SOLUTIONS TO RECOVER AND COLLECT FROM THE CONSUMER
SAFARI INTO CONSUMER CREDIT – OCTOBER 2015
John GardeHead: Collections and Recoveries Solutions
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
How fit for Purpose are we to influence the future?
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
The 5 ‘P’s’ – ‘’What Price Paradise?” Consider your Capability & Maturity Doing the Basics Brilliantly
- Pre-Delinquency & Risk Segmentation
- Treatments
- Campaign Management
- Intelligent Insights
From Good to Great- Data Consumption
Agenda
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
The 5 P’s: What Price Paradise?
Prevention (Pre Delinquency)
Prediction (Risk Segmentation)
Policy(Treatments)
Purify (Campaign
Management)
Pathology (Yields,
Penetration and Activation)
The 5 ‘‘P’s’’
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
Consider your Capability & Maturity
CMM
Strategy
People
Process
Tech
• Business Planning• Strategy Design• Analytics• Portfolio Yields• Reputation Risk• Policy Framework• Regulatory
Framework
• Leadership Competency
• Performance Management
• Role profiling• Capacity Planning• Reward
Management• Training
• Process Leadership• Audit Enterprise• Stakeholder Management• Productivity Management• Vendor Management• Cost Management• Management Information• Policy Groups• Dialler Optimisation
• Systems Architecture• Collections & Recovery
Workflow• Strategy Software
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
FollowerFails to exceed the
minimum capability and maturity standards in more than 50% of the
categories
Performance consistently does not
meet expectations and/or Performance does not fully meet
expectations
LeaderMeets the minimum
capability and maturity standards in more than 70% of the categories
Performance generally meets expectations and
occasionally exceeds expectations
VisionaryMeets the minimum
capability and maturity standards in more than 90% of the categories
Performance consistently exceeds
expectations
Consider your Capability & Maturity?
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
Consider your Capability & Maturity?
• No risk segmentation• Practitioner management
criteria unclear• No defined yield
expectations• Basic management
information• No business intelligence
to shape allocation and strategy
• Risk segmentation based on internal data
• Generic practitioner management criteria
• Yield rather than activation expectations understood.
• Basic regulatory and compliance framework
• Reputation risk policy• Generic contingency tariffs • Business allocation supported
by comparative performance reviews
• Good, insightful Management Information
• Defined propensity to pay based on internal and external data
• Practitioner panel supports concentration risk profile
• Clearly defined yield and activity metrics and consistently tested against industry benchmarks
• Yield outcomes and recovery strategies based on propensities to pay
• Robust framework for business allocation and withdrawal
• Economic Selling Point defined and implemented
• Tiered contingency tariffs to incentivise required yields
• Hybrid of recovery processes based on commercials
• Superior governance and reputation risk framework
• Optimum suite of MI
Follower Leader Visionary
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
Doing the Basics Brilliantly: Pre-delinquency & Risk Segmentation
Profile:
Requires a predictive capability across
all components of the delinquent life
cycle.
Below par collection and recovery
yields and is looking to create crisper
treatments in response to differing risk
profiles.
Requires newer generation scorecards
with more predictive risk variables.
Where existing risk scores are primarily
driven by internal behavioural
information only.
Variable Source ContributionPercentage of months where payment > 0 in the last 6 months
Client 0.128
Consecutive no change in delinquency in the last 12 months
Client 0.085
The number of open satisfactory trade lines that have been open for 24 months or more
Bureau 0.068
Ratio of overdue balances to monthly instalment on open trade lines
Bureau 0.053
Current delinquency level Client 0.050
Maximum consecutive decrease in balance in the last 6 months
Client 0.036
Maximum delinquency level in the last 12 months for trade lines that have been open less than 12 months
Bureau 0.031
PTP kept in the last 6 months as a %of PTP made in the last 6 months
Client 0.030
The number of times 1+ delinquent in the last 6 months across all trade lines
Bureau 0.011
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
Doing the Basics Brilliantly: Pre-delinquency & Risk Segmentation
Benefits:
Enhanced collection and recovery
yields.
Synergy between strategy and
tilted treatments.
Ability to obtain aspirational yields
in different risk segments of the
portfolio.
