Debt & Collections
By: Maria Moynihan State and local governments responsible for growth may be missing out on an immediate and sizeable revenue opportunity if their data and processes for collections are not up to par. The Experian Public Sector team recently partnered with Governing Magazine to conduct a nationwide survey with state and local government professionals to better understand how their debt collections efforts are helping to address current revenue gaps. Interestingly enough, 81% stated that the economic climate has negatively impacted their collections efforts, either through reduced staff or reduced budgets, while 30% of respondents are actively looking for new technologies to aid in their debt collections processes. New technologies are always a worthwhile investment. Operational efficiencies will ultimately ensue, but those government organizations who are coupling this investment with improved data and analytics are even better positioned to optimize collections processes and benefit from growth in revenue streams. No longer does the public sector need to lag behind the private sector in debt recovery. With the total outstanding debt among the 50 states reaching an astounding size of approximately $631 billion dollars, why delay? Check out Experian\'s guide to improving debt collections efforts in the public sector. What is your agency doing to capitalize on revenue from overdue obligations?
By: Kyle Aiman For more than 20 years, creditors have been using scores in their lending operations. They use risk models such as the VantageScore credit score, FICO or others to predict what kind of risk to expect before making credit-granting decisions. Risk models like these do a great job of separating the “goods” from the “bads.” Debt recovery models are built differently-their job is to predict who is likely to pay once they have already become delinquent. While recovery models have not been around as long as risk models, recent improvements in analytics are producing great results. In fact, the latest generation of recovery models can even predict who will pay the most. Hopefully, you are not using a risk model in your debt collection operations. If you are, or if you are not using a model at all, here are five reasons to start using a recovery model: Increase debt recovery rates – Segmenting and prioritizing your portfolios will help increase recovery rates by allowing you to place emphasis on those accounts most likely to pay. Manage and reduce debt recovery costs – Develop treatment strategies of varying costs and apply appropriately. Do not waste time and money on uncollectible accounts. Outsource accounts to third party collection agencies – If you use outside agencies, use recovery scoring to identify accounts best suited for assignment; take the cream off the top to keep in house. Send accounts to legal – Identify accounts that would be better served using a legal strategy versus spending time and money using traditional treatments. Price accounts appropriately for sale – If you are in a position to sell accounts, recovery scoring can help you develop a pricing strategy based on expected collectibility. What recovery scoring tools are you using to optimize your company\'s debt collection efforts? Feel free to ask questions or share your thoughts below. VantageScore is a registered trademark of VantageScore Solutions, LLC.
Consumers want to hear about data breaches - Eighty five percent of respondents in a recent study say learning about the loss of their data is pertinent to them. However, when they do, 72 percent indicated that they are dissatisfied with the notification letters they receive. Companies need to take note of these findings because more than one-third of consumers who receive a notification letter contemplate ending their relationship with the company. Providing affected individuals with a membership in an identity protection product is extremely important since 58 percent of consumers consider identity protection to be favorable compensation after a breach. Learn five pitfalls to avoid in your notification letters and how Experian Data Breach Resolution can help. Source: Download the complete 2012 consumer study on data breach notification.
2011 was the 12th consecutive year that identity theft topped the list of FTC consumer complaints. Florida had the highest rate of complaints, followed by Georgia and California. Rank State Complaints per 100,000 population 1 Florida 179 2 Georgia 120 3 California 104 Learn how to detect and manage fraud activity while meeting regulatory requirements. Source: Consumer info.com infographic and FTC\'s Consumer Sentinel Network Data Book for January-December 2011.
