Category Archives: Collections & Recovery

Collections & Recovery IFRS 9: Three Critical Areas of Focus for Collectors

May152017

My colleague Bruce Curry recently published a blog on “IFRS 9 & Collections – The 31 Day Time Bomb”. During my various client interactions, I can see that many businesses are developing and testing the impairment models that will give them a good understanding on the financial impacts that the new standard will have on their balance sheet performance, but the operational implications are currently less clear. From a practical perspective, I believe there are three areas across collections that should be reviewed to mitigate the increases in impairment that are expected to result from IFRS 9: 1. Pre-arrears strategy – These strategies have been a topic of conversation for a number of years and their success has been mixed. IFRS 9 means that it is now more important than ever to adopt a “prevention rather than cure” approach in mitigating the risk, and flow, of accounts into Stage 1... [Read More]

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Collections & Recovery What is it Costing You to Collect? Are the Odds in Your Favor?

May042017

If you are considering a new collections platform, you are probably already aware that the upfront price isn’t the only cost that you will pay over the lifetime of the system. How much time and effort you actually want to spend calculating the potential total cost of ownership (TCO) as part of your purchase is an individual choice. Many organizations tend to generalize, knowing that TCO isn’t an exact science, and that a new system’s benefits tend to outweigh other factors. As a starting point you should spend some time understanding where common, easily-avoided pitfalls lurk. With this knowledge you will be able to make the right choices that can shift the TCO odds in your favor. Two areas—a platform’s flexibility and security—can have a huge impact on an organization’s exposure to risk and result in unforeseen expenses if not properly supported. Flexibility The ability for a platform to easily... [Read More]

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Collections & Recovery Three Top Regulatory Themes Emerge from Debt Collection Panel

Three Regulatory Themes
Apr102017

I recently moderated a regulatory panel discussion before a group of nearly 100 collections and recovery (C&R) professionals at the FICO® Debt Manager™ User Group Forum. The esteemed panel consisted of a mix of veteran policy and business leaders, including: Maria Wolvin, Vice President and Senior Counsel of Regulatory Affairs at ACA International; Terry Collins, Collections and Recovery Manager at Trustmark National Bank; and Lucia Lebens, Vice President of Government Relations and Public Policy at Navient. Much of the discussion focused on what C&R professionals can expect in the new US regulatory environment that has emerged in the wake of the November elections. While our experts spoke on a number of hot-button topics, three main themes emerged. CFPB Debt Collection Rulemaking Will Likely Move Forward The panel discussed the CFPB’s continued focus on developing new debt collection regulations. The CFPB has indicated that its next pre-rule action will be the... [Read More]

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Collections & Recovery IFRS 9 and Collections – The 31-Day Time Bomb

IFRS 9 as digital clock display
Apr052017

IFRS 9 may just be a new accounting standard, but accountants aren’t the only people scrambling to meet the January 2018 deadline. If you’re involved with consumer debt in any way, this regulation is going to change your world. (Unless, of course, you’re in the US – the name of the game for you will be CECL.) I recently presented a webinar on how IFRS 9 will impact collections, and in this post I’ll share two changes that will have a massive impact on everyone in debt collection, from in-house collectors to DCAs to debt purchasers. At 31 Days, Everything Changes When accounts roll from Stage 1 (low risk) to Stage 2 (impaired risk), it’s a big deal. 31 days is a hard trigger that sends an account from Stage 1 to Stage 2. Impairment for Stage 1 accounts is 12-month expected credit losses. Impairment for Stage 2 and 3 accounts... [Read More]

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Collections & Recovery Why GDPR Is a Four-Letter Word for Collectors

GDPR logo
Mar202017

Collectors in Europe who have been ignoring GDPR because it was risk’s problem, or the CIO’s problem, or the compliance team’s problem should think again. GDPR could well be a four-letter word for collections. You’re probably familiar with the General Data Protection Regulation, Europe’s attempt to create a single, enforceable standard to protect the freedom and rights of EU citizens. But you might not have thought much about it from a collections perspective. I just presented a webinar on GDPR in collections, so I’ve got an hour’s worth of material if you want to listen to it. However, I’ll keep it brief here and just give you 11 takeaways to ponder: 1. It applies from 25 May 2018. You have a year to get comfortable with it. 2. It’s not just about social media data. That’s how it started, but it broadened into an all-encompassing piece of regulation by the time it... [Read More]

