Debt Resolve White Paper


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A company offering you patented technology to resolve consumer debt quickly, privately and with dignity, online.

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Debt Resolve White Paper

  1. 1. DebtResol√e TM Resolved. With Dignity WHITE PAPER Improving the Collection of Past-Due Accounts The Many Advantages of Online Collections ServicesThe wall between collections departments and debtors is becoming progressively more difficultto penetrate. Consumers are less likely to answer the phone, in part due to caller ID andanswering machines and due to the increased educational campaigns to monitor the collectionindustry from abusive practices. The Federal Trade Commission listed debt collection in secondplace of all consumer complaints in 2010 (responsible for 11% of complaints).1a Collectionsagents spend an enormous amount of time trying to reach debtors. When they do make contact,increasingly stringent regulatory requirements limit what agents can say. Time does not stop,yet the collections department must quickly break through to recover valuable past dueaccounts.Is there a way to rapidly settle debt, maximizing the collections portfolio?How can businesses ensure regulatory requirements are never violated?To address these challenges, banks and other creditors are turning to online collectionsservices. Designed as an alternative channel for debt resolution, online collections servicesprovide creditors a highly efficient and scalable way to settle accounts using the Internet. Theseservices also provide debtors a convenient and face-saving way to pay debt. This white paperwill examine some of the challenges collections departments face when collecting debt andintroduce the many advantages of online collections services.Consumer TrendsEnormous consumer debt and the widespread adoption of the Internet are two key consumertrends causing collections departments to reexamine existing collections processes. 2011: USeCommerce and Online Retail sales projected to reach $197 billion, an increase of 12 percentover 2010 Americans consumers are still struggling amid higher costs for gasoline and foodleading to greater delinquencies. As of April 2011, consumer debt was $2.4 trillion, according tothe Federal Reserve.1 Improving trends in consumer credit delinquencies hit a soft patch as theeconomy slowed in the first quarter of 2011 with five of eleven loan categories showing slightlyhigher delinquencies, according to the American Bankers Associations Consumer CreditDelinquency Bulletin Bank card delinquencies rose 12 basis points to 3.40 percent of allaccounts compared to the previous quarter.2 "Delinquencies and charge-offs are the singlelargest individual operating cost for most credit card issuers," stated a Mercator Advisory Groupanalyst report.3 Not only are consumers amassing more debt, they are also going online to1a Federal Trade Commission - th1 (March 7, 2007). Federal Reserve Statistical Release June 7 20112 ABA Bayri, E. (May 2005). Mercator Advisory Group: Account lifecycle solutions: Scoring solutions in collections and recovery.DebtResolve White Paper July 8, 2011
  2. 2. DebtResol√e TM Resolved. With Dignity WHITE PAPERmake purchases and handle financial transactions. A new “Pew Internet & American Life Projectreport” says 73 percent of Americans say they use the Internet, up from 66 percent in January2005. Nearly 75% of U.S. households have Internet access at home, according to aNielsen//Net Ratings survey.By 2006, 77 percent of Americans had access to the Internet, according to Harris Interactive.4 AFederal Reserve study indicated, "The majority of noncash payments made in the United Statesare now initiated electronically."5 The study showed an increase of 13.8 billion electronicpayments between 2000 and 2003. "Consumers today require a level of convenience andcontrol inconceivable years ago. They want the freedom to select the channel and method oftheir payments, as well as the frequency and timing. Conventional paper checks cannot providethis level of flexibility, so consumers are turning to electronic payment options—credit card,debit card and ACH transactions initiated over the Internet," explained a PayStream Advisorsreport.6 Not only are consumers purchasing goods and services online, they are also receptiveto resolving debt via the Internet. A study by FiSite Research indicated that, "Consumers findthe concept of online collection services as highly attractive over a broad range of consumerlending products. Consumers see an opportunity to avoid emotional distress andembarrassment that come from traditional collection methods."7Challenges Afflicting Collections DepartmentsCollections departments face two primary challenges when collecting funds: the high cost ofmaking contact with debtors and significant restrictions on what can be said when a debtor