The CFPB, the FTC and other regulatory authorities have been building up their presence in debt collections. Are you in the line of fire, or are you already prepared to effectively manage your riskiest accounts? This year’s collections headlines show an increased need to manage account risk. Consumers have been filing suits for improper collections under the Fair Debt Collection Practices Act (FDCPA), the Servicemembers Civil Relief Act (SCRA), and the Telephone Consumer Protection Act (TCPA), to name a few. Agencies have already paid millions in fines due to increased agency scrutiny. One collections mistake could cost thousands or even millions to your business—a cost any collector would hate to face. So, what can you do about better managing your regulatory risk? 1. First of all, it is always important to understand and follow the collection regulations associated with your accounts. 2. Secondly, follow the headlines and pay close attention to your regulatory authorities. 3. Lastly, leverage data filtering tools to identify accounts in a protected status. The best solution to help you is a streamlined tool that includes filters to identify multiple types of regulatory risk in one place. At minimum, you should be able to identify the following types of risk associated with your accounts: Bankruptcy status and details Deceased indicator and dates Military indicator Cell phone type indicator Fraud indicators Litigious consumers Why wait? Start identifying and mitigating your risk as early in your collections efforts as possible.
One of the most successful best practices for improving agency performance is the use of scorecards for assessing and rank ordering performance of agencies in competition with each other. Much like people, agencies thrive when they understand how they are evaluated, how to influence those factors that contribute to success, and the recognition and reward for top tier performance. Rather than a simple view of performance based upon a recovery rate as a percentage of total inventory, best practice suggests that performance is more accurately reflected in vintage batch liquidation and peer group comparisons to the liquidation curve. Why? In a nutshell, differences in inventory aging and the liquidation curve. Let’s explain this in greater detail. Historically, collection agencies would provide their clients with better performance reporting than their clients had available to them. Clients would know how much business was placed in aggregate, but not by specific vintage relating to the month or year of placement. Thus, when a monthly remittance was received, the client would be incapable of understanding whether this month’s recoveries were from accounts placed last month, this year, or three years ago. This made forecasting of future cash flows from recoveries difficult, in that you would have no insight into where the funds were coming from. We know that as a charged off debt ages, its future liquidation rate generally downward sloping (the exception is auto finance debt, as there is a delay between the time of charge-off and rehabilitation of the debtor, thus future flows are higher beyond the 12-24 month timeframe). How would you know how to predict future cash flows and liquidation rates without understanding the different vintages in the overall charged off population available for recovery? This lack of visibility into liquidation performance created another issue. How do you compare the performance of two different agencies without understanding the age of the inventory and how it is liquidating? An as example, let’s assume that Agency A has been handling your recovery placements for a few years, and has an inventory of $10,000,000 that spans 3+ years, of which $1,500,000 has been placed this year. We know from experience that placements from 3 years ago experienced their highest liquidation rate earlier in their lifecycle, and the remaining inventory from those early vintages are uncollectible or almost full liquidated. Agency A remits $130,000 this month, for a recovery rate of 1.3%. Agency B is a new agency just signed on this year, and has an inventory of $2,000,000 assigned to them. Agency B remits $150,000 this month, for a recovery rate of 7.5%. So, you might assume that Agency B outperformed Agency A by a whopping 6.2%. Right? Er … no. Here’s why. If we had better visibility of Agency A’s inventory, and from where their remittance of $130,000 was derived, we would have known that only a couple of small insignificant payments came from the older vintages of the $10,000,000 inventory, and that of the $130,000 remitted, over $120,000 came from current year inventory (the $1,500,000 in current year placements). Thus, when analyzed in context with a vintage batch liquidation basis, Agency A collected $120,000 against inventory placed in the current year, for a liquidation rate of 8.0%. The remaining remittance of $10,000 was derived from prior years’ inventory. So, when we compare Agency A with current year placements inventory of $1,500,000 and a recovery rate against those placements of 8.0% ($120,000) versus Agency