Variable Source Contribution
Percentage of months where payment > 0 in the last 6 months
Client 0.128
Consecutive no change in delinquency in the last 12 months
Client 0.085
The number of open satisfactory trade lines that have been open for 24 months or more
Bureau 0.068
Ratio of overdue balances to monthly instalment on open trade lines
Bureau 0.053
Current delinquency level Client 0.050
Maximum consecutive decrease in balance in the last 6 months
Client 0.036
Maximum delinquency level in the last 12 months for trade lines that have been open less than 12 months
Bureau 0.031
PTP kept in the last 6 months as a %of PTP made in the last 6 months
Client 0.030
The number of times 1+ delinquent in the last 6 months across all trade lines
Bureau 0.011
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
Low Medium HighGross Monthly Income Prediction 9 148 7 683 7 507 NLR Compuscan Score 637 609 601 CPA Monthly instalment 3 088 2 102 1 922 NLR Monthly instalment 1 929 2 095 2 212 Number of judgements L5 years 0.09 0.21 0.29 Value of judgements L5 years 1 404 2 749 3 686
Current delinquency level 0.2 2.2 2.9Percentage of months where payment > 0 L6m 57% 33% 10%Max. delq. L12 months (tradelines open < 12m) 1.6 5.7 7.5Consecutive no changes in delq. L12m 3.4 0.4 0.2No. of open curr. satisfactory tradelines open for 24m+ 2.9 1.4 1.0Ratio overdue bal. to monthly instal. on open tradelines 1.1 2.9 3.7Max. consecutive decrease in bal L6m 2.2 1.3 0.3PTP kept L6m as a % of PTP made L6m 11.9% 23.3% 12.2%No. of times 1+ delq L6m across all tradelines 1.9 5.7 6.3
Score
card
vari
able
sDoing the Basics Brilliantly: Pre-delinquency & Risk Segmentation
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
RehabilitationX – 60 Days
Repayment61 – 120 Days
ICURepayment150 Days
Recovery180 Days +
Defined Treatments
Defined Teams
Defined Handovers
Defined Metrics
Doing the Basics Brilliantly: TreatmentsBenefits:
Synergy between risk strategy and operational
execution.
Enhanced collection and recovery yields.
Reduced cost to collect and recover.
Optimised Dialler campaign management.
Profile:
Lack of synergy between collection and recovery strategy design and
operational execution.
Below par collections and recovery risk strategy and treatment performance.
Immature treatment frameworks that do not create a compelling ‘alternatives
to consequence’ pathway for defaulting clients.
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
Pre and Post Write Off Broken PTP Call Script 1 Pre and Post Write Off Broken PTP SMS Pre Write Off High Propensity Call Script 2 Pre Write Off (HP SMS 1) Post Write Off High Propensity Call Script 5 Post Write Off (HP SMS 2)
Key script points:
- Agent spoke to customer on <PTP Made Date>- Customer agreed to pay <PTP Amount> by <PTP Date>- Assisted customer by sending two PTP reminder SMS's- Remind the debtor that he/she has a history of failed repayment promises.If they didn't receive the SMS's confirm mobile number- Why did customer fail to honour the agreed payment?- What will the customer do to fix the problem and remind the debtor that there is a repayment or settlement option (wait for the customer to offer a solution)
What consequence options are available?
- If Status 4 and broken PTP - refer to credit score compromise, additional collection costs, that debtor will be listed at the credit bureau and the fact that debtor's other credit providers will be aware of the account status.- If Status 5 and broken PTP - refer to credit score compromise, additional collection costs, that debtor will be listed at the credit bureau and legal action will be considered to recover the outstanding amount.
Despite previous SMS's you have failed to pay <PTP Amount> by <PTP Date> on your <Brand> account. Call <ACS (External Debt Collector)> to prevent
further costs and legal action.
Account is in arrearsNumerous SMS's sent (give detail)Previous PTP's made (give detail)Why have they defaulted despite undertakings?Confirm contact details and stress it is customers responsibility to maintain contact details
Are they employed and confirm employment/source of income.
Consequences:Credit score compromise.Ability to access future credit.External Debt Collector costs for clients account.
Payment options:Repayment: Up to 3 months to settle in full.Settlement: Lump sum repayment (as per the NPV calculation) in full and final settlement.
Your <Brand> account is <Arrears> in arrears. You need to pay immediately to prevent your credit profile being compromised.
