The challenges Collection & Recovery departments face nowadays have forced them to become more inventive and efficient. The 12 steps to achieve excellence in C&R embed business knowledge that EXUS has accumulated all these years through the cooperation with field experts. Go through this presentation and evaluate how these “best practices” employed by top financial institutions in the world can be adopted by your organisation.

1. Chris Maranis
Business Development Manager

2. C&R Best Practices Step 1:
Single authority / organisation

3. A single collection management
authority and one centralized
collection organization, from the
start of the collection process
through to recovery or
abandonment
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Collection & Recovery
3

4. Ensures
Consistency
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Accountability
4

5. Results into
Industrialisation -> Effectiveness

6. Results into
Cost control

7. Results into
Ability to introduce quick changes

8. Define collection policy centrally,
followed up by central collection
management
8

9. Ensures
Compliance
Efficiency

10. Involve branch staff in relation to
specific customers or product
segments
10

11. Perform regular training sessions
for the network
11

12. C&R Best Practices Step 2:
Phased management, rule based
progress

13. The right communications and
actions for customers in the early
delinquency stage are quite different
from those required when litigation
is involved

14. Pressure applied must be
progressive
5kg
3kg
1kg
10kg

15. Divide management into
phases

16. Management phases
Soft
Pre-litigation
Litigation
Recovery

17. Define a consistent collection
approach applied by a specialised
unit within the bank’s organization
for each phase

18. During early phases,
focus is on working out a solution in
cooperation with the customer,
giving high priority to the protection
of the customer relationship.
aim is to minimize the
number of cases
moving through to the
later stages

19. During late phases,
focus shifts from protecting the
customer relationship to protecting
assets and minimizing losses

20. moving from phase to phase must
be
predefined clearly stated,
Not based only on DPD but
factor in risk information

21. Allow some space for ad-hoc
management but with clos monitor
and control

22. C&R Best Practices Step 3:
Dedicated collection staff

23. Employ and train dedicated
collection staff

24. Clearly define and document all
roles and job descriptions (from
collection manager to skip tracing
agent)

25. internal organization of the
collection department directly affects
its performance

26. Organise them for efficiency.
For example:
One supervisor for 15 collectors
One dedicated trainer
for each group of 75
to 100 collectors

27. C&R Best Practices Step 4:
Capacity planning

28. People are the most expensive
item in the collection centre’s
budget

29. Estimating the number of
collection staff needed to
implement C&R strategies its a
necessity, not a luxury.

30. Use regression modelling to link
forecasting with capacity planning

31. utilize metrics like :
the number of accounts to be worked,
account-to-collector ratios (ACRs),
seasonality,
personnel shift records

32. C&R Best Practices Step 5:
Account or Customer Level ?

33. Account level
approach
Customer level
approach
involving separate
handling of each
delinquent account, with
no view of a customer’s
other accounts with the
bank
taking into consideration
any other customer
accounts with the bank

34. The account level approach
facilitates industrialization and
global effectiveness.

35. Account level strategies are more
efficient in terms of amounts
collected and collector productivity

36. The customer level approach places
more emphasis on the customer
relationship

37. Use Account level strategies in early
stages of consumer finance
environments

38. Use Customer level in retail banking
for specific products or types of
customers requiring special
treatment in the early phase and for
the whole portfolio in post early
management

39. Aim at offering the right offer to the
right customer at the right time

40. C&R Best Practices Step 6: the
right offer to the right customer at
the right time

41. Segment portfolio using
customer/account analytics

42. Use Static metrics
like
Use Behavioral
metrics like
product type, customer
exposure, account
balance, etc
Kept Promise Ratio, Nonstarter, Recidivist, time
since last max bucket,
etc

43. Results to decisions that
Increase self cure rate
avoid customer irritation
Reduce costs
protect customer relationship

44. C&R Best Practices Step 7: Pool
vs Ownership

45. Before the implementation of
automated outbound calling
technology, most collection
operations assigned accounts to
collectors ‘from the cradle to the
grave’.

46. This has changed the recent
years in favor of dynamically
distributing accounts to a pool of
resources, which provides for
increased productivity

47. Ownership Assignments
Advantages
Disadvantages
Collectors can increasingly apply firmer collection
Accounts are often segmented by billing cycle,
tactics in a logical order as accounts age, since
alphabetical order or other random group and the
collectors become familiar with customers and
number of accounts assigned to each collector may
accounts.
vary widely, making it difficult to measure and
Collectors become familiar with customers and their
compare performance results between collectors.
specific situations, allowing them to be creative in
When different collectors handle different
working out payment arrangement
accounts each day, week or month, a variety of
Collectors are cross-trained in handling all
tactics and techniques may be applied to attempt
delinquency levels and most collection issues.
the collection
Collectors may ignore customers they do not like or
difficult situations.
If a collector has planned or unplanned
absences, then ensuring the accounts assigned to
him are worked adequately can be a challenge
A dialer cannot be used

48. Pool Assignments
Advantages
Disadvantages
Accounts are intelligently segmented and
Collectors do not become familiar with customers
distributed.
and their specific situations, thus requiring more
When different collectors handle different accounts
each day, week or month, a variety of tactics and
techniques may be applied to attempt the collection
time in per call to familiarize
Collectors do not choose customers to work on
Planned or unplanned absences are easily dealt
with
Dialers may be used
Collectors become specialized in the specific
segment to which they are assigned and become
proficient at identifying solutions to bring the
account up-to-date.
.