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Collections & Recovery What We Heard When UK Collectors Sat Down

Word balloons with key themes
Feb082017

Last week I sat down with around 20 executives who manage collections for both lenders and debt collection agencies in the UK, to discuss what’s happening in the industry and how analytics — FICO’s specialty — can help. I will discuss my takeaways from this meeting in a separate post, but first I want to share some of the statements made during this meeting. If you ask me, the diversity of opinions in this group, and the participants’ clear desire to improve collections and customer relationships, show how much the industry is changing. This was not your father’s back-room chat on how to squeeze people for cash. This was a group of highly engaged professionals who understand regulations, customer needs and technology as well as anyone in the lending industry. Here are some quotes that should get anyone in the collections industry thinking. Regulation “The FCA is asking, ‘Are we... [Read More]

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Collections & Recovery How Thames Water Cut Bad Debt by 11% in a Year

Thames Water logo
Feb072017

Think of collections and most people think of angry phone calls and repossessed cars and homes. But what happens when you provide an essential service you can’t switch off? That’s the case for Thames Water, the UK’s largest provider of water and wastewater services, which uses technology to increase results. Thames Water has reduced bad debt by 11% in the last 12 months by innovating its collections process using FICO® Debt Manager™ solution. For its achievement, Thames Water has been awarded the FICO Decisions Award for Debt Management. “The introduction of Debt Manager 9 has allowed us to design our treatment strategies from the bottom-up — rather than building strategies to the system limitations, we built them to the business and customer needs,” said Ross Betts, Thames Water’s collections system, strategy & segmentation manager. “This program has been hugely successful, not least because it managed to implement several ambitious goals... [Read More]

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Collections & Recovery Medical Collections Rates Highest for Consumers Aged 24-46

Medical-Collections-by-Age
Jan112017

Since medical costs often increase as we age, one might expect that the rate at which medical bills are unpaid and then sent to collections companies would also increase with age – at least until age 65 when US citizens qualify for Medicare. New FICO research shows that not this not the case. Looking at credit bureau data as of July 2016, medical collections reporting – both paid and unpaid collections greater than $99 – breaks down by age as follows: While the peak of this curve occurs at age 27, the rate of consumers with medical collections is uniformly high for ages 24 to 46. Over a quarter of consumers in that age range have at least one such collection showing on their bureau report. After age 46, we see the rate slowly drop, and as expected, it drops substantially after age 65. Part of the issue stems from... [Read More]

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Collections & Recovery FICO Survey: APAC Consumers Taking Longer To Pay Bills

Dec222016

It’s Christmas time again and apart from the jingling of bells it’s also a time for the juggling of bills. And apparently, that’s getting harder than ever in Asia Pacific. That was the firm message we got from our Asia Pacific collections managers when we polled them about what had been happening with their customer base over 2016. Three in five respondents from banks, telcos, and utilities revealed that their customers have taken longer time to pay their bills in the past year. The 60-days past-due segment has seen the highest growth according to 41 percent of respondents. 72 percent of collections managers also registered an increase in the number of first-time delinquents. This is in keeping with figures out earlier this year from Moody’s that reported household debt in Asia has grown at an average of 13.5 percent a year. Our survey, conducted last month at our FutureCollect event... [Read More]

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Collections & Recovery FICO Research: Student Loan Explosion Hurts Other Borrowing

Writing on chalkboard
Oct202016

The student loan crisis in the US is getting much worse — student loan debt is over $1.3 trillion and is increasing by more than $2,700 per second. Lenders cannot ignore the impact of that debt on individual borrowing. Our latest research shows that: The number of US consumers aged 25-34 with student loan debt of at least $50,000 doubled from 2005 to 2015. During that same time, the average student loan debt across all age 25-34 consumers also doubled — by comparison, average credit card debt and mortgage debt for this population actually fell. While the number of consumers age 25-34 with student loans grew from 2005 to 2015 (from 27% of this population to 40%), there are fewer 25-34 year olds with mortgages or credit cards than 10 years ago.   In fact, our data shows that people with active student loans are far less likely to have... [Read More]

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