It occurred to me that this morning I wrote an article about what to do if your debt settlement company might go out of business but while I’m sitting here waiting for my next flight I thought I’d share some advice if you are a debt settlement company and it does not look like you will be able to continue because of the loss of fees under the contingency fee model.
I’ve always felt there are two entities that must come first in the debt relief industry; employees and consumers.
While you still have some cash on hand it makes sense to begin thinking about preparing for an orderly transition if the company may have to shutter. The worst case scenario is that you wait too long and leave unhappy employees and clients.
When I closed down my credit counseling agency, the first thing I did was to layoff as many employees as possible and pay them a generous severance package. This left a skeleton crew to manage the remaining clients while we found a place for them to go that would take exceptional care of them.
Facing the failure or closure of your business, well, it sucks. It’s not fun but doing the right thing is not always the fun thing.
Once we did locate a great home for the clients we then spent a lot of time working out all the details of the transfer and the transfer itself. This process consisted of a written policy and procedure manual that both the pitcher and catcher agreed on. The goal is no surprises.
The first step was to get our IT heads together and map our two data systems so we could export the electronic client data to their system. We emailed test files back and forth for a couple of weeks until we were satisfied the process would work. We then sent all the client information over and noted the date.
Rather than transfer loads of clients in once bunch we sent them in manageable bundles. Once they were tucked in at their destination we then sent the next bundle over. It was a continuos process.
Any updated electronic information after the big data dump we could easily send electronically via an encrypted file and the company taking over would update their systems. We did this till the last bundle of clients moved.
During this time we also boxed up the physical client files of the bundles as we sent them and sent the boxes flying across the country to the new agency taking them over.
In the end everything went darn near perfect.
Here is what I learned from the process.
- There is no substitute for finding an exceptional partner to take over the clients. While you may want to sell them for top bucks, there is tremendous value in not selecting the highest paying new servicer, but rather the partner that is committed to exceptional customer service and support. Oh yes, they need to have a good reputation to make the clients comfortable. It’s going to be difficult enough on the clients to make the switch and they will be much happier if they are well informed and going to a company with great customer service with an exceptional reputation.
- There is no substitute for good communications. The minute you decide you may have to close you should let your clients know, after you tell the employees of course. It is much better for a client to have two months notice and updates along the way than to get a last minute, “We closed’” letter.
- Be sure to send communication to clients via email and letter. You need to make sure they get the communications in a format they most easily digest.
- The importance of taking care of the employees and clients first is so that your company does not fail and leave thousands of unhappy people that may sully your name. You are probably going to remerge somewhere in the debt relief world again and your reputation is important to maintain.
- Once the clients and employees are transitioned you’ll probably be left with a lot of debt. You may have to file a corporate bankruptcy to clean that up.
- I didn’t have to do that. Simply because by acting in advance I tied everything up without any lingering debt. I can’t express how important it is to take early action and make the tough decisions as early as possible. I can only imagine if I had waited to the last minute and stranded both employees and tens of thousands of clients. It would not have been pretty. Money can by a lot of things but not a good reputation.
The issue with advanced fee companies that will fail is that consumers passed on will eventually have to pay some fee when their debt is settled. You may be able to negotiate a reduced rate for the clients you are passing on. It makes the transfer a bit more palatable for the consumer. Also, being open and honest with the consumer can help to mitigate a tsunami of unhappy clients. Explain the truth to them, keep them in the loop, and you’ll win over the majority by doing the right thing.
If you think you may be headed down this closure path, I would suggest you reach out to one of the member AACC companies that will put your clients first and take exceptional care of them.
And if I can can provide any advice, please don’t hesitate to comment below.
What to do Right Now if You Are a Debt Settlement Company and You May be Going Out of Business. Lessons Learned. by Steve Rhode
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