Lauren Foley

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Building performance measures into your
partnership with collection agencies AGA/EEI
Customer Service Conference Philadelphia, PA

• Lauren Foley
• Division Head, Customer Service
• April 9-12, 2006

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WGL PROFILE

• Our Service Territory includes Maryland, Virginia
  and the District of Columbia
• Over one million customers with four percent
  annual growth
• 17 in DC 38 MD 45 VA
• 93 Residential (75 of ) 7 Commercial

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WHAT IS THE PROBLEM?

• An Increase in Uncollectible Accounts
• Impact from volatile wholesale prices
• The effect from customer meter growth
• Lack of adequate security deposits
• Ineffective OCA management

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PRIOR OCA Management

• Washington Gas utilized two OCAs for over 25
  years
• Improvement was needed in the following areas
• Reporting
• Lack of effective reporting received from the
  agencies
• Reporting to Credit Bureaus
• Measurements
• Lack of performance metrics

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PRIOR OCA MANAGEMENT

• Technology
• No access to the Agencys system.
• Lack of ability to recall accounts from primary
  placement and refer to secondary OCA
• Agencies had minimal/dial up access to our
  system.
• Paper driven processes for placement of accounts,
  invoicing and payments.

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NEW OCA SELECTION PROCESS

• Due Diligence
• Formal bid process in conjunction with the
  Procurement, Legal, and the Finance areas.
• Decision Matrix
• Technology/Daily Operations
• years using Predictive Dialer
• size of IT staff
• remote access
• file transmission
• electronic invoice and payment
• customized reporting based on WGs needs
• web-based
• recorded phone conversations

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NEW OCA SELECTION PROCESS

• Due Diligence, contd
• Previous Utility Experience/Reference Check
• list of five minimum utilities as a reference
• used formal performance evaluation form
• Pricing
• pre-collect
• primary
• secondary
• legal
• warehousing

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NEW OCA SELECTION PROCESS

• Due Diligence, contd
• Facilities/Collectors
• total of collectors - utility collectors
• location of collectors
• ratio of collectors to accounts
• ratio of supervisors to collectors
• recovery ratios
• offsite recovery location

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NEW OCA SELECTION PROCESS

• Due Diligence, contd
• Insurance/Bonding Requirements
• performance guarantee
• Volume
• number of outstanding accounts and balances
• Financial Review
• audited financial statements for three years
• SAS 70

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NEW OCA SELECTION PROCESS

• Due Diligence, contd
• Other Influencing Factors
• responsive
• transparent
• low maintenance
• high interest - representation to the team
• IT (in-house)
• fines
• minority owned status

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PROCESS IMPROVEMENTS

• Contract was signed for two years with three
  OCAs agencies that included the following terms
  and conditions
• General nature of the contract
• Referral process
• Reporting accounts to credit reporting agencies
  rules
• Payments processing procedures
• Legal action authorization

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PROCESS IMPROVEMENTS

• Contract contd
• Bankruptcies
• Recall and cancellations process
• Reporting requirements
• Price and payment schedule
• Term and Termination

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PROCESS IMPROVEMENTS

• Contract contd
• Warranties Licenses, compliance, QA
• Insurance and credit security
• Indemnity
• Relationship of parties
• Confidentiality
• Audit

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PROCESS IMPROVEMENTS contd

• Performance Measures Scorecard Champion /
  Challenger
• Recovery performance is measured monthly based on
  placement date
• Formulas used to calculate percentages collected
  are

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PROCESS IMPROVEMENTS contd

• Performance Measurements (contd)
• Incentive based reward program in place to
  maximize agency performance.
• Incentive reward is based on six-month net
  recovery average. The average is determined by
  the three agencies collections for that period.
• Any agency that falls 10 below the net average
  recovery will have its placement referrals
  reduced.
• The top performer will receive an increase in
  placement referrals.
• Agencies receive monthly collection/recovery
  scorecard

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PROCESS IMPROVEMENTS contd
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PROCESS IMPROVEMENTS contd

• Auditing Collection Agencies
• Continuous monitoring of reporting components to
  ensure reporting is effective
• On-site visits to the agencies to monitor
  collection practices and to ensure compliance
  with Fair Debt Collection Practice Act
• Periodic meetings with agencies to set
  expectations and to resolve any issues or
  concerns.

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PROCESS IMPROVEMENTS contd

• Auditing Collection Agencies
• Audit program outline (planning, Field work, and
  reporting). Specific audit procedures includes
• Reviewing written policies and procedures
• Training program
• Quality assurance / control program
• Physical access control
• Inventory reconciliation
• Staffing level and working hours

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PROCESS IMPROVEMENTS contd

• Auditing Collection Agencies
• Timeliness and accuracy of loading referred
  accounts
• File scribing and skip tracing procedures
• Dunning notices
• Call monitoring and recording
• Payment arrangements/ broken promises
• Settlements
• NSF/Returned items processing and fees
• FDCPA compliance

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PROCESS IMPROVEMENTS contd

• Auditing Collection Agencies
• Reporting accounts to credit reporting agencies
• System Controls Dialer, Logical access and
  disaster recovery plans
• Insurance requirements
• Trust account review

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Questions