collecting from a delinquent borrower collecting from a delinquent borrower

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Collecting from a Collecting from a Delinquent Borrower Delinquent Borrower

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Page 1: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

Collecting from a Collecting from a Delinquent BorrowerDelinquent Borrower

Page 2: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

WHY PROMPT COLLECTION WHY PROMPT COLLECTION EFFORTS?EFFORTS?

Page 3: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

1.1. Laxity in collection would merely Laxity in collection would merely invite more difficulties in collection invite more difficulties in collection and at the same time helps convert and at the same time helps convert potential good borrowers into poor potential good borrowers into poor ones.ones.

Page 4: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

2.2. The longer the receivable remains The longer the receivable remains outstanding, the longer the bank outstanding, the longer the bank becomes continually exposed to becomes continually exposed to hazards and risk of non-payment or hazards and risk of non-payment or loss.loss.

Page 5: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

3.3. Prompt collection tend to reduce Prompt collection tend to reduce the investment required in the investment required in receivables and its capital cost.receivables and its capital cost.

Page 6: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

STEPS TO BE TAKEN IN STEPS TO BE TAKEN IN COLLECTING FROM COLLECTING FROM

DELINQUENT BORROWERDELINQUENT BORROWER

Page 7: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

1.1. Maintain a regular, continuous Maintain a regular, continuous follow-up.follow-up.

2.2. Keep in constant touch with the Keep in constant touch with the borrower.borrower.

3.3. Try to be cooperative and helpful.Try to be cooperative and helpful.4.4. Always show courtesy but Always show courtesy but

nevertheless firm.nevertheless firm.5.5. Exercise some compassion and Exercise some compassion and

understanding as circumstances understanding as circumstances would indicate.would indicate.

6.6. The bank must not hesitate to use The bank must not hesitate to use all available resources to enforce all available resources to enforce collection. collection.

Page 8: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

Classes and types of Classes and types of delinquent borrowersdelinquent borrowers

Page 9: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

BORROWER WHO FORGOT TO BORROWER WHO FORGOT TO PAYPAY

This is the easiest type of borrower to This is the easiest type of borrower to extract payment from. They are extract payment from. They are basically good borrowers who due to basically good borrowers who due to hectic schedules or unforeseen hectic schedules or unforeseen circumstances unintentionally missed circumstances unintentionally missed payment on their loan amortization.payment on their loan amortization.

Page 10: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

2.2. BORROWER WHO IS NOT BORROWER WHO IS NOT ABLE TO PAYABLE TO PAY

Majority of them have the means of Majority of them have the means of paying their loan but become paying their loan but become delinquent not out of their own delinquent not out of their own making but in some instances was making but in some instances was brought about by events beyond brought about by events beyond their control, resulting to temporary their control, resulting to temporary dislocation of family budget. This dislocation of family budget. This type of borrower will not hesitate to type of borrower will not hesitate to pay his loan as soon as he is pay his loan as soon as he is provided with an opportunity.provided with an opportunity.

Page 11: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

3.3. BORROWER WHO IS NOT BORROWER WHO IS NOT WILLING TO PAYWILLING TO PAY

This type of borrower normally has the This type of borrower normally has the means or has the capability of paying means or has the capability of paying his loan but find it hard to part with his loan but find it hard to part with his money. Generally they are his money. Generally they are borrowers who:borrowers who:

1. 1. are able to pay but unwilling at the are able to pay but unwilling at the momentmoment

2. 2. are able to pay but is unwilling to are able to pay but is unwilling to paypay

Page 12: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

BORROWER WHO IS NOT BORROWER WHO IS NOT WILLING TO PAYWILLING TO PAY

Some of them exhibits the Some of them exhibits the following type of characters following type of characters like:like:

Page 13: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

““POLITICIAN TYPE”POLITICIAN TYPE” This type of borrower does not deny the This type of borrower does not deny the

existence of his debt nor he shun away existence of his debt nor he shun away from the presence of collectors. This from the presence of collectors. This borrower has many reasons for not paying borrower has many reasons for not paying and always ask for postponement in and always ask for postponement in paying his loan. He always makes the paying his loan. He always makes the collector feel welcome at his place and in collector feel welcome at his place and in some instances treats them with free some instances treats them with free coffee or merienda. Almost in all instances coffee or merienda. Almost in all instances the collector returns empty handed since the collector returns empty handed since he is being awed by such action. he is being awed by such action.

Page 14: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

““HABITUAL COMPLAINER”HABITUAL COMPLAINER”

This type of borrower has always This type of borrower has always certain grievance or complaints, certain grievance or complaints, fabricated or otherwise every time fabricated or otherwise every time collector visits him. In some collector visits him. In some instances they are designed as instances they are designed as smoke screen for his failure to meet smoke screen for his failure to meet his obligation on time. Complaints his obligation on time. Complaints may range from poor service, may range from poor service, usurious interest rates and usurious interest rates and exorbitant penalty charges.exorbitant penalty charges.