isreached.Difficulty Making ContactWith each passing day, the likelihood of recovering delinquent debt fades.The highly manual process used by most collections departments is a slow and laboriousprocess. As the number of delinquencies grows, collections agents are challenged to operateefficiently.Collections agents are often plagued with wrong party connections and answering machines,slowing the collections process. "Collecting on delinquent accounts generally requires tenaciouscall center operations to reach consumers actively trying to avoid issuer phone calls," explaineda Mercator Advisory Group report.8Many collections departments have reached a critical point where the cost of recovery isprohibitive. Another Mercator Advisory Group report stated, "The collections and recovery stageis still handled manually. The operations remain labor-intensive and are very much reliant on theefforts of highly trained collectors.4 Gonsalves, A. (May 25, 2006). TechWeb Technology News. Number of online Americans continues to grow.5 The Federal Reserve System. (December 15, 2004). The 2004 Federal Reserve Payments Study.6 PayStream Advisors. (August 13, 2006). Consumer collections automation.7 FiSite Research. (October 2004). Online collection services. The mostly manual processes used to make contact with debtors isslow and costly8 Friedman, M. (2005). Mercator Advisory Group: Capturing the online customer: Current and future investments in online self-serviceDebtResolve White Paper July 8, 2011
  3. 3. DebtResol√e TM Resolved. With Dignity WHITE PAPERThis means that the collections function is not at all scalable."9 With the cost per agent callreaching $15, collections departments must seek lower cost debt resolution methods.10Regulatory Constraints State and federal regulations place major limitations on what acollections agent can say. Issues such as when a call can be placed, where contact can bemade, who can be spoken to and what can be said are all regulated in many states.For example, in many states there are limits on calls that can be placed to a debtors place ofemployment. Still other states prevent mentioning what the call is about to a spouse or whichcompany an agent is calling from. These regulations also place significant restraints on whatcan be said to a debtor. It is not unusual that a collections agent might unknowingly violate oneof these regulatory requirements, placing the company at risk of significant fines or lawsuits.Additionally, communication must be carefully documented to remain compliant with the FairDebt Collection Practices Act. Fortunately, even small improvements in collections can have amajor impact on the profitability of a portfolio. Key technology advancements have come aboutto improve collections efficiency and profitability.Brief History of Collections InnovationsA number of innovations have improved the collections process over the last 15 years. In theearly 1990s, dialer technology helped agents improve efficiency by placing phone calls todebtors and connecting agents only when a person answered the phone. By the mid 1990s,interactive voice response systems engaged debtors using voice recordings. The idea was tooffload work from collections agents, only connecting them with debtors during the negotiationstage. However, these systems were only effective for the most basic collects efforts.Around 2000, collections analytics systems were widelyused. They helped agents work more intelligently byexamining historical consumer data and identifying debtorsmost likely to pay. These systems also tailored settlementoffers based on consumer behavior and other strategies.Around the same time, online bill payment grew inpopularity. Financial transactions, such as credit card,mortgage and auto loan applications were being processedonline. The success of online payment services such asPayPal attest to the consumer embracement of Internet payments. For example, during 2006,nearly $38 billion in online transactions occurred using PayPal alone.11 By 2004, onlinecollections services began to emerge that could initiate consumer contact, interact with debtors,negotiate settlements and collect payments.9 Bayri, E. (May 2005). Mercator Advisory Group: Account lifecycle solutions: Scoring solutions in collections and recovery.10 Friedman, M. (2005). Mercator Advisory Group: Capturing the online customer: Current and future investments in online self-service. Collections agents communication with debtors is highly regulated and varies by state A steady advancement of technologyinnovations is changing the way collections departments operate11 (February 28, 2007). Form 10-K for eBay Inc. Online collections services automate the entire collections process, speeding therecovery of funds Online collections services allow debtors to negotiate settlements onlineDebtResolve White Paper July 8, 2011
