Many collection agencies and departments use commission-based compensation for their collection agents. This model is perceived as the only way to “make it” in collections: margins are slim to none, agencies themselves are compensated only for dollars collected, and commission-based compensation lets them hire cheap labor and have great performers rise to the top. In fact, this is a broken model, based on a flawed premise that only humans can collect from humans. It’s not only the Wells Fargo case that should alarm collectors and creditors who use them; it’s the conflict of interest that’s inherent to commissions in collections, and the legal and moral risks it introduces. With new technologies maturing and beating traditional call centers, it’s time to reconsider.
It’s not easy being a collector – commission or not
Even with commission payment, an average collector’s salary isn’t high. Coupled with a lower base, most collector job descriptions present no complex requirements. As a result, the average collector is an unskilled worker, sometimes with prior collections experience. These people are required to get on the phone, cold call hundreds of people, and get them to make a payment – a payment that determines the collector’s take home pay. It’s not uncommon for collectors to be debtors themselves. However you look at it, the industry is pitting low paid people against each other.
Subject to a stressful work environment, collectors are also expected to adhere to compliance guidelines or lose their job. But humans are fallible, deeply impacted by recent events. Debtors themselves can be very abusive. Collectors can be tired, jaded, or just worried about not making their numbers. These adverse conditions create the small, daily violations that lead to lawsuits and demand letters.
It’s time to stop using commission-based compensation
Moving away from commission-based compensation is a tough transition, but it’s possible. It requires a change in mindset, and upfront investment. At TrueAccord, we built our small service team to be expert operators of a highly automated system. The team is compensated with a reasonable salary, sets a higher hiring bar, and handles more than 40,000 cases per agent. We reach these numbers thanks to our machine learning based engine, Heartbeat, and a team of engineers and data scientists focused on process and decision automation.
Eliminating commission-based compensation is incredibly important. Sophisticated creditors who control all facets of their vendors’ business should demand that from their collection agency partners. No amount of scripting and quality assurance can compensate for the impossible situation those collectors have to deal with. It’s only investment in technology and scale, and high quality of service teams, that can hit collection goals while improving consumers’ perception of the collection process.