Why Ethics Matter in the Factoring Industry
The Ethics Initiative launched on March 30th, 2015; that’s 3 ½ weeks ago. In that time we’ve had a lot of questions and comments directed our way. Some good, some not so good. The bulk of these comments, particularly the critiques, will be addressed below along with a discussion of the core issues we’re confronting.
Firstly, an update on the petition from the March 13th post: the petition to stop robocalls has, as of this posting, reached over 36,000 signatures. We encourage anyone interested in this cause to sign and support this petition.
There is nothing sexy to say about ethics. No one’s ears perk up and pupils dilate when they see those words, though perhaps I shouldn’t speak in absolutes. It’s important to remember, though, that even though ethics may not have the flash or pizazz of a commercial running during the Super Bowl, it nonetheless holds a great deal of importance to business. But why?
If we’re going simply by the dictionary (dictionary.com for full disclosure) there are two definitions relevant in answering the question of why ethics are important. First, and most elementary: ethics are “the rules of conduct recognized in respect to a particular class of human actions or a particular group, culture, etc.: e.g. medical ethics, Christian ethics,” business ethics, academic ethics, and so on. So when we’re speaking of ethics in the factoring industry, we’re speaking about rules of conduct for the group at large. So what rules, formal or otherwise, do we see as prevalent in the industry today that shouldn’t be?
Court “Scraping” / Court “Sniffing” – the act of going through legal filings to glean personal information for business purposes. In other words, a person will seek out names and contact information for a potential annuitants that can be contacted, usually with great frequency, for the purpose of obtaining business. For factoring companies, this means convincing the annuitant that selling either a portion of or the entirety of a structured settlement or annuity payment stream is a prudent and desirable course of action to take.
Poaching – the act of undermining an established business relationship and contract between a competing company and an annuitant by offering a seemingly better deal at the latest possible time. This is a flagrant assault upon the philosophy of and legally binding nature of contracts. If a contract can be dismissed so easily then why bother with contracts to begin with? What makes the poacher so confident in the contract’s enforceability that it will also have signed? Is this problem not self-evident?
Aggressive Deception – the act of deceiving annuitants, in particular, of either getting a good deal or by mere misrepresentation of identity or facts. For example: are you sure the company you’re dealing with is competing with another company you’re in contact with? There are names in this industry that may seem independent of each other, but in reality they are not. For annuitants, it is especially important that you get proper contact information for a representative in contact with you; sometimes you’ll run into the bottom-of-the-barrel types that will attempt to make you believe they’re with a company they’re not actually with. Be wary.
Critics, all of whom will remain respectfully anonymous, have attempted to explain away or excuse these behaviors with the following arguments in principle:
On scraping, “Everybody does it! If you’re not doing it, you’re just being stupid.” Or: “You’re just being anti-competition.”
On poaching, “Sucks for the company that got poached. It’s just business.” Or, again: “You’re just being anti-competition.”
And on deception, “Annuitants are just looking for the best deal offered to them. If they think they’re getting a good deal, that’s all that matters. If they think they’re being fought over, even better.”
I will now address each of these arguments directly and in-turn.
On Scraping: Not everyone does it, but it is very common, yes. But why is the act of going through legal filings to obtain personal information for the purpose of obtaining business acceptable? The answer is simple, of course – it’s to make money. Every business is out to make money, that’s not the issue – the issue is the manner in which money is earned. As has been mentioned elsewhere on the FactoringEthics.com site, there is absolutely nothing wrong with a company offering its service directly to the potential customer, but in this particular business there is another consideration that must be kept in mind: factoring companies are not selling vacuum cleaners, special sponges, or lawn-care products. Factoring companies are offering a service far more sensitive than those; they’re offering to alter the financial circumstances of their customers. These customers are not your average Joes, either. Many, if not most, of factoring business is conducted with people whose payment streams are a result of tragedy and injury. The payment streams exist to provide security to these individuals. Factoring is great for people who need to employ it – there is no disputing this. What is in dispute, however, is in how these people reach the conclusion that factoring their payment streams is the acceptable course of action. Ambushing annuitants shortly after receiving their payment streams simply due to the filing of the court order is simply dirty. Not only have these people been victimized and given some degree of restitution through their settlements, but now they’re being further victimized by those who would give no thought to the needs or desires of the annuitant, but merely to their own bottom-lines. There is nothing wrong with being concerned for the bottom-line of one’s company, but it is a questionable practice to seek business directly from people that may be perfectly content until you’ve convinced them otherwise. Again, this isn’t a matter of convincing them that their vacuum cleaner, lawn mower, or waffle maker isn’t as good as the one you’re selling – it’s a matter of convincing them that their financial well-being is better with factored transactions, once or more, than with their existing structured payment streams. Financial well-being is a much more sensitive and potentially life-altering state of being than the torment of deciding whether to buy that new waffle maker.
It is more anti-competitive to use underhanded tactics and show a general disregard for the contextual appropriateness of scraping annuitant information than it is to try to conduct business in a fair, traditional manner. Some may call scraping creative and the ultimate opportunity; I have collected far too many testimonials from furious annuitants who see this practice as nothing more than a predatory and/or parasitical indulgence on their own financial well-being.
In anticipation of the counter-point: “How is scraping any different than direct advertising?” Direct advertising gives the person a choice to open themselves to direct contact by phone, conversational correspondence mail, etc. Choice is the point. How many of you, non-annuitants, respond with interest, respect, and friendliness when you’re being actively telemarketed? Even if you are of the minority who don’t regard telemarketing calls with hostility – how many of you can say you’re not annoyed, irritated, or perhaps even angry by such contact? And thus the ultimate concluding question: why is it okay for annuitants to be subject to this but not the average person, or the scrapers themselves? The answer is simple: it’s not okay. This is why the behavior is unacceptable.
On Poaching: despite what Texas may have on the books, it is a dangerous and slippery slope if contracts begin losing their enforceability. It’s truly as simple as this. Our entire legal framework is based upon the binding nature of contracts. Why should contracts in this industry be regarded as any different? The answer is simply: they shouldn’t be any different because they aren’t any different.
On Deception: the feel-good argument of pretending like annuitants have a choice is nothing more than a sham. Turn the situation around for a moment: suppose a factoring company is attempting to get competing contracts from a building-cleaning service. Several services come forward and all seem to be competing; you go with the best rate presented to you and all is hunky dory. Now be presented with the knowledge that all three of these companies are actually the same company, merely with different names – do you feel cheated? You should.
There is one last definition of ethics that truly encompasses the fundamental issues presented by the FactoringEthics.com site: ethics are “that branch of philosophy dealing with values relating to human conduct, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions. (emphasis added)” If we examine the broad business ethics of factoring as simply what’s prevalent, then scraping, poaching, and deception is acceptable merely due to its frequency. If we go one step further and look at it from the above definition, with respect to whether something is right or wrong, both in terms of motive and ends, these issues become far more problematic. Context is vital in this business, and the reason this cry for ethics has arisen is due to it.
For our detractors, particularly those claiming that this project is “an irritant,” I offer this food for thought: do companies engage in these practices for the sake of annuitants, whom they claim to serve, or out of greed? The answer cannot be both.
On a much lighter note, I’d like to personally thank each and every one of our contributors for reaching out to FactoringEthics.com in support of this initiative. Your support and encouragement is appreciated. We’re reviewing the influx of testimonials with great interest and will use this information going forward.