  4. 4. DebtResol√e TM Resolved. With Dignity WHITE PAPERThe Solution: Online Collections ServicesOnline collections service allows creditors toautomate the entire collections process usingthe Internet. Designed to efficientlycommunicate with debtors and ensureconsistent regulatory compliance, onlinecollections services can interact withthousands of debtors and quickly resolvepast-due accounts.Allowing debtors to review and pay their debtin private, online collections servicesovercome the embarrassment often felt bydebtors while providing 24 hour access to theservice.Consumers can negotiate debt and securelyprocess online payments in private. Creditorscan quickly set payment options and collectfunds, without ever picking up the phone.Some of the capabilities of online collections services include: • Negotiation of debt online • Secure payment processing over the Internet • Customized debt resolution options, including varied payment plans • Contact preference updates • Cross-selling of alternative financial servicesHow It WorksA letter is typically sent to a debtor with an invitation to go online to settle his or her debt.For early-stage delinquencies, the online service offers a quick and convenient way forcustomers to bring their accounts current.For late-stage and charged-off accounts, a blind bidding process can be presented. Theconsumer is provided multiple chances to submit an offer and settle the account. The creditorestablishes a minimum accepted offer that is unknown to the debtor. The offer is based oncustom business rules that reflect the creditors internal collections strategies.Multiple payments can be set up for paying down debt. Payments are collected online using avariety of payment methods, including ACH, credit card, PayPal, MoneyGram and WesternUnion. When the debtor makes a successful payment, funds are transferred via electronicpayment gateways directly into creditor accounts.DebtResolve White Paper July 8, 2011
  5. 5. DebtResol√e TM Resolved. With Dignity WHITE PAPERBenefits of Online Collections ServicesResearch suggests that resolving delinquent accounts online can reduce transaction costs byalmost 5 times when compared to phone or traditional mail-based solutions.12 Beyond majorcost savings, online collections services provide a significant number of benefits for bothcreditors and debtors.Benefits to creditors: • Allows collections departments to efficiently interact with an unlimited number of debtors • Eliminates the need for added personnel to meet growing collections requirements • Reduces liability resulting from noncompliance with federal and state regulations by controlling and documenting debtor interactions • Improves the image of creditors with a consumer-friendly service • Increases profits for late-stage debtors with blind bidding • Reduces the overhead of collections processes • Bypasses answering machines, caller ID and cell phones • Easily captures debtor contact preferencesBenefits to consumers: • Avoids the embarrassment that often occurs when dealing with collectors • Empowers customers to settle accounts at their convenience • Allows consumers to quickly resolve debt • Provides access 24 hours a day, every dayCase ExampleAn auto finance arm of a major bank used an online collections service to improve its debtrecovery. This banks goal was to collect as much as possible prior to the end of every month.The bank used an online collections service to establish flexible business rules to help it meetits objectives. For example, if a consumer first logged into the system in the middle of themonth, he or she was given a wider range of days to make a payment than if there were only afew days left in the month. In addition, the bank wanted the ability to spread payments over ayear only if the debtor agreed to a large up-front payment of 10 percent. Easy to customizebusiness rules enabled the bank to achieve its objectives.12 Friedman, M. (2005). Mercator Advisory Group: Capturing the online customer: Current and future investments in online self-service. Online collections services can reduce the cost of recovering consumer debtDebtResolve White Paper July 8, 2011
  6. 6. DebtResol√e TM Resolved. With Dignity WHITE PAPER What to Look For in an Online Collections ServiceWhen seeking an online collections service, consider the following important criteria.Automated debt negotiation: Seek a solution that automates later-stage debt negotiation byallowing consumers to bid against a blind settlement floor.Intelligent resolution offers: The ideal solution should intelligently present options toconsumers based on debt or debtor characteristics. For example, early-stage debt should notbe provided negotiation options.Compliance flexibility: Look for a solution that is flexible enough to meet external legalrequirements and is in compliance with state and federal regulations.Business rules: Seek a service that offers a wide range of real-time business rulecustomization, such as settlement