Debt Collectors From India Attractive to US Collection Agencies
In a glass tower on the outskirts of New Delhi, dozens of young Indians are on the telephone, calling out-of-work, forgetful and debt-stricken Americans to ask for cash.
“Are you sure that’s all you can afford?” one operator in a row of cubicles inquires politely.
“Well, how do you take care of your everyday expenses?” presses another.
Americans are used to receiving calls from India for insurance claims and credit card sales. But debt collection represents a growing business for outsourcing companies, especially as the U.S. economy slows and its consumers struggle to pay for their purchases.
Armed with a sophisticated automated system that dials tens of thousands of Americans every hour, and puts confidential information like Social Security numbers, addresses and credit history at the fingertips of operators, this new cadre of collectors is chasing down late car payments, overdue credit card debt and lapsed installment loans. Debt collectors in India often cost about one-quarter the price of their American counterparts, and are often better at the job, debt collection company executives say.
“India will be the only place we grow this year,” said J. Brandon Black, the chief executive of Encore Capital Group, a debt collection company based in San Diego. India is Encore’s largest operating area, with about half the company’s collection force of more than 300.
Although the stereotype of a collector may be “some guy with chains and a cut-off shirt,” Black said, collectors in India are “very polite, very respectful, and they don’t raise their voice.”
“People respond to that,” he added.
Companies like Encore buy bad loans from banks and credit card issuers for pennies on the dollar and pocket the cash they collect. The delinquent borrowers often owe at least a thousand dollars.
So far just a tiny fraction, maybe 5 percent, of U.S. debt collection is done outside the country, industry executives estimate. But new business is in the pipeline.
Financial services clients are saying, “We want you to collect my debt, to analyze it and change the way that we sell” the loans, said Tiger Tyagarajan, executive vice president at GenPact, the business processing company spun off from General Electric that has roots in India.
GenPact works with lenders to get customers to pay, rather than buying loans directly like Encore. It employs thousands of debt collectors in India, Romania, Mexico and the Philippines, and is hiring in all those locations.
In the past, the prevailing wisdom about wringing money from late payers has been “if you’re calling the Midwest, you want someone from the Midwest to twist their arm,” said Mark Hughes, an analyst with Sun Trust Robinson Humphrey. That theory is changing as the pool deepens for trained telephone professionals in India and other locations, and companies look outside the United States for lower costs
Debt collection, no matter who does it, can have “a devastating impact on people’s lives,” Druliner said, because calls can stress family relationships and sometimes debtors are pressed into paying late bills instead of buying necessities like prescriptions. Still, he said, he had not run into any specific problems with overseas debt collectors. “What they may lack in authority or ability to handle slang, they do handle the process very well and are very well spoken,” he said.
Mortgage loans, which involve complex state and national laws, are nearly always handled by collectors in the United States. But credit card, auto and other debt are prime candidates for collection overseas.
Just over 4.5 percent of all bank credit card accounts were delinquent in the fourth quarter of 2007, according to the U.S. central bank, the Federal Reserve, up from 3.5 percent two years before. Businesses in the United States put $141 billion in delinquent consumer debt up for collection in 2005, according to a PricewaterhouseCoopers survey commissioned by an industry group, and debt collection agencies collected $51 billion that year. They kept nearly a quarter of that in profit.
Collection veterans are seeing an unusual phenomenon in this economic downturn. “People are walking away from their homes and hanging on to their credit cards, because that is their lifeline,” Rajinder Singh, head of global analytic services for GenPact, said.
Encore hires people with call center experience in India, and then trains them in unexpected skills like sympathy. Clients “get very abusive, very emotional, very sad,” said Manu Rikhye, vice president at the Encore unit in Gurgaon. The collector’s job is to “try to empathize with the consumer,” he said, and try to figure out, if they are angry, why. “Maybe it’s us, maybe it’s someone else,” he said. “You have to hear what they have to say.”
Collectors are taught to handle abuse by telling debtors: “This attitude is not going to get you anywhere. We can either work with you or refer you for further action,” implying a lawsuit. Collectors who raise their voices or try “tough” tactics are warned, Rikhye said, and those who misrepresent facts can be fired.
Manju Muddanna, 27, who uses the name Michelle Green when she is on the phone, is one of Encore’s best collectors. With laced-up stiletto sandals, wood bangles and a wad of chewing gum, she wheedles work and cell phone numbers out of debtors’ relatives to track them down. Like most Encore collectors, Muddanna handles several hundred calls a day, but actually makes contact with only a handful of borrowers.
Muddanna’s telephone voice veers to the schoolmarmish, her learned American accent into Blanche DuBois territory. When people on the other end of the phone mumble, she upbraids them, politely, “Ahhh just can’t understand you, ma’am.”
Encore pays its collectors in India an average base salary of 17,000 rupees, or $425, a month, and they earn bonuses — sometimes more than $1,000 a month — for getting customers to pay. In contrast, collectors in the United States, make about $6,500 a month. Thanks to the income, a windfall in India, where the average monthly wage is $63, collectors are buying some of the status symbols that probably got their clients into trouble in the first place — new scooters, iPods, Swatch watches and exotic vacations.
Story by Heather Timmons, NewsFactor.com
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