Shocked and Appalled – Michael Dennis, CBF

Shocked and Appalled

If you recall the weakest credit application you have seen this year, you will have an idea about the problems with an application I rejected. I assumed the applicant company would not be surprised by the decision. I also assumed they hoped for the best, but expected the worst when the application was submitted.

To my surprise, I immediately received a call from the applicant’s CFO. He told me he was “utterly shocked and amazed” by my decision. He asked if I had contacted the three referenced listed on the application. I told him I did not. At this point, the CFO informed me that: “I failed to conduct basic due diligence” and “My lack of attention and professionalism caused me to make an incorrect decision.”

In the credit file was a credit report as well as an industry group trade payment experience report showing the applicant paid vendors an average of 90 days slow. In addition, multiple vendors had placed the company for collection. At some point, the debtor’s CFO said something like this: “So what do you have to say for yourself?” I explained that even if the three references provided reported his company paid right on time, there was more than enough adverse information on file to reject the applicant for open account terms.

I refer to this particular negotiating tactic by a customer or applicant as: “Shocked and Appalled.” The CFO was shocked and appalled by the decision. My experience suggests that companies use the Shocked and Appalled technique: (a) when they have little or nothing to lose and/or (b) because this tactic sometimes prompts creditors to second-guess their original decision. My recommendation is not to change your decision in the absence of a compelling reason to do so…. Otherwise it is like betting against yourself; no matter what happens you lose. Once you recognize the “shocked and appalled” negotiating tactic, you will know how to react to it.

Comments and constructive criticism are welcomed.

Michael Dennis, CBF

Michael Dennis’ Covering Credit Commentary. Michael’s website is

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

12 Replies to “Shocked and Appalled – Michael Dennis, CBF”

  1. Very good! I have not experienced this yet from applicants, but if I do, I now know how to handle the situation. Thanks Michael!

  2. I am curious what this customer had to say after they were told there was more than enough adverse information in the file to reject the credit application. I would they would want to know what kind of adverse information and from where? What would you say to them? I am always stumped on what to tell a rejected customer when they what to know what information and where I got it from. Don’t they have a right to know as consumers do when personal credit is denied?

  3. Commercial credit is completely different. You do not have to divulge ANY information or your sources. You simply advise them that their is some derrogatory iniformation that does not meet your criteria to grant an open line of credit at this time.

    Love this Michael:)
    Experience shows the more they shout, moan and complain in the beginning, the harder it will be to collect the balance!

  4. Michael, nice logic!
    No matter how adept you are at making a good decision about pass or fail applications the bottom line always goes back to executive management.

    Management keeps the balance between too tight of credit policy and too lose of a credit policy. We all have one of “those” moments when a prospective client calls and wants you to expeience the wrath of shame for not giving them the chance to use your firms money to finance their bad decisions! Sticking to your guns is a reality check for the customer and in the long run will help them understand it’s time to clean up their act.

  5. If they are whining and complaining at the outset, when they are actually trying to make a good impression, imagine what they will be like when they get charged restocking because they cancelled an order, or when they have a lien about to be filed. Guaranteed that is what you will see in your crystal ball.

  6. I have had a few instances where both our sales rep and the customer have called to scold me for “not doing my job” when I have made a sound credit decision based on my review. I used the same defense suggested. They then ask “what review?”. I tell them the credit sources we use. They then asked if they could see them. I direct them to the credit sources to resolve any issues. We do not provide copies of our credit reports. It is my experience that those yelling the loudest usually are hiding something.

  7. In response to Wilson’s question, at some point I suggested to the applicant’s CFO that we start over — since shocked and appalled was not going to work.

    I said that I assumed he knew more about his company’s payment history with creditors than me. I said I was certain he knew his account had been placed for collection numerous times. I said that as CFO he certainly knew that his company had a history of slow payment of up to 90 days with existing creditors, and on that basis of all the problems there was no way that I would consider open account terms.

    Was he happy? No. Did he thank me? No. Did he argue? Not really. What is there to say when faced with overwhelming facts?

    1. Michael: Thank you for your response. After I read it, I had a vague memory of having a similar response at least once in my credit career when I more or less had to tell the potential customer something like “you know how you are paying your creditors, I suggest you contact them if you want further information.” They also were not happy campers and as I recall posed no subequent argument. I was just curious as to how it ended.

  8. In the same vein as “Shocked and Appalled” is one of my prospective customers years ago. His references were non-existent (literally, as I couldn’t reach them on the phone, or locate them in D & B), and I called the owner/CFO/chief cook and bottle washer, and told him there wasn’t sufficient information to make a credit decision.

    I then asked him for his financials. Did he ever howl! I explained that we were selling him product and needed to make sure he was good for it, and to ensure they weren’t going out of business soon, as many similar companies had done to us in preceding months due to a bad economy.

    Apparently, he felt the need to reciprocate, and demanded copies of our financials, stating he needed to know if *we* were going to remain in business before risking his money with us. After duly confirming with my controller that we would not be giving him our financials, I simply disallowed the account.

    Turned out to be a smart move, as they went away months later. I don’t know how much he owed, but none of it was to my employer.

  9. ROFL, thanks I needed a good laugh! I’ve met several of them over the years which means that behavior has worked for them in the past with some other vendors. Asking for financials usually suspends their shocked demands. I also find this behavior to be a glimpse of things to come in the relationship and am happy to sell to them “on c.o.d. terms
    until their situation improves”
    We don’t have an industry group for our divisions, but the trade references are often worse than the dealer assumes they will be, either that or the clerk listing the references is clueless…

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