vision 2014: members-in-trouble-collections-strategies-for-credit-unions

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Members in trouble — collections strategies for credit unions

Bill Butler Experian

Alex Siotos Experian

#vision2014

2 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Life events happen to the best of us How will your members remember you?

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Balancing act

► What drives decisions today?

Best practices and case studies

► Compliance in action

► Member retention

► Optimize resources and maximize revenue

Question and answer

Agenda


Balancing act—what

drives decisions

today?


1) Compliance

Regulations, best practices, and fines

2) Member retention

Which Members to invest in

Importance of credit education

3) Optimizing resources and revenue

Segmenting and prioritizing accounts to improve efficiency

Eliminate wrong party contacts and acquire valuable information for quick actionable opportunities

The new balance beam – collection, retention… …and “compliance”

Refining your focus:


Best practices:

Compliance in action


Compliance Where does it fit into collections?

Evaluate Prioritize Locate Review Monitor

Member life cycle thru collections

Compliance


Servicemembers Civil Relief Act (SCRA)


Telephone Consumer Protection Act (TCPA)


Account suppression or filtering for special handling:

Compliance is needed for all accounts

Portfolios to be screened monthly

Address SCRA, TCPA, FDCPA, and more

Types of searches: Department of Defense active duty military, bankruptcies, deceased, fraud address indicator, cell phone identification and verification

How do I protect my credit union?


Dynamic nature of data:

Individuals move ~12 times per lifespan (average)

About 42M Americans (14%) move each year

There are over 4M births, 2M deaths, 2M marriages, and 1M divorces

Socials inexact due to shared SSN, fraud and key entry errors not caught by algorithms

Over 5% use “Jr.” and “Sr.”

40%+ consumers now use cell phone as their primary phone

► Age groups do vary

Continued compliance


Contact strategies

Cell phone

► Identify the phone numbers in your database that are cell “vs.” residential land line or other types

● Manually dial cells

● Ask for permission to continue to call cell

● Document the members response



Contact strategies

Wrong party calling

► Consider phone cutoff score to increase confidence and performance

► Once you have verified-eliminate it quickly from your calling campaign

● Protect yourself from lawsuits

Right party calling

► Determine the “right” number of calls during what time period



50K active accounts

Nationwide coverage

Goals: Verify good address / phone data, standardize data, separate landline from cells for compliance, and append new information

Results:

Data hygiene example:

Client case study results Contact solutions

Phone verification = 62% / address verification = 70%

Hit rate = 79% with new information

► 78% with one or more new phones

► 12% new addresses

Phones: 53% landline / 47% cells and non-published


Best practices:

Member retention


Strengthen member relations through consumer credit management

Enhance your ability to drive member satisfaction

► Meet the needs of credit challenged members

► Create a positive experience for members that don’t understand how credit works

► Put customers on the path to achieving their financial goals

Member retention Customer relations are constantly changing

An informed and educated consumer who has the tools to better

manage their financial health is a great long term member


Member education

Explanation and copy of personal credit report

Review of each section within the credit report

Discuss different types of inquiries

Discuss potentially negative and positive items

Potentially fraudulent accounts and attempts

Credit report basics

Personal VantageScore®

Explanation and review of score factors

How do creditors utilize scoring models?

Examples of actions that may improve my VantageScore®

Benchmark scores for the nation, my state and region

Credit score

Tips and information for maintaining a healthy credit profile

Data management tips

Links to online resources for credit management and life events information

Value add services

http://www.experian.com/consumer-information/credit-educator-form-video.html


Educated consumers are reacting to the education they have received and see shorter timelines to reach positive improvements

Member education Analysis results

Action Educated

group Control group

Average VantageScore® 3.0 +14 pts +/- 0 pts

Number of credit inquiries -9% 0%

External collection trades -21% +1%

Percent of trades ever delinquent in last 12 months - 7% 0%

Trades voluntarily closed (3 months after course) +10% -8%

Number of open revolving bankcard trades >75%

utilization (3 months after course) -13% -4%

Data shown is 12 months post observation, unless otherwise noted


Best practices:

Optimize resources

and maximize revenue


Scoring

► Recovery – highest ability to pay versus least ability to pay

► Resource management

Additional segmentation with attributes

Event based notification

► Trigger events vs. real-time or batch processing to reduce effort and improve collections

Optimize resources and maximize revenue Best practices throughout the life cycle


6-month performance window

Performance definition:

► Good – any payment over the performance window

► Bad – no payment over the performance window

Average liquidation rate: 2.1%

Total records: 62,097

Type of debt: Auto

Placement status: fresh, first, second, third, quad, other

Average balance ~ $8,021

Scoring in action Auto portfolio analysis


Auto debt type validation Cumulative $ recovered

% of total accounts worked

% o

f Tota

l $ c

olle

cte

d

0%

20%

40%

60%

80%

100%

PriorityScore Incidence

PriorityScore Dollar

50/50 Chance Odds

Two times the performance

without a score


6-9 month performance on placements

Performance definition

► Good – any payment over the performance window

► Bad – no payment over the performance window

Average liquidation rate: 1.3%

Total records: 1,493,111

Type of debt: credit card

Placement status: fresh, first, second, third, quad, other

Average balance ~ $3,191

Scoring in action Credit card portfolio analysis


Credit card debt type validation Cumulative $ recovered

% of total accounts worked

% o

f to

tal $

colle

cte

d

0%

20%

40%

60%

80%

100%

PriorityScore Incidence

PriorityScore Dollar

50/50 Chance Odds

Collected ~70% vs. ~30% with the

same effort


By overlaying additional attributes, Experian has seen appreciable lift over and above the use of a score alone

Further separation of recovered and non-recovered accounts

Customization without the added time and expense of a custom model

The attributes and thresholds applied will vary widely depending on dollar amounts, placement level, type of account being worked, etc.

