{"id":71292,"date":"2020-03-09T22:20:46","date_gmt":"2020-03-09T21:20:46","guid":{"rendered":"https:\/\/tcm.be\/the-economics-and-psychology-of-poverty-can-debt-collection-increase-the-bandwidth-of-debtors\/"},"modified":"2026-08-12T23:25:27","modified_gmt":"2026-08-12T21:25:27","slug":"the-economics-and-psychology-of-poverty-can-debt-collection-increase-the-bandwidth-of-debtors","status":"publish","type":"post","link":"https:\/\/tcm.be\/en\/the-economics-and-psychology-of-poverty-can-debt-collection-increase-the-bandwidth-of-debtors\/","title":{"rendered":"The economics and psychology of poverty: can debt collection increase the bandwidth of debtors?"},"content":{"rendered":"\n\n\n

In the six years that I worked as a full-time credit controller at collection agency TCM Belgium, I often heaved a sigh. Don\u2019t get me wrong: the job is very diverse and challenging. But your patience is often challenged too.<\/em><\/p>\n\n\n\n

One of the most important recruitment criteria for new employees in debt collection<\/strong> is therefore a great empathic ability. A lot of decisions made by debtors<\/strong> are (economically<\/strong>) difficult to frame rationally. On a psychological<\/strong> level, however, they are very understandable: many actions and reactions can be traced back to the bandwidth<\/strong> of people living in poverty<\/strong>.<\/em><\/p>\n\n\n\n

\u2018The best way to save money is to spend money\u2019 \u2013 Eldar Shafir<\/h2>\n\n\n\n

It is sometimes frustrating for credit controllers to hear that an invoice remains unpaid, given that the debtor in question just purchased a new mobile phone, flatscreen or car.<\/p>\n\n\n\n

But Eldar Shafir (co-author of Scarcity: Why Having Too Little Means So Much<\/em>) gives a very clear view on this, one that every debt collector should keep in mind. When you\u2019re poor and suddenly have a large sum of money at your disposal, it\u2019s best to spend it quickly \u2014 or, in other words, to \u2018invest\u2019 as a way of saving \u2014 before your environment or your creditor comes to collect the amount.<\/p>\n\n\n\n

Culture, character, environment and education are not the cause of poverty, but they do contribute to getting out of poverty or not. In technical terms, this is called cultural perpetuation<\/strong>. There is also such a thing as economic consolidation<\/strong>: economic rules do not cause poverty, but they maintain it.<\/p>\n\n\n\n

Poverty is a costly affair. Just think of the best-known \u2018poverty trap\u2019, in which people in poverty who would give up their benefits for a paid job end up generating less income, since a lot of aid attached to those benefits would no longer apply.<\/p>\n\n\n\n

A debtor who buys a new mobile phone when unpaid invoices are piling up usually doesn\u2019t do this because of a \u2018weak character\u2019 or a \u2018low IQ\u2019. Sometimes spending is simply not such an irrational decision<\/strong>. In addition, one must also take into account the bandwidth<\/strong> of debtors.<\/p>\n\n\n\n

Scarcity in bandwidth<\/h2>\n\n\n\n
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It\u2019s not that poor people have less bandwidth. It\u2019s that \u201call people, if they were poor, would have less effective bandwidth.\u201d<\/em><\/p>\nSendhil Mullainathan & Eldar Shafir<\/cite><\/blockquote>\n\n\n\n

Scarcity in bandwidth<\/strong> occurs when there is a lack of time and money<\/strong>. Your cognitive space is reduced by that scarcity<\/strong>, so usually only decisions with a short-term effect are made. The most urgent matters (invoices) are dealt with first; the rest is pushed back.<\/p>\n\n\n\n

Borrowing money to pay off borrowed money on time at high rates, when there is no time to negotiate. There is literally no room in your head \u2014 no bandwidth \u2014 for other, let alone long-term, solutions. Scarcity in the mind promotes tunnel vision.<\/p>\n\n\n\n

Some readers will think that if they were to end up in poverty, they would certainly deal with the situation differently \u2014 read: better \u2014 than \u2018stereotypical debtors\u2019. I, too, have been guilty of that thought. Two situations, however, clearly support the opposite idea.<\/p>\n\n\n\n