Implementing Effective Collection Practices and Guarding against Common Abuses

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Implementing Effective Collection Practices and
Guarding against Common Abuses

• Bill Milligan - VP Collections
• PLS Financial
• Lou Nash - Chief Recovery Officer
• Checksmart Financial

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Understand that effective collection practices
begin before the transaction occurs.
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• Lending Practices
• Are your lending practices setting your customers
  up to default?
• Are you lending to what they qualify for or the
  maximum you can loan them?
• Are you aligning repayment dates with pay dates?
• Are lending limits graduated based on customer
  longevity?
• Application Process
• Does your application process provide sufficient
  information to contact the consumer if they
  default?
• Home numbers
• Work numbers (extensions)
• Mobil numbers
• Employer name, address, pay date, direct deposit
  information
• Home address
• References (names, numbers and relationship)
• Verifying banking information

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• Application process (continued)
• Do you verify or confirm the information is up to
  date at each transaction?
• Do you ask open ended questions when confirming
  location information? (Open ended questions can
  not be answered with a yes or no)
• Whats your mobile phone number ?
• Where are you working ?
• Does the transaction make sense? (Check Cashers)
• Is it logical?
• Do you have recourse
• Is the customer cashing paychecks daily?
• Is it a scam?
• Did your customer really win a Foreign lottery?
• Are they cashing large postal money orders from
  out of state?
• Do they really earn 5,000 monthly as an internet
  mystery shopper or are they claiming s the 2000
  check they are cashing their share of government
  stimulus?

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• Does the transaction make sense? (continued)
• Is the check real?
• Are their misspellings?
• Does it look like a real check
• Are you proactive in avoiding collections
• Are you making reminder calls?
• Are you requiring new customers to pickup their
  checks?
• Do you spend time discussing the lending process
  with new customers?
• Are there a consequence for not paying promptly?
  

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If you approach every transaction with the belief
that its going to end up in collections, the
more successful you will be recovering it if it
does.
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Develop a plan to maximize collection performance

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• Develop a comprehensive collection process.
• Create a blueprint that identifies the essentials
  to your plan.
• Will you centralize your collection process?
• Will you use outsource providers and if so at
  what time ?
• What is your anticipated workflow ?
• Will accounts be worked in a pool or assigned
  environment?
• How will you compensate collectors?
• What are your collection strategies?
• Set clear and realistic collection expectations
  and goals.
• Align objectives throughout your organization.
  (get everyone pulling in the same direction)
• Set stretch goals
• Manage your expectations

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• Staff your collection department with qualified
  collectors
• Strong negotiation skills (create a win win)
• Creativity and problem solving skills
• Professional demeanor and character
• Perseverance and a strong work ethic
• Ability to work independently as well as with
  others.
• Make sure the workload is right sized to the
  staff.
• Inspect what you expect
• Develop performance reporting and make sure it
  ties out to accounting.
• Develop an account audit program to review both
  quantity and quality of work efforts on accounts.
  
• View account liquidation performance in 7 day
  increments

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Planning is bringing the future into the present
so that you can do something about it
now. -Alan Lakein
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Developing effective collection strategies
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Understanding Borrower Behavior

• There are four (4) primary behavioral categories
  which defaulted customers comprise. They are
• Customers who can pay and will pay
• Customers who can not pay but want to pay
• Customers who can pay but will not pay
• Customers who can not pay and will not pay
• The key to an efficient and effective collection
  program is to understand these behaviors and
  develop collection strategies designed to
  maximize recoveries in each of these categories.
  

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Directing Collector Focus

• To optimize performance your focus must be on the
  segment of business that you have the greatest
  influence over.

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Maximizing Collector Performance

• Successful collectors understand that maximizing
  call volume and right party contacts are
  essential to performance.
• Working accounts efficiently and effectively
  means making smart calls.
• Effort is the number one attribute to look for
  with Skill coming in at a close second.

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Performance Standards Measuring your success

• Collector performance should be evaluated based
  upon the following matrix categories
• Prime time hours worked
• Number of calls made
• Number of promises to pay obtained
• Dollars promised per hour
• MTD running totals for all matrix categories
• Work standards for each performance matrix allow
  the collector and manager to know the
  expectation, and how they compare to their peer
  group (similar collectors working similar
  products).
• Collectors should be goaled to obtain 80 of the
  best performer.

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Common collection abuses you need to be aware of
and prevent
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• Collection related complaints and lawsuits have
  risen dramatically during the most recent
  economic downturn.
• Our industry makes us easy targets of complaints.
• Negative press from bad players are costly to the
  industry as a whole.
• A recent scam has been perpetrated with con
  artist claiming to be payday loan collectors
  calling people and threatening jail for non
  payment of non existent loans.

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Five top consumer complaints as related to debt
collections

• 1 The debt collector called continuously in an
  effort to harass them, including early morning or
  late at night calls.
• Debt collectors are barred from calling
  before 8 a.m. or after 9 p.m., unless given
  express permission to do so. While terms like
  continuously are subject to interpretation,
  making multiple contacts in a single day would be
  a violation of the law. Debt collectors also
  cant shout or swear at you.

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Five top consumer complaints as related to debt
collections

• 2 The debt collector attempted to collect too
  much money.
• Complaints claim that collectors attempted to
  collect debts that had been discharged in
  bankruptcy. Some said the collector simply added
  or threatened to add fees and charges that were
  not allowed by law.

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Five top consumer complaints as related to debt
collections

• 3 The debt collector threatened dire
  consequences including having the debtor thrown
  in jail if they didnt pay up.
• Federal law says that the debt collectors
  cant threaten an action that they have no
  authority or intention of taking. You can inform
  consumers that you will sue to collect a debt
  only if you routinely do so.

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Five top consumer complaints as related to debt
collections

• 4 The debt collector called them at work.
• If your customer provides a written / verbal
  request that states that their employer routinely
  prohibits calls of a personal nature at work you
  should avoid violating that request.
• 5 The Debt collector revealed information about
  the consumers debt to a third party.
• Disclosing information about a consumers
  debt to an employer, co-worker or even a relative
  (excluding spouse) is strictly forbidden.

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You can minimize your exposure by instituting
policies and procedures on how collection
activity will be conducted in your organization

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Establishing Collection Core Values Collecting
debts in a professional, fair, and lawful manor

• Establish and enforce corporate collection
  policies and practices based upon applicable
  practices of the Federal Fair Debt Collection
  Practices Act (FDCPA).
• Train all associates on the importance of
  properly handling accounts and maintaining
  customer good will.
• Provide consumers with an internal avenue to
  defuse potential complaints.
• Institute random testing (mystery calls) to
  ensure that calls are being worked to your
  established standards.
• Include FDCPA compliance testing annually.

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Approach every collection call with the belief
that its being recorded and is going to end up
in litigation, then if it does you will be more
successful in defending it.
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General Questions