Written by Shane
Created: 20 May 2014
I recently met with a 70 year woman who had just recently retired, to discuss the payment of a debt that we were asked to collect. The woman, quite honestly was the salt of the earth. During the conversation to discuss the debt owed, I was told the following.
The woman had worked hard all her life from the age of 15. She stopped work for a few years to have children, but was forced to return to work quickly to support her family. Her late husband she says, whilst capable was a poor money manager, lacked the discipline to save and to make a plan for their future and stick to it. The woman’s husband passed away suddenly some years ago and at the time of his untimely death, owned nothing and owed a bit. The woman kept on working to pay rent, pay her household bills and service debt. The income that she was able to generate did not leave any money to be saved for the unexpected.
The woman very proudly put in front of me her repayment record over a number of years, as if to demonstrate that she was hardworking, honest and that she paid her bills on time.
As I was looking through the information in front of me, the woman went to clear her mailbox. When she came back in side, she placed a retail store card in front of me and asked whether she could clear her debt with this card as she had just received a credit limit increase of $3,000.00 above her previous limit. I immediately told the woman NO, and then started to comprehend what actually had just happened.
The woman is 70 years old. No savings, no investments at all and is paying market rent. Her source of income is now the retirement benefit that she receives from the Government each fortnight. She is heavily in debt. She had always been a good credit risk, by paying her bills on time when she was employed. Now that her income has been reduced and with no other income to rely on to supplement spending and service debt, she is struggling financially to cope. Her values are colliding. This once proud woman, who worried about what her creditors thought of her, is now starting to look at alternatives. At 70 years of age, yes 70, the No Asset Procedure or even the Bankruptcy option is looking more and more likely to escape debt and have enough money left over to be able to live on.
Why are we increasing credit limits merely based on a person’s re-payment history and not checking the key indicators such as income, assets, investments and debt servicing. An outstanding re-payment history is simply that, history. Why do we provide credit so often, based on the past and not on a person’s current situation.
The re-payment of debt, although being a legal responsibility is also a moral one; a personal choice.
Here is something to consider, to debate. How intermit are you with your customers, both current and overdue. What do you know about “their” now? Remember, delinquency starts with either a choice or a change in some one’s circumstances. Why increase the risk of loss, without first finding out if things are, well at least the same.