B, with current year placements inventory of $2,000,000 and a recovery rate of 7.5% ($150,000), it’s clear that Agency A outperformed Agency B. This is why the vintage batch liquidation model is the clear-cut best practice for analysis and MI. By using a vintage batch liquidation model and analyzing performance against monthly batches, you can begin to interpret and define the liquidation curve. A liquidation curve plots monthly liquidation rates against a specific vintage, usually by month, and typically looks like this: Exhibit 1: Liquidation Curve Analysis Note that in Exhibit 1, the monthly liquidation rate as a percentage of the total vintage batch inventory appears on the y-axis, and the month of funds received appears on the x-axis. Thus, for each of the three vintage batches, we can track the monthly liquidation rates for each batch from its initial placement throughout the recovery lifecycle. Future monthly cash flow for each discrete vintage can be forecasted based upon past performance, and then aggregated to create a future recovery projection. The most sophisticated and up to date collections technology platforms, including Experian’s Tallyman™ and Tallyman Agency Management™ solutions provide vintage batch or laddered reporting. These reports can then be used to create scorecards for comparing and weighing performance results of competing agencies for market share competition and performance management. Scorecards As we develop an understanding of liquidation rates using the vintage batch liquidation curve example, we see the obvious opportunity to reward performance based upon targeted liquidation performance in time series from initial placement batch. Agencies have different strategies for managing client placements and balancing clients’ liquidation goals with agency profitability. The more aggressive the collections process aimed at creating cash flow, the greater the costs. Agencies understand the concept of unit yield and profitability; they seek to maximize the collection result at the lowest possible cost to create profitability. Thus, agencies will “job slope” clients’ projects to ensure that as the collectability of the placement is lower (driven by balance size, customer credit score, date of last payment, phone number availability, type of receivable, etc.) For utility companies and other credit grantors with smaller balance receivables, this presents a greater problem, as smaller balances create smaller unit yield. Job sloping involves reducing the frequency of collection efforts, employing lower cost collectors to perform some of the collection efforts, and where applicable, engaging offshore resources at lower cost to perform collection efforts. You can often see the impact of various collection strategies by comparing agency performance in monthly intervals from batch placement. Again, using a vintage batch placement analysis, we track performance of monthly batch placements assigned to competing agencies. We compare the liquidation results on these specific batches in monthly intervals, up until the receivables are recalled. Typical patterns emerge from this analysis that inform you of the collection strategy differences. Let’s look at an example of differences across agencies and how these strategy differences can have an impact on liquidation: As we examine the results across both the first and second 30-day phases, we are likely to find that Agency Y performed the highest of the three agencies, with the highest collection costs and its impact on profitability. Their collection effort was the most uniform over the two 30-day segments, using the dialer at 3-day intervals in the first 30-day segment, and then using a balance segmentation scheme to differentiate treatment at 2-day or 4-day intervals throughout the second 30-day phase. Their liquidation results would be the strongest in that liquidation rates would be sustained into the second 30-day interval. Agency X would likely come in third place in the first 30-day phase, due to a 14-day delay strategy followed by two outbound dialer calls at 5-day intervals. They would have a better performance in the second 30-day phase due to the tighter 4-day intervals for dialing, likely moving into second place in that phase, albeit at higher collection costs for them. Agency Z would come out of the gates in the first 30-day phase in first place, due to an aggressive daily dialing strategy, and their takeoff and early liquidation rate would seem to suggest top tier performance. However, in the second 30-day phase, their liquidation rate would fall off significantly due to the use of a less expensive IVR strategy, negating the gains from the first phase, and potentially reducing their over position over the two 30-day segments versus their peers. The point is that with a vintage batch liquidation analysis, we can isolate performance of a specific placement across multiple phases / months of collection efforts, without having that performance insight obscured by new business blended into the analysis. Had we used the more traditional current month remittance over inventory