You may remember learning about Abraham Maslow's psychological
theories back in high school. Your teacher probably drew a pyramid on
the board with the five levels of human needs: physical requirements for
survival, safety, a sense of belonging and love, esteem/respect, and
self-actualization.
Maslow's Hierarchy of Needs
is a tidy little theory that helps to explain why so few people are
able to achieve self-actualization — that is, the ability to completely
fulfill their potential. It's pretty difficult to write the great
American novel when you're worried about having enough food (physical
requirements) or enough money (safety), or if your wife just left you
for your best friend (sense of belonging and love), and she announced
the split on a billboard in the center of town that called you bad names
(esteem).
While Maslow's theory can help us to better understand the plots to
many country songs, it can also be used much more insidiously. In
particular, one industry relies on Maslow's Hierarchy to conduct its
business every day — credit card collections.
It should come as no surprise that the credit card industry is interested in consumer psychology. I've
written before about how companies gather data about you based upon your purchases — and use that data to better market to you.
But, of course, credit card companies do not stop there. The industry
uses psychology every step of the way, from convincing you to sign up
for a card, to getting you to carry a balance, to hounding you for
payments when you get in over your head. (See also:
Party Like It's 19.99: The Psychology of Pricing)
Here is what the credit card and collection industries don't want you
to know about how they are making their agents into amateur
psychologists.
Appeals and Needs
When a debt collector calls for payment on a delinquent bill, there
are only so many ways they can go about appealing to the customer for
payment. After all, they are bound by both the
Fair Debt Collection Practices Act and the fact that it is impossible to
force someone to do something (particularly over the phone, since it's much harder use the rack on a victim from a remote location).
In fact, according to
a workbook for professional telephone collectors
put out by the Association of Credit and Collection Professionals
(which for some unknown reason goes by the initials ACA), there are only
three main appeals for collection: honesty, pride, and consequences.
Basically, collection agents can appeal to a consumer's honesty by
asking them to preserve their integrity by fulfilling this financial
obligation. The appeal to pride focuses on how other people will think
of someone who reneges on a debt. And the consequences appeal asks
customers to think about the very serious repercussions they face by not
paying their bill.
These appeals are already pretty psychologically loaded. Collection
agents are basing their appeals on how a customer feels about himself
and his life and circumstances.
Where it gets even more pernicious is when these basic appeals are
used in conjunction with the agent's understanding of Maslow's
Hierarchy. According to the
ACA workbook, "when these [three basic appeals] are used in conjunction with Maslow's Hierarchy of Needs,
they become the single best way to inspire consumers to pay their bills." (Emphasis theirs.)
In short, customers are being psychoanalyzed by their collection
agents to determine what kind of appeal will most likely "inspire"
payment. That feels a little creepy, no?
The Collection Agent Is Your New Best Friend
While the intimidation tactics we are most familiar with in
collection agents are certainly still being used with regularity, credit
card companies and others in the industry are now developing different
strategies for extracting payment. In particular, they are following the
age-old wisdom about catching more flies with honey than vinegar.
Charles Duhigg reported in
New York Times magazine that even the job title of "collection agent" is getting a makeover in many companies:
It was the first day of training for Bank of America's
newest credit-card customer-assistance employees, and some of the 12 new
hires sitting around the classroom were a little confused. At another
company, these employees…might be called "collection agents" or "at-risk
account reps." But at Bank of America, "our whole program is built
around assisting the customer," explained Ric Struthers, president of
the credit-card division. "We call it assistance, because we're here to
find a solution."
From day one, brand new collection agents are trained to treat their
customers in a friendly way and to build a sense of trust. Then, when
the appeal to pay comes along, you're much more likely to listen.
This is a familiar tactic to anyone who went to college in the bad
old days when credit cards were still allowed to solicit college
students. I remember one persistent telephone solicitor who claimed that
I shared a birthday with his little sister. I found myself signing up
for a card I didn't want because I was reluctant to disappoint my new
"friend" who sounded so fond of his sister who was a fellow Aquarius.
Applying Maslow's Hierarchy
Duhigg goes on in his article to tell a fairly chilling anecdote about
a collection agent using Maslow's psychology against his customer.
This particular customer called to offer $10,000 to settle his $29,000
debt. It's important to note that by the time debts reach the collection
stage, debtors can often settle for much less than they owe because the
creditor would prefer some money to none. Nearly every debt expert and
reputable credit counseling service will advise their clients to take
this route if it's possible, as it can end the debt mess.
However, this particular debtor's offer was refused, even though his
collection agent had been advised to allow settlement for no less than
$10,000. Instead the agent — who had spent several weeks getting to know
the debtor over the phone — "diagnosed" the unfortunate man as being in
the esteem phase of Maslow's hierarchy. The agent appealed to the man's
pride, asking him if he wanted to be the type of person who broke his
promises. It worked. The debtor called back with an offer of $12,000.
This also meant that the agent enjoyed a higher commission — which
was information he did not share with his good buddy the debtor.
Inverting Maslow's Hierarchy
The problem with credit card companies using psychology to extract
payment goes deeper than the issue of having amateur psychologists
pushing your buttons. The real problem is that these tactics can end up
confusing consumers as to what their financial priorities should be.
In particular, those who get in over their heads with credit card
debt are often also experiencing financial woes elsewhere in their
lives. When having to make the choice between paying the mortgage or
paying your credit card bill, it should be obvious that keeping a roof
over your head is more important. After all, that's a basic physical
need and the very foundation of Maslow's Hierarchy. Without that, there
can be no safety, belonging, esteem, or self-actualization.
But collection agents don't care about your mortgage, no matter how
much they may pretend friendliness. Their goal is to get you to pay your
delinquent credit card bill — and earn their commission. If you are
concerned about money (safety) and worried about what people will think
of you for falling behind (esteem), you could easily fall victim to an
agent's appeal, even though you really do need to prioritize your
mortgage.
Since consumers haven't received background training in psychology, they're at a definite disadvantage.
Know Thyself
While all consumers need to be better informed about the practices
used by the credit card industry, the best defense against these sorts
of tactics is to be well aware of your priorities. Whether you've never
missed a payment in your life or you are chewing your fingernails
because you're not sure
how to get out of debt, you need to know what is most important to you.
That starts with recognizing that some bills might need to take
precedence over others in the case of financial hardship. But in the
modern world, knowing your priorities can also mean remembering
the difference between wants and needs. No one wants to be the one pleading poverty to a collection agent while talking on an iPhone and drinking a Starbucks coffee.
Maslow would certainly hope you could recognize where those luxuries fit in the hierarchy of your life.
source: wisebread.com