Account is in arrearsNumerous SMS's sent (give detail)Previous PTP's made (give detail)Why have they defaulted despite undertakings?Confirm contact details and stress it is customers responsibility to maintain contact details
Are they employed and confirm employment/source of income.
Consequences:Credit score compromise.Ability to access future credit.External Debt Collector costs for clients account.Credit Profile compromised and listed at the Bureau. Attorneys will be engaged if there is further default - cost for debtors account plus judgement and potential attachment of movebale or immovable property.Payment options:Repayment: Up to 4 months to settle in full.Settlement: Lump sum repayment (as per the NPV calculation) in full and final settlement.
No payment was received on your <Brand> account which is now in arrears. Pay <Arrears> tomorrow to avoid being handed over to an External Debt Collector.
Pre Write Off (HP SMS 3) Post Write Off (HP SMS 4)
Despite previous SMS your <Brand> account is <Arrears> in arrears. The credit bureau will be notified unless an immediate payment is received.
You have failed to respond to our SMS regarding your <Brand> account which is <Arrears> in arrears. Your account has been handed to an External Debt Collector -
costs for your account.
Pre Write Off (HP SMS 5) Post Write Off (HP SMS 6)
Despite previous SMS your <Brand> account is <Arrears> in arrears. The credit bureau has been notified. You must pay immediately to remove the
credit bureau notification.
You have failed to respond to calls and SMS’s regarding your <Brand> account which is <Arrears> in arrears. Your account has been identified for legal action and will be
handed accordingly to an Attorney - costs for your account.
Pre Write Off Medium Propensity Call Script 3 Pre Write Off (MP SMS 1) Post Write Off Medium Propensity Call Script 6 Post Write Off (MP SMS 2)
Account is in arrearsNumerous SMS's sent (give detail)Previous PTP's made (give detail)Why have they defaulted despite undertakings?Confirm contact details and stress it is customers responsibility to maintain contact details
Are they employed and confirm employment/source of income.
Consequences:Credit score compromise.Ability to access future credit.External Debt Collector costs for clients account.
Payment options:Repayment: Up to 6 months to settle in full.Settlement: Lump sum repayment (as per the NPV calculation) in full and final settlement.
Your <Brand> account is <Arrears> in arrears. You need to pay immediately to prevent your credit profile being compromised.
Account is in arrearsNumerous SMS's sent (give detail)Previous PTP's made (give detail)Why have they defaulted despite undertakings?Confirm contact details and stress it is customers responsibility to maintain contact details
Are they employed and confirm employment/source of income.
Consequences:Credit score compromise.Ability to access future credit.External Debt Collector costs for clients account.Credit Profile compromised and listed at the Bureau. Attorneys will be engaged if there is further default - cost for debtors account plus judgement and potential attachment of movebale or immovable property.Payment options:Repayment: Up to 8 months to settle in full.Settlement: Lump sum repayment (as per the NPV calculation) in full and final settlement.
No payment was received on your <Brand> account which is now in arrears. Pay <Arrears> tomorrow to avoid being handed over to an External Debt Collector.
Pre Write Off (MP SMS 3) Post Write Off (MP SMS 4)
Despite previous SMS your <Brand> account is <Arrears> in arrears. The credit bureau will be notified unless an immediate payment is received.
You have failed to respond to our SMS regarding your <Brand> account which is <Arrears> in arrears. Your account has been handed to an External Debt Collector -
costs for your account.
Pre Write Off (MP SMS 5) Post Write Off (MP SMS 6)
Despite previous SMS your <Brand> account is <Arrears> in arrears. The credit bureau has been notified. You must pay immediately to remove the
credit bureau notification.
You have failed to respond to calls and SMS’s regarding your <Brand> account which is <Arrears> in arrears. Your account has been identified for legal action and will be
handed accordingly to an Attorney - costs for your account.
Trace SMS
Your <Brand> account is now being traced using data from other credit providers. Call <ACS (External Debt Collector) to prevent legal action and further costs.
Pre Write Off Low Propensity Call Script 4 Pre Write Off (LP SMS 1)
Account is in arrearsNumerous SMS's sent (give detail)Previous PTP's made (give detail)Why have they defaulted despite undertakings?Confirm contact details and stress it is customers responsibility to maintain contact details
Are they employed and confirm employment/source of income.