value, Agency Z might be put into a more favorable light, as each month, they collect new paper aggressively and generate strong liquidation results competitively, but then virtually stop collecting against non-responders, thus “creaming” the paper in the first phase and leaving a lot on the table. That said, how do we ensure that an Agency Z is not rewarded with market share? Using the vintage batch liquidation analysis, we develop a scorecard that weights the placement across the entire placement batch lifecycle, and summarizes points in each 30-day phase. To read Jeff\'s related posts on the topic of agency management, check out: Vendor auditing best practices that will help your organization succeed Agency managment, vendor scorecards, auditing and quality monitoring
Last month, I wrote about seeking ways to ensure growth without increasing risk. This month, I’ll present a few approaches that use multiple scores to give a more complete view into a consumer’s true profile. Let’s start with bankruptcy scores. You use a risk score to capture traditional risk, but bankruptcy behavior is significantly different from a consumer profile perspective. We’ve seen a tremendous amount of bankruptcy activity in the market. Despite the fact that filings were slightly lower than 2010 volume, bankruptcies remain a serious threat with over 1.3 million consumer filings in 2011; a number that is projected for 2012. Factoring in a bankruptcy score over a traditional risk score, allows better visibility into consumers who may be “balance loading”, but not necessarily going delinquent, on their accounts. By looking at both aspects of risk, layering scores can identify consumers who may look good from a traditional credit score, but are poised to file bankruptcy. This way, a lender can keep their approval rates up and lower risk of overall dollar losses. Layering scores can be used in other areas of the customer life cycle as well. For example, as new lending starts to heat up in markets like Auto and Bankcard, adding a next generation response score to a risk score in your prospecting campaigns, can translate into a very clear definition of the population you want to target. By combining a prospecting score with a risk score to find credit worthy consumers who are most likely to open, you help mitigate the traditional inverse relationship between open rates and credit worthiness. Target the population that is worth your precious prospecting resources. Next time, we’ll look at other analytics that help complete our view of consumer risk. In the meantime, let me know what scoring topics are on your mind.
The Consumer Financial Protection Bureau (CFPB) now has the ability to write and enforce 18 consumer protection laws that guide financial products and services. The new regulator has signaled the following issues as priorities: Clarity on how credit scores affect lender decisions: Beginning July 21, 2011, lenders were required to disclose the credit score that they used in all risk-based pricing notices and adverse action notices Shorter and simpler consumer disclosure forms: One of the first priorities is to make the terms and conditions associated with purchasing a mortgage or applying for a credit card shorter and clearer Enforcing the Fair Debt Collection Practices Act: The CFPB will enforce the Fair Debt Collection Practices Act and review current debt collector practices Learn more about the CFPB
Auditing provides the organization with assurance that all financial controls are in place to ensure that trust account funds are maintained, access to financial records at the vendor location is tightly controlled, customer data is secure, and that the vendor is in full compliance with contractual requirements (i.e., minimum account servicing requirements for issues such as vendor actions following initial placement, ongoing contact efforts, remittance processing, settlement authorizations, etc.). There are two basic auditing processes that occur from a best practices perspective. The first one is fairly common, and involves use of an on-site audit. Onsite Auditing The onsite audit is required to examine financial records involving customer transactions, accounting processes, trust accounts and remittances, IT and security for handling sensitive customer information and records, and documentation of the processes that have occurred towards customer communication, contact efforts and results. There are differences of opinion as to both the frequency of onsite audits, and whether they should be announced or unannounced. Frequency is primarily an issue of the size of the overall vendor relationship and the degree of financial risk associated with a default, typically involving the trust account and legal exposure to litigation and brand reputation risk. Most utilities should follow an annual onsite audit schedule due to size of portfolio and attendant financial exposure. While surprise audits have the advantage of reducing any opportunity by the vendor to potentially alter records to cover up what would normally be audit violations, it does result in a more time-consuming audit