Segmentation

Attributes with thresholds or matrixed score

Score only splits

Total population


Segmentation lift over score only

17% Lift


Top-20 premier attributes

Variable Rank

Percentage of trades ever 90 or more days delinquent or derogatory 1

Total number of mortgage type trades presently 90-180 days delinquent reported in the last 6 months 2

Total number of mortgage type trades presently 60 days delinquent reported in the last 6 months 3

Total number of mortgage type trades presently 30 days delinquent reported in the last 6 months 4

Total number of unsatisfied charge-off trades 5

Total number of trades ever 90 or more days delinquent or derogatory in the last 24 months, including external collections 6

Total number of external collections with a balance > $250 7

Total number of trades presently satisfactory that were ever 30 or more days delinquent or derogatory, including external

collections 8

Total balance on open revolving trades reported in the last 6 months 9

Number of months since the most recent external collection 10

Total number of trades ever 60 or more days delinquent or derogatory in the last 24 months, including external collections 11

Total available credit amount on open revolving bankcard trades reported in the last 6 months 12

Total balance on open first mortgage trades reported in the last 6 months 13

Total credit amount on open first mortgage trades reported in the last 6 months 14

Overall balance to credit amount ratio on open revolving trades reported in the last 6 months 15

Worst present status on a trade reported in the last 6 months, including external collections 16

Worst ever status on a trade in the first 12 months of open date 17

Total available credit amount on open revolving trades reported in the last 6 months 18

Total number of ever derogatory trades, external collections, or public records 19

Worst present status on a revolving trade reported in the last 6 months 20

Based on previous client validations, not a guarantee of future performance.

Results can change as applied to different portfolios and/or as additional client validations are performed and added to the overall results shown here.


Event-based opportunities

No ability to pay

Diminishing ability to pay Full capacity to pay

A debtor’s cycle of delinquency

Debtor

Overextended

Health issues

Job loss Bankruptcy Employment

Paying off

debts

Shopping for

credit

New

credit line

Be notified of these events and then determine the right time to collect


Using collection triggers in combination with a scorecard/attribute strategy

is the most effective way to collect payments

Triggers in action Bankcard portfolio analysis

Lift : 55%

All collection triggers

Avg payment: $56

% of accounts: 13.2%

3.4%

More payments Less payments

Lift: 175%

Best collection triggers

Avg payment: $94

% of accounts: 3.1%

6.0%

Base Population

Lift : -8%

No collection trigger

Avg payment: $34

% of accounts: 86.8%

2.2%

Liquidation rate


Variable Rank

Performance

% of Trigger

Population #

Liquidation $

% Lift

Average

Payment $

% Lift

Recreational Merchandise Inquiry 1 4672% 1099% 0.0%

Paid was 150 2 1402% 745% 0.1%

Closed Zero Bal was 120 3 2610% 730% 0.0%

Paid was 120 4 602% 722% 0.1%


Settled Dispute 6 490% 400% 5.2%

Paid Collection 7 450% 333% 2.0%

Auto Lease Inquiry 8 860% 327% 0.0%

Credit Available Home Equity Loan 9 123% 304% 0.1%


Paid was 90 11 254% 272% 0.2%

Credit Available Revolving Bankcard 12 105% 241% 3.3%

Home Equity Inquiry 13 206% 241% 0.3%

Credit Available Bankcard 14 65% 226% 0.3%

Paid Charge-off 15 349% 196% 1.6%

Current 60 was 150-180 16 118% 190% 0.0%

Business Loan Inquiry 17 18% 185% 0.1%

Mortgage Inquiry 18 160% 184% 5.9%

Current was 150 19 324% 183% 0.7%

Paid was 180 20 269% 179% 0.1%

Paid Recreational Merchandise 21 79% 160% 0.0%

Paid Auto Loan 22 106% 150% 2.4%

Credit Available Flexible Spending 23 19% 123% 0.0%

Top event based notification performance chart


Call to action

Setup standard compliance processes to reduce regulatory risk

Strengthen business practices around improving contact strategies

Score your accounts based on greater ability to pay

Additional segmentation by credit attributes for greater separation

Event-based notification

► Be the first to know when a member is curing other debt


Q&A


For additional information, please contact:

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vision 2014: members-in-trouble-collections-strategies-for-credit-unions

Economy & Finance

5050 chance

mortgage trades

worst present

average liquidation

total accounts

credit amount

contact strategies

cell phone