on millions of consumers. Numerous consumers were forced to take on debt to absorb regular living expenses after losing their job or taking a pay cut. Others were unable to pay off existing debt after their income sources evaporated. This has forced many businesses to reevaluate the approach they have taken to manage customers with poor credit.
One of my colleagues manages an HVAC retail outfit. He said that the company has started taking a more lenient approach to managing customers with poor credit. They recognize that many customers had gotten poor credit after the financial collapse. Many of them were still dependable customers and able to pay their bills. His employer would have lost a lot of business by refusing to extend financing to them. They also could not negative towards them with their customer service policies.
However, they also encountered some challenges with certain poor credit customers. Here are some guidelines that will help things go more smoothly.
Resisted the urge to retaliate against delinquent customers
Every employee in your organization, including your customer service team must understand the importance of treating customers with respect. That rule applies even if they are delinquent with their bills, unless of course there is clear evidence of fraudulent intent.
Michael Hess discussed this in an article that he wrote for CBS. He said it is natural to feel vindictive towards customers that fell behind on payments. However, Hess emphasizes that it is important to try to be understanding. They may have genuinely fallen on hard times and struggled to meet their financial obligations.
The trick is to find a balance between being understanding and protecting your bottom line. Let customers know that it isn’t personal, but that you may need to deny future financing. Your customer service team should be discouraged from discussing the possibility of hiring a collections agency unless there is no other alternative.
If customers are struggling to meet their financial obligations, you may want to give them support to help them get on track. If you have a close relationship with them, then you may want to offer money management tips, so they can have enough money left over to pay their bills.
Give them the same consideration as other customers, until you decide not to do business with them anymore
It is tempting to ignore customers that you don’t expect to meet their financial obligations. However, this is a mistake that can have lasting consequences. They will likely spread the word that you are giving preferential treatment to some customers. They may believe that you are giving them subpar service for other reasons. They may also tell people that you are unable to deliver quality service, because you weren’t assertive enough to tell them the truth.
As long as you decide to work with a customer, your customer service team needs to give them the same attention as anybody else. Don’t insist that you can’t help them when you are clearly able to do so. If you eventually decide to discontinue your relationship, you need to be direct and honest. Until then, treat them like any other customer.
Use objective criteria when deciding to deny financing
While you don’t want to give the appearance of nepotism, it is perfectly reasonable to set strict boundaries with customers that are costing you money. One of the ways to do this is by limiting or denying financing to customers with poor credit scores or delinquencies on payments to your company.
However, there are a couple of things that your customer service team needs to understand:
- They must follow the guidelines consistently. They shouldn’t make exceptions and give financing to customers that don’t meet qualifications, nor should they refuse financing to customers that are eligible. Your business’s reputation for fairness depends on holding all customers to the same standard.
- Standards need to be clearly and tactfully explained to customers. Let them know what credit score and debt to income ratio you require before extending credit to any customers. You should also tell them if you only offer credit to customers that have not been delinquent on more than one payment over the past 12 months. Most customers will be understanding if these criteria are explained to them politely and clearly.
You also need to make sure that your financing eligibility criteria is fairly assessed in the first place. If you make any changes, make sure they are clearly communicated so customers that were previously denied don’t feel discriminated against and realize they may have a second opportunity to request financing or a line of credit.
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