schedule onsite, as the vendor is unable to prepare and have documentation available. The use of substantial online documentation lessens this issue, but nonetheless, there is more work to do onsite when nothing has been captured for review in advance. The other issue is that key managers from the vendor may not be available on the dates of a surprise audit. One way in which organizations chose to resolve the issue of surprise versus planned audit is to conduct one pre-planned and announced audit annually, and a smaller scaled unannounced onsite audit annually at least 2 quarters separated from the planned audit. The use of remote auditing and monitoring lessens the requirements for onsite audits in certain areas, other than IT / Security, financial and compliance. Remote Auditing / Monitoring Remote auditing and monitoring of vendors is a stronger tool for credit grantors to improve performance of agencies, in that it combines some of the same auditing checks to ensure compliance and quality of collections with an added value of focus on performance. The best tool in the arsenal is the use of digital logging to capture the collection call between the vendor and customers. When digital logging technology first came into use, it was cost prohibitive for collection agencies, and not fully accepted by the industry due to its possible use in litigation against the agencies. Over the past decade, as the costs of deployment have lessened, and agencies became more attuned to customer satisfaction and full FDCPA compliance, more agencies have installed digital logging into their call centers. Most agencies that utilize digital logging capture every customer contact effort that results in either a right party contact, or third party contact for messages, etc. Many of those agencies will tag each of these voice records as to whether they were a right party contact or not. The intent is to be able to audit more frequently those calls that were right party contacts, so that collector skills can be assessed in terms of how they managed the customer, their ability to create and sell payment solution, and ability to negotiate successfully with the customer. Typically, an organization that is using digital logging will have an internal quality assurance team that will create a compliance audit process that establishes a number of right party and non-right party contacts per collector. These calls are typically evaluated using a scorecard approach, and used for training purposes. They might alter the frequencies of monitoring based upon the tenure of the collector, their performance levels, and the results of prior monitoring, such that sample sizes are affected. Utilities and other credit grantors should have access to the entire inventory of raw digital log files for their projects and randomly audit them remotely. These should not be “assembled” or pre-selected by the vendor, so that there is no undue influence in deciding which calls / collectors to review. If the vendor is using a QA monitoring / compliance program and separately maintains a scorecard driven monitoring process, the credit grantor should have access where those calls and evaluations related to their own customers and contacts. The intent of the process is to listen for both quality of the communication with the customer from the perspective of effectiveness, but also to ensure compliance with FDCPA and that the customer was treated with respect and appropriately. Typically, a credit grantor would establish a remote monitoring schedule where x calls across the agent pool handing their assigned portfolio are monitored and evaluated with a simple checklist. Ideally, the credit grantor should be listening to a range of 100-150 right party contacts per month, based upon overall inventory and activity, but typically no more than 1-2% of the total right party contacts per month on their customer accounts. The credit grantor should provide monthly feedback to the agency regarding the monitoring of quality and compliance, noting any compliance or policy violations, and any concerns relating to customer contact quality and performance. Other aspects of the remote auditing that occurs each month should include ensuring that all servicing requirements are met. As an example, we would expect that the agency should perform various external checks for bankruptcy, deceased, etc. before initiating contact once the file has been received from the credit grantor as a placement. These database checks should be performed within the first 24 hours once placed, and then a letter of representation should be sent to those not flagged. The initial call to the customer should also occur within 24-48 hours from placement by the credit grantor, subject to phone number availability. Skip trace processes should commence immediately on those without phone numbers. There are requirements for how often accounts are attempted for contact, and settlement authorizations. All of these requirements are subject to the remote monitoring that is performed to ensure these are met. Coming soon... Best practices for improving agency performance.