Consequences:Credit score compromise.Ability to access future credit.External Debt Collector costs for clients account.Potential for Attorney Litigation, legal costs and judgement.Payment options:Repayment: Up to 9 months to settle in full.Settlement: Lump sum repayment (as per the NPV calculation) in full and final settlement.
Your <Brand> account is <Arrears> in arrears. Your account will be placed on record with the credit bureau profile being compromised.
PTP SMS 1
Confirmation that you have agreed to pay <PTP Amount> by <PTP Date> on your <Brand> account. Your account is being monitored to confirm payment.
Pre Write Off (LP SMS 2)
Despite previous SMS your <Brand> account is <Arrears> in arrears. The credit bureau has been notified. You need to make an immediate payment
to withdraw this notice.
PTP SMS 2
Reminder that you have agreed to pay <PTP Amount> by <PTP Date> on your <Brand> account. Your account is being monitored to confirm payment.
Pre Write Off (LP SMS 3)
Despite previous SMS your <Brand> account is <Arrears> in arrears. The credit bureau has been notified. Your account will be handed to an External
Debt Collector for collection - costs for your account.
PTP SMS 3
Thank for for your payment. You have taken the first step to rehabilitaing your account. If you maintain your agreed payments, we will remove your Credit Bureau notification.
HP/MP LETTER 1
Dear Mr/s (Customer Surname)
(Division) Account number: (account number) – IN ARREARS
(Division) advises that your account is currently R (amount) in arrears and that the last payment received from you was credited to the account on the (date).
As you will acknowledge, this is not the first time (Division) has had to discuss arrears on your account with you and unfortunately, unless we receive a payment of R (amount) by (date) we will instruct an Attorney to recover the outstanding balance as well as attachment of any assets you might own.
Not only could you lose important assets, your credit profile both with (Division) and the Credit Bureaus will be negatively impacted and you will not be able to raise credit for the foreseeable future. In addition your credit profile with your other credit providers will be negatively affected You also need to take note that these constant arrears are adding additional interest and costs to your outstanding balance.
(Division) requires that you repay R (amount) by (date) and should you fail to meet this repayment commitment, we will we will instruct an Attorney to proceed against you with immediate effect.
Yours faithfully
(Division)
PRE DELINQUENCY SCRIPTS & SMS
EARLY STAGE SCRIPTS, IVR &
SMS LATE STAGE SCRIPTS, SMS &
LETTERS
Doing the Basics Brilliantly: Treatments
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
CALENDAR MONTH
Campaign Description Treatments 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Broken PTPs
Accounts with broken PTP in effect
Calls CALL SCRIPT 1
SMS BROKEN SMS 1
High Propensity
to Pay
Pre Write-Off (Status 4 - 5)
Calls
CALL SCRIPT 2
SMS HP SMS 1 HP SMS 3 HP SMS 5
Medium Propensity
to Pay
Pre Write-Off (Status 4 - 5)
Calls
CALL SCRIPT 3
SMS MP SMS 1 MP SMS 3 MP SMS 5
Low Propensity
to Pay
Pre Write-Off (Status 4 - 5)
Calls
CALL SCRIPT 4
SMS LP SMS 1 LP SMS 2 LP SMS 3
High Propensity
to Pay
Post Write-Off (Status 6+)
Calls
CALL
SCRIPT 5
SMS HP SMS 2 HP SMS 4 HP SMS 6
HP Letter 1
Medium Propensity
to Pay
Post Write-Off (Status 6+)
Calls
CALL
SCRIPT 6
SMS MP SMS 2 MP SMS 4 MP SMS 6
MP Letter 1
Pre - Trace All accounts that have not been
contacted during preview phase of
campaign
Calls
SMS TRACE SMS TRACE SMS TRACE SMS
In Effect PTPs
PTP Confirmation SMS PTP SMS 1
PTP Reminder SMS
PTP SMS 2
In Effect PTPs
PTP Acknowledgement
SMS
PTP SMS 3
Campaigns Treatments Timing Tone
Profile:
Declining collection and recovery yields.
Wanting to optimise strategy and
operational execution.
Wanting to link Dialler campaign effort
and potential yields.
Wanting to optimise capacity to work
those components of the portfolio
which will yield the best relationship in
terms of effort
Wanting to optimise the cost and
investment in telephony relative to
expected/required portfolio yields.