floors, payment intervals, payment methods andconsiderations such as how much must be paid up front and how quickly the debt must be paiddown.Easy to implement: Seek a solution that seamlessly integrates with existing collectionssystems investments without a major IT investment.Hosted model: Look for a solution that is securely hosted, eliminating the need to invest inhardware and software as well as freeing IT personnel.Look for an online collections service that provides flexible business rules to ensurechanging needs can be accommodatedEasy to use: Look for a solution that is easy for consumers to use and collections managers tomaintain. No technical knowledge should be needed.Customizable branding: The ideal solution should enable customized branding to helpmaintain a consistent look and feel for consumers.Multi-language support: Common languages, such as English, Spanish and Korean should besupported to reach the broadest range of consumers.Solely focused on collections: Look for a company that exclusively specializes in collectionsand intimately understands all stages of the collections process.Offers live support: Seek a company that includes business analysts at no additional cost toexamine your ongoing use of the solution for streamlined success.Automates email communication: Seek a solution that handles email communicationbroadcasts to increase the use of the application.DebtResolve White Paper July 8, 2011
  7. 7. DebtResol√e TM Resolved. With Dignity WHITE PAPER The DebtResolve™ AdvantageAs the name suggests, DebtResolve helps consumers resolve their debt online with dignity. Asthe premier online collections service, DebtResolve enables debtors to self-cure, negotiatesettlements and finalize payment arrangements online, at any time and in any language.Creditors realize significant cost savings, collect more debt and make contact with consumerswho were previously unreachable.Designed by Debt Resolve, Inc. (OTCBB DRSV), a pioneer in online collections software, theDebtResolve solution provides creditors an innovative way to streamline the collections process.Used by top American banks and collections agencies, DebtResolve was designed to handlevery early delinquencies to post charge-off debt. Penetrate the barriers between collectionsagencies and debtors by contacting DebtResolve today. • Over 10.5 Million accounts has been placed on the Debt Resolve System • Over $10.8 Billion Face Value Debt has been placed on the Debt Resolve System • 53% of registered users Settle • 73% of registered users settle when followed up with traditional methods • Settle over 14% above bump (floor) rate • 20% of settlements are transacted after regulated collection hours. • Assure legal compliance with FDCPA (US) & DPA (UK) through a controlled website presentationDebtResolve White Paper July 8, 2011
  8. 8. DebtResol√e TM Resolved. With Dignity WHITE PAPER THE DEBT RESOLVE SYSTEM MODULES DRCollect™DR Collect is a fully automated on-line module offering a unique, quick to implement universalupload tool. DR Collect offers an innovative pricing structure established especially for collectionagencies, collection law firms, and other markets working with the tight margins of contingencyfee structures. Additionally, the DR Collect module eliminates most of the manual integrationprocess associated with implementation of the program, and allows private label customizationfor the agency or law firm. DRPrevent™For early-stage collections, Debt Resolve can help you collect overdue payments, makepayment arrangements, and manage account self-cures all online. DRSettle™On late-stage collections and charged-off accounts, DR Settle incorporates several treatmentsincluding a dispute resolution engine that allows your customers to make offers. These offersare evaluated using your business rules and scoring models, leading to immediate settlements. DRPay™DR Pay captures customer payments online using your electronic payment gateways. We canintegrate with any payment processor and settle in any currency. Debt Resolve never touchesthe client’s funds. All funds are directly deposited with the client. DRControl.™DRControl is the administrative interface where templates and rules are established. Once thetemplates are established and parameter identified, you can simply assign the treatments withthe click of the mouse and apply change real-time throughout the system. DRMail. ™Following registration, all communication is handled through DRMail The system will notify theconsumer 2 days prior to any scheduled payment arrangement to remind them of the upcomingpayment and give them time to allocate funds to cover any payment arrangement. If a paymentis unsuccessful DRMail will automatically send notification to log back in and make differentpayment arrangements. For a free demonstration, call 914-949-5500 or email OR visit for product information.DebtResolve White Paper July 8, 2011