Page 15: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

““FINGER POINTER”FINGER POINTER”

This type of borrower usually points to This type of borrower usually points to other borrowers to collect from. He other borrowers to collect from. He feels that he will only pay his loan if feels that he will only pay his loan if other borrowers pay first ahead of other borrowers pay first ahead of him. His usual response is “ I know him. His usual response is “ I know you must have others who owe a lot you must have others who owe a lot more than I do. So why pick on me?”more than I do. So why pick on me?”

Page 16: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

““ELUSIVE TYPE”ELUSIVE TYPE”

This kind of debtor is elusive as an eel. This kind of debtor is elusive as an eel. Many of them maintain two doors, Many of them maintain two doors, one to gain entry and the other as an one to gain entry and the other as an exit without being detected by those exit without being detected by those who are waiting for them. They who are waiting for them. They usually leaves their house very early usually leaves their house very early in the morning and come back late at in the morning and come back late at night. In some instances they instruct night. In some instances they instruct their employees or members of their their employees or members of their family to provide alibis for collectors.family to provide alibis for collectors.

Page 17: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

““HOSTILE TYPE”HOSTILE TYPE”

This borrower normally shows a belligerent This borrower normally shows a belligerent attitude towards collector. They are always attitude towards collector. They are always arrogant and proud and often hurl arrogant and proud and often hurl brickbats to the bank. In some instances brickbats to the bank. In some instances they challenge the collector to a fist fight, they challenge the collector to a fist fight, a mentality and behavior reminiscent of a mentality and behavior reminiscent of the days of the old frontier wherein the days of the old frontier wherein might might is rightis right. They are irked to see the presence . They are irked to see the presence of collector and sometimes in order to of collector and sometimes in order to drive them or scare them away they let drive them or scare them away they let loose their dog so as to chase the collector loose their dog so as to chase the collector whom they consider as intruder.whom they consider as intruder.

Page 18: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

“ “ In order for a collector to be effective In order for a collector to be effective and successful on his assigned task and successful on his assigned task he must strategize and formulate he must strategize and formulate action plans in enforcing payments action plans in enforcing payments on these borrowers. He must on these borrowers. He must develop techniques on how to develop techniques on how to approach a certain type of borrower, approach a certain type of borrower, how to handle problem borrower and how to handle problem borrower and the most important is- the most important is- how to obtain how to obtain prompt payment from them.”prompt payment from them.”

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ACTION/ APPROACH IN ACTION/ APPROACH IN COLLECTIONCOLLECTION

Page 20: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

BORROWER WHO FORGOT TO BORROWER WHO FORGOT TO PAYPAY

Page 21: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

1.1. Frequent visitation/constant Frequent visitation/constant follow-upfollow-up

immediate visitation upon missed immediate visitation upon missed amortizationamortizationBefore visitation double check Before visitation double check recordsrecordsshow courtesy and tactshow courtesy and tactif borrower fails to pay set date at if borrower fails to pay set date at earliest time for next visitearliest time for next visitmake borrower feel that you are make borrower feel that you are doing him a favor by picking up his doing him a favor by picking up his payments.payments.refrain from collecting early/late at refrain from collecting early/late at nightnight

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2.2. Explain advantage of early Explain advantage of early paymentpayment

repeat loanrepeat loan

avoidance of penalty/surchargeavoidance of penalty/surcharge

3.3. Flexibility as to time/manner of Flexibility as to time/manner of collection.collection.

Page 23: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

BORROWER WHO IS NOT ABLE BORROWER WHO IS NOT ABLE TO PAYTO PAY

Page 24: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

1.1. Frequent visitation/constant Frequent visitation/constant reminderreminder

assess present condition of assess present condition of borrower/collectibility of future borrower/collectibility of future amortizationsamortizations

2.2. Explain advantage of early paymentExplain advantage of early payment

3.3. Develop good sense of timing. When Develop good sense of timing. When is the proper time to collect? Must be is the proper time to collect? Must be familiar with “cash cycle” of familiar with “cash cycle” of borrower.borrower.

Page 25: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

4.4. Flexibility as to time/manner of Flexibility as to time/manner of collection.collection.

5.5. Develop close rapport. This would Develop close rapport. This would come handy in case of multiple come handy in case of multiple creditors.creditors.

6.6. Appeal to the wife. Normally wives Appeal to the wife. Normally wives makes the family budget and pay makes the family budget and pay the bills, moreover they’re more the bills, moreover they’re more concerned in protecting the family concerned in protecting the family reputation. reputation.

7.7. Inform co-maker. Enlist his help in Inform co-maker. Enlist his help in convincing borrower.convincing borrower.

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8.8. Seek help of father/motherSeek help of father/mother financial help/assistancefinancial help/assistance convincing borrower to settle loanconvincing borrower to settle loan

9.9. Implement security Implement security agreement/chattel mortgage. agreement/chattel mortgage. Request for additional collaterals if Request for additional collaterals if present ones are inadequate. Be present ones are inadequate. Be sure that borrower is absolute sure that borrower is absolute owner and properties are not owner and properties are not subject to lien.subject to lien.