Organizations approach agency management from three perspectives: (1) the need to audit vendors to ensure that they are meeting contractual, financial and legal compliance requirements; (2) ensure that the organization’s clients are being treated fairly and ethically in order to limit brand reputation risk and maintain a customer-centric commitment; (3) maximize revenue opportunities through collection of write-offs through successful performance management of the vendor. Larger organizations manage this process often by embedding an agency manager into the vendor’s site, notably on early out / pre charge-off outsourcing projects. As many utilities leverage the services of outsourcers for managing pre-final bill collections, this becomes an important tool in managing quality and driving performance. The objective is to build a brand presence in the outsourcer’s site, and focusing its employees and management team on your customers and daily performance metrics and outcomes. This is particularly useful in vendor locations in which there are a number of high profile client projects with larger resource pools competing for attention and performance, as an embedded manager can ensure that the brand gets the right level of attention and focus. For post write off recovery collections in utility companies, embedding an agency manager becomes cost-prohibitive and less of an opportunity from an ROI perspective, due to the smaller inventories of receivables at any agency. We urge that clients not spread out their placements to many vendors where each project is potentially small, as the vendors will more likely focus on larger client projects and dilute the performance on your receivables. Still, creating a smaller pool of agency partners often does not provide a resource pool of >50-100 collectors at a vendor location to warrant an embedded agency management approach. Even without an embedded agency manager, organizations can use some of the techniques that are often used by onsite managers to ensure that the focus is on their projects, and maintain an ongoing quality review and performance management process. The tools are fairly common in today’s environment --- remote monitoring and quality reviews of customer contacts (i.e., digital logging), monthly publishing of competitive liquidation results to a competitive agency process with market share incentives, weekly updates of month-to-date competitive results to each vendor to promote competition, periodic “special” promotions / contests tied to performance where below target MTD, and monthly performance “kickers” for exceeding monthly liquidation targets at certain pre-determined levels. Agencies have selective memory, and so it’s vital to keep your projects on their radar. Remember, they have many more clients, all of whom want the same thing – performance. Some are less vocal and focused on results than others. Those that are always providing competitive feedback, quality reviews and feedback, contests, and market share opportunities are top of mind, and generally get the better selection of collectors, team /project managers, and overall vendor attention. The key is to maintain constant visibility and a competitive atmosphere. Over the next several weeks, we'll dive into more detail for each of these areas: Auditing and monitoring, onsite and remote Best practices for improving agency performance Scorecards and strategies Market share competition and scorecards
By: Kari Michel The way medical debts are treated in scores may change with the introduction of June 2011, Medical Debt Responsibility Act. The Medical Debt Responsibility Act would require the three national credit bureaus to expunge medical collection records of $2,500 or less from files within 45 days of their being paid or settled. The bill is co-sponsored by Representative Heath Shuler (D-N.C.), Don Manzullo (R-Ill.) and Ralph M. Hall (R-Texas). As a general rule, expunging predictive information is not in the best interest of consumers or credit granters -- both of which benefit when credit reports and scores are as accurate and predictive as possible. If any type of debt information proven to be predictive is expunged, consumers risk exposure to improper credit products as they may appear to be more financially equipped to handle new debt than they truly are. Medical debts are never taken into consideration by VantageScore if the debt reporting is known to be from a medical facility. When a medical debt is outsourced to a third-party collection agency, it is treated the same as other debts that are in collection. Collection accounts of lower than $250, or ones that have been settled, have less impact on a consumer’s VantageScore. With or without the medical debt in collection information, the VantageScore model remains highly predictive.
With the raising of the U.S. debt ceiling and its recent ramifications consuming the headlines over the past month, I began to wonder what would happen if the general credit consumer had made a similar argument to their credit lender. Something along the lines of, “Can you please increase my credit line (although I am maxed out)? I promise to reduce my spending in the future!” While novel, probably not possible. In fact, just the opposite typically occurs when an individual begins to borrow up to their personal “debt ceiling.” When the amount of credit an individual utilizes to what is available to them increases above a certain percentage, it can adversely affect their credit score, in turn affecting their ability to secure additional credit. This percentage, known as the utility rate is one of several factors that are considered as part of an individual’s credit score calculation. For example, the utilization rate makes up approximately 23% of an individual’s calculated VantageScore. The good news is that consumers as a whole have been reducing their utilization rate on revolving credit products such as credit cards and home equity lines (HELOCs) to the lowest levels in over two years. Bankcard and HELOC utilization is down to 20.3% and 49.8%, respectively according to the Q2 2011 Experian – Oliver Wyman Market Intelligence Reports. In addition to lowering their utilization rate, consumers are also doing a better job of managing their current debt, resulting in multi-year lows for delinquency rates as mentioned in my previous blog post. By lowering their utilization and delinquency rates, consumers are viewed as less of a credit risk and become more attractive to lenders for offering new products and increasing credit limits. Perhaps the government could learn a lesson or two from today’s credit consumer.