Doing the Basics Brilliantly: Campaign ManagementDialler Campaigns
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
Doing the Basics Brilliantly: Campaign Management
Benefits:
Enhanced collection and
recovery yields.
New Dialler Campaign
insights and reporting
platform.
Capability to maximise
effort/yield equation.
Knowing what accounts
to work and when to
stop working accounts
beyond a declining effort
threshold.
CALENDAR MONTH
Campaign Description Treatments 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Broken PTPs
Accounts with broken PTP in effect
Calls CALL SCRIPT 1
SMS BROKEN SMS 1
High Propensity
to Pay
Pre Write-Off (Status 4 - 5)
Calls
CALL SCRIPT 2
SMS HP SMS 1 HP SMS 3 HP SMS 5
Medium Propensity
to Pay
Pre Write-Off (Status 4 - 5)
Calls
CALL SCRIPT 3
SMS MP SMS 1 MP SMS 3 MP SMS 5
Low Propensity
to Pay
Pre Write-Off (Status 4 - 5)
Calls
CALL SCRIPT 4
SMS LP SMS 1 LP SMS 2 LP SMS 3
High Propensity
to Pay
Post Write-Off (Status 6+)
Calls
CALL
SCRIPT 5
SMS HP SMS 2 HP SMS 4 HP SMS 6
HP Letter 1
Medium Propensity
to Pay
Post Write-Off (Status 6+)
Calls
CALL
SCRIPT 6
SMS MP SMS 2 MP SMS 4 MP SMS 6
MP Letter 1
Pre - Trace All accounts that have not been
contacted during preview phase of
campaign
Calls
SMS TRACE SMS TRACE SMS TRACE SMS
In Effect PTPs
PTP Confirmation SMS PTP SMS 1
PTP Reminder SMS
PTP SMS 2
In Effect PTPs
PTP Acknowledgement
SMS
PTP SMS 3
Campaigns Treatments Timing Tone
Dialler Campaigns
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
Portfolio Financial Tactical
• Portfolio size• Value (balance)• Volume
• Delinquency construct• Recency construct• Roll rates• Collections performance
• Amount collected• Payment as % of total
due• Policy groups
• Volume• Recovery performance
• Early warnings• Vintages• Risk classification• First payment defaulters
• Third party management• Value/volume per EDC• Recovery amount/rate
• Bad debt provision (balance sheet)
• Write-offs• Post write-off recoveries• Bad debt provision (income
statement charge)• EDC commissions paid• Total cost to collect R1
• Penetration (worked)/Activation (paid) stats
• % of accounts• % of payments
• Dialler performance• Total online time• Active time• Call intensity (calls per
account)• RPC rate (call/account
level)• PTP Rate
• PTP performance• Value/Volume due• Value/Volume kept rate
• Restructure performance• Value/volume of
restructures• 3M/6M performance
• Debit order tracking• SMS tracking• Trace statistics
Portfolio Financial TacticalDoing the Basics Brilliantly: Intelligent Insights
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
From Good to Great: Data Consumption
Credit Bureau 1
Credit Bureau 2
Credit Bureau 3
Other 3rd party
Collections Management System
Dialler
Internal Behavioural Data
• Dead/alive?• Married?• Home/business owner?• Paying elsewhere?• Income estimation?• Contact details?
• Collector actions• PTP data• Kept/broken promises• Special statuses• Legal data
• Campaign details• Telemetry data• Contact details• Productivity
• Payment history• Behavioural scores• Other products held• Customer details
Collection Leaders are making use of decision and data service hubs
These hubs are able to connect to 3rd parties, internal systems and able to store structured data
Many of these systems are used also in the originations and account management spaces too
Creates risk segmentation insights Propensity to roll and pay Right time to call Litigation warranted? Economic Outsource Point? Portfolio activation rates Portfolio penetration rates
Work Wonders. © 2015 Principa Decisions (Pty) Ltd.
Understand your current capability and maturity.
Confront dominant logic about this industry!
Develop a roadmap to ensure that the basic’s are done brilliantly.
Create a culture of ‘test and learn’.
If it moves, measure it!
Consider what will take your organisation from ‘good to great’.
Be prepared to make mistakes!
In Summation
THANK YOU!
John GardeHead: Collections and Recoveries Solutions