Client protection principles Principle #3 in practice

Principle #3 – Appropriate Collections Practices

This presentation is made possible by the Smart Campaignwww.smartcampaign.org

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1. Client protection principles2. Principle #3 in practice3. How inappropriate practices affect

clients and institutions4. Participant feedback5. Practitioner lessons and good practices6. Conclusion and call to action

Agenda

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1. Avoidance of over-indebtedness

2. Transparent and responsible pricing

3. Appropriate collections practices

4. Ethical staff behavior

5. Mechanisms for redress of grievances

6. Privacy of client data

Client Protection Principles

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Agenda

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Debt collection practices are neither abusive nor

coercive.

The institution treats clients with dignity even when they

fail to meet their contractual commitments.

Appropriate Collections Practices: Principle in Practice

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• Credit staff uses offensive or abusive language.• Collections agents threaten clients or harass

them at work, home, or their place of worship.

Examples of Inappropriate Collections PracticesOffensive

language and threats

• Collections agents enter a client’s home and/or seize property without a judicial order.• The institution accepts collateral that may

deprive borrowers of their basic survival capacity.

Unethical seizure of property

• The institution subcontracts collections to businesses that are not subject to the same ethical standards as the institution.

Subcontracting to unethical

businesses

Careless debt extension

• The institution issues automatic debt extensions.

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Agenda

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How Inappropriate Practices Affect Clients and the Institution

Inappropriate Collections Practices

Clients mistrust

the institution,

and tell others.

To avoid humiliation, clients go

to extremes to repay

their loans.

Staff rely on coercion for repayment, rather than

good portfolio

management.

What affects

have YOU seen?

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Agenda

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Feedback from ParticipantsWhat kinds of collections practices have you seen at your own (or other) MFIs?

Have you received training at your institution that highlights appropriate collections practices?How do institutions collect on-time payments? How do institutions collect late payments?

What are the positive consequences of appropriate collections practices (e.g., client retention, portfolio quality) ?

Do institutions tend to keep the collections function in-house or outsource it?

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Agenda

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[Write your points for the presentation here:]• Points• Points• Points• Points

Lessons from Practitioners

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Indicators of Good Practice: Appropriate Collections (1 of 2)

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Indicators of Good Practice: Appropriate Collections (2 of 2)

15Source: Financiera El Comercio

Example: Elements of a Collections Manual

16Source: BanGente

Example: Collections Timeline

17Source: Financiera El Comercio

Example: Ensuring that Staff Model Appropriate Collections

18Source: Adapted from Financiera El Comercio

Example: Helping Clients Get Back on Track

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Agenda

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Summary:• The Smart Campaign has developed six principles of

client protection, one of which is appropriate collections practices.

• Clients must be treated with dignity at all times, and collection efforts should never be abusive or coercive.

• Inappropriate collections practices are bad for business and can lead clients to act in ways that put them at risk.

• Good practices are available to help institutions achieve a collections system that is both effective and ethical.

Conclusion

Call to action

• What next steps can your institution take (e.g., developing a collections timeline, sanctioning inappropriate practices by staff)?

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Join the Campaign and Endorse the Principles of Client

Protection

Have questions? Want more information?

Contact the Smart CampaignEmail: [email protected]

Thank you!

Client protection principles Principle #3 in practice

Documents

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