This paraphrased lament from Coleridge’s Rime of the Ancient Mariner may loosely reflect the predicament facing many communications companies today: afloat on vast sea of customer information, yet, lacking resources or expertise, unable to draw from it much new or actionable intelligence. Not that data mining is ever a small or insignificant task. It isn’t. Even when resources are plentiful, obstacles can loom large—especially across numerous lines of business, where risk can multiply exponentially. Siloed data, disparate customer records and other challenges also make the work difficult, as do: The dynamic nature of consumer information Inconsistent data quality and match logic throughout the enterprise The inability to reliably link active and inactive accounts failing to identify existing customer relationships at the point of application The missing link Experian has seen many communications companies overcome these issues through database linking—that is, connecting, integrating and packaging customer information from several sources into a more cohesive and accessible structure. Linking reduces risk by identifying overlap of consumers with multiple accounts across several lines of business. It also reveals duplicate records, as well as active accounts that may be current in one line of business, but delinquent or inactive in another. The benefits The broader perspective gained through database linking can drive new efficiencies and profitability in many vital areas of your business, from fraud prevention to skip tracing and collections. Should the need arise, newly linked information can also be used to locate elusive customers or former employees for legal purposes. What you can do right now Even if resources are currently limited you can still begin discovery—the process of identifying precisely what data you have, where it resides within the enterprise, how it’s being used, and by whom. This information, perhaps combined with guidance from an experienced external service, can provide a solid foundation from which to begin leveraging (and if indicated, supplementing) existing customer data. We know communications clients who have identified millions of dollars in uncollected bad debt that was linked directly to current, active customers, using a couple of “next generation” data tools. Like the old Mariner, your in-house data has a big story to tell. Question is, are you equipped to hear it? If you like this topic, click here to read the post entitled “Leveraging Internal Data to Create a Holistic View of Your Customers.
By: Kari Michel As consumers and businesses continue to experience financial hardship, the likelihood of continued bankruptcy filings is fairly strong. Data from the Administrative Office of the U.S. Courts show there were 1,222,589 filings through September, versus 1,100,035 in the first nine months of 2009. According to American Bankruptcy Institute executive director Samuel J. Gerdano, \"As the economy looks to climb out of the recent recession, businesses and consumers continue to file for bankruptcy to regain their financial footing. With unemployment hovering near 10% and access to credit remaining tight, total filings in 2010 will likely exceed 1.6 million.\" Given the bankruptcy trends, what can lenders do to protect themselves from acquiring consumers that are at risk for filing for bankruptcy? Bankruptcy scores are available, such as Bankruptcy PLUS, and are developed to accurately identify characteristics specific to a consumer filing for bankruptcy. Bankruptcy scores are typically used in conjunction with risk scores to set effective acquisition strategies. _________________ Source: http://www.collectionscreditrisk.com/news/bankruptcy-filings-up-3003998-1.html
By: Wendy Greenawalt Given the current volatile market conditions and rising unemployment rates, no industry is immune from delinquent accounts. However, recent reports have shown a shift in consumer trends and attitudes related to cellular phones. For many consumers, a cell phone is an essential tool for business and personal use, and staying connected is a very high priority. Given this, many consumers pay their cellular bill before other obligations, even if facing a poor bank credit risk. Even with this trend, cellular providers are not immune from delinquent accounts and determining the right course of action to take to improve collection rates. By applying optimization, technology for account collection decisions, cellular providers can ensure that all variables are considered given the multiple contact options available. Unlike other types of services, cellular providers have numerous options available in an attempt to collect on outstanding accounts. This, however, poses other challenges because collectors must determine the ideal method and timing to attempt to collect while retaining the consumers that will be profitable in the long term. Optimizing decisions can consider all contact methods such as text, inbound/outbound calls, disconnect, service limitation, timing and diversion of calls. At the same time, providers are considering constraints such as likelihood of curing, historical consumer behavior, such as credit score trends, and resource costs/limitations. Since the cellular industry is one of the most competitive businesses, it is imperative that it takes advantage of every tool that can improve optimizing decisions to drive revenue and retention. An optimized strategy tree can be easily implemented into current collection processes and provide significant improvement over current processes.
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