10.10.Explain to borrower/spouse the risk Explain to borrower/spouse the risk of court case.of court case.

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BORROWER WHO IS NOT BORROWER WHO IS NOT WILLING TO PAYWILLING TO PAY

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ABLE TO PAY BUT UNWILLING ABLE TO PAY BUT UNWILLING AT THE MOMENTAT THE MOMENT

Borrowers who are characterized Borrowers who are characterized as:as:

politician typepolitician type

habitual complainerhabitual complainer

finger pointerfinger pointer

elusive typeelusive type

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1.1. Frequent visit/constant reminderFrequent visit/constant reminder more persistent and increased frequency more persistent and increased frequency

of visitof visit must have knowledge and familiar with must have knowledge and familiar with

other assets of borrower in case bank will other assets of borrower in case bank will institute court action.institute court action.

2.2. Explain advantage of early payment.Explain advantage of early payment.3.3. Flexibility as to time/manner of Flexibility as to time/manner of

collection.collection.4.4. Appeal to the wife.Appeal to the wife.5.5. Inform co-maker. Enlist his help in Inform co-maker. Enlist his help in

convincing the borrower.convincing the borrower.6.6. Seek the help of father/mother in Seek the help of father/mother in

advising/convincing son/daughter to advising/convincing son/daughter to settle loan. settle loan.

Page 30: Collecting from a Delinquent Borrower Collecting from a Delinquent Borrower

7.7. For borrowers imployed in government, For borrowers imployed in government, make a personal or letter of appeal make a personal or letter of appeal addressed to respective offices.addressed to respective offices.

8.8. Implement security agreement/chattel Implement security agreement/chattel mortgage. Request for additional mortgage. Request for additional collaterals.collaterals.

9.9. Explain to the borrower/spouse the risk Explain to the borrower/spouse the risk of court case. Emphasize cost of suit and of court case. Emphasize cost of suit and damaged family reputation.damaged family reputation.

10.10. Have the legal department sent a Have the legal department sent a demand letter threatening court action.demand letter threatening court action.

11.11. File case in barangay court,MTC/or RTC.File case in barangay court,MTC/or RTC.

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ABLE TO PAY BUT UNWILLING ABLE TO PAY BUT UNWILLING TO PAYTO PAY

Characterized by:Characterized by:

hostile typehostile type

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1.1. During visitation collector must be:During visitation collector must be:courteous and tactful.courteous and tactful.

show confidence, maintain show confidence, maintain composure and calmness during composure and calmness during course of conversation.course of conversation.

must not allow emotions to control must not allow emotions to control decisions and actions.decisions and actions.

Avoid direct confrontation and Avoid direct confrontation and immediately leave the place if immediately leave the place if borrower starts to show borrower starts to show belligerent attitude.belligerent attitude.

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2.2. Appeal to the wife.Appeal to the wife.3.3. Inform co-maker. Enlist his help in Inform co-maker. Enlist his help in

convincing the borrower.convincing the borrower.4.4. Seek the help of father/mother in Seek the help of father/mother in

advising/convincing borrower to pay advising/convincing borrower to pay his/her loan. Inform them of borrower’s his/her loan. Inform them of borrower’s belligerent attitude towards belligerent attitude towards collector/bank.collector/bank.

5.5. In some instances wherein borrower’s In some instances wherein borrower’s spouse shows belligerent attitude, spouse shows belligerent attitude, immediately leave the area, avoid immediately leave the area, avoid confrontational attitude. confrontational attitude.

6.6. For borrowers employed in government For borrowers employed in government make a personal/ letter of appeal to make a personal/ letter of appeal to respective offices.respective offices.

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6.6. Collector may seek the help of barangay Collector may seek the help of barangay officials in enforcing security agreement. officials in enforcing security agreement. Also enlist the help of the spouse in its Also enlist the help of the spouse in its implementation. Request for additional implementation. Request for additional collaterals.collaterals.

7.7. Explain to spouse the risk of court case. Explain to spouse the risk of court case. Emphasize the cost of suit and damaged Emphasize the cost of suit and damaged family reputation.family reputation.

8.8. Acquire information on other assets Acquire information on other assets borrower owns in case the bank decides borrower owns in case the bank decides to pursue court action.to pursue court action.

9.9. Have the legal department sent a Have the legal department sent a demand letter threatening court action.demand letter threatening court action.

10.10. File case in barangay court, MTC/or RTCFile case in barangay court, MTC/or RTC

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The collector may now choose what The collector may now choose what action /collection technique(s) he action /collection technique(s) he may use in enforcing collection from may use in enforcing collection from those delinquent borrowers. those delinquent borrowers. Furthermore he may reclassify Furthermore he may reclassify borrowers based on that borrowers based on that classification during the course of his classification during the course of his collection and apply necessary collection and apply necessary action(s) accordingly.action(s) accordingly.