49. Pool for soft collection in retail environments
Ownership assignment for corporate accounts or
hard collection and litigation management

50. C&R Best Practices Step 8:
Multiple Contact channels

51. It is becoming harder to reach
customers by telephone

52. Recovered amount =
number of customers
contacted

53. Employ multiple contact channels
ATMs
Mobile banking
apps
SMS
Web based
Collection
portals
IVR
email
auto dialers

54. C&R Best Practices Step 9:
Centrally defined collection tools
& communication scripts

55. object of collection is to obtain an
agreement to repay the overdue
amount, followed by fulfilment of
this agreement.

56. Repayment agreements can take
several forms, depending on the
delinquency stage. These should
be defined centrally and all
customer communication should
comply with these guidelines

57. Pool for soft collection in retail environments
Ownership assignment for corporate accounts or
hard collection and litigation management

58. Soft Phase
a single Promise to Pay
or
a Repayment Plan
under which the overdue
amount is repaid by
fractions, with no change
to the credit contract
Acceptable Promises to
Pay & Repayment Plans
have to be clearly defined in
terms of the amount to be
repaid and the delay in
repaying,
Rules must be set on
qualifying a Promise to Pay
as kept, partially kept or
broken, as well as monitoring
fulfilment of repayment plan

59. Pre-Litigation
a repayment plan under
which the overdue amount
is repaid by fractions with a
discount with no change to
the credit contract
Or
A restructuring of the credit
contract

60. Agents contacting a customer
represent the bank and should be
helped to convey the right
message and handle customers’
arguments effectively

61. Scripts should be created that
take account of the customer’s
profile and level of delinquency
and that promote the bank’s code
of ethics

62. Simple repetition of similar
messages in successive phone
calls or mails is counterproductive.

63. A communication script should
cover:
Introduction
discovery phase ,
involvement phase,
incentives, and
appropriate replies
to arguments

64. Use of the external resource of a
debt collection agency (DCA)
typically results from cost/benefit
analysis of this approach in
comparison with carrying out the
operation internally

65. Extreme caution when selecting:
Decision should not based solely on price,
!

66. Extreme caution when selecting:
Research market and investigate :
DCA’s organizational structure,
IT systems,
Contingency plans,
Financial strength,
Customer base.
Reputation & experience
in the specific sector

67. Contract is #1 critical factor.
1
2
3

68. Extreme caution when selecting:
Perform due diligence should & On-site visits
DCA

69. Contract should cater for:
description of the services and the bank products to be assigned
the assignment/recall process, involvement phase,
assignment files management,
PTP–RTP description,
the bank’s notifications and controls
Fees, penalties, and conditions for audit should be agreed
binding SLAs should be imposed

70. Manage them closely
Monitor compliance with contract
Measure performance
Implement on-line collaboration

71. C&R Best Practices Step 11:
Measure & Motivate your collectors

72. Collection agents are the
means through which a
collection strategy is mainly
applied
their performance must be
closely monitored

73. Supervisors should assess
collectors’ strengths and identify
opportunities for improvement, in
areas such as:
Technology usage
Product knowledge
Compliance with strategy
Communicational skills

74. Collectors need feedback about
day-to-day performance
Positive feedback improves self-esteem and
personal competence
Negative feedback may drive
training activities &
behavioral changes

75. Define simple & appealing incentive schemes
that stress on continuous improvement, using
dynamic goals that do not allow collectors to slip
into complacency
It also helps attracting and
retaining the best collections
representatives.

76. Rewards may be:
Monetary: usually around 10–15% of
the monthly salary,
and not exceeding 20%, so as not to
create an atmosphere
of entitlement
Non-monetary: e.g. clothing vouchers,
parking spaces, gift certificates, dinners
out, and weekends away …

77. Example 1: Amount
recovered / Working
Hours
Example 2: VaR
reduction
Balance : $ 20,000, Overdue: $ 700,
P(write-off) = 0.5 -> VaR = $10,000
Agent obtains PTP $ 500,
Balance : $19,500, Overdue: $200,
P(write-off) = 0.1 -> VaR = $1,950
Δ(VaR) = $8,050
Top 5 agents are rewarded monthly
* P(write-off) estimated by combining: Bucket,
Behavioral Scores, historic roll rates, …
Agents scoring >10% avg are rewarded

78. C&R Best Practices Step 12: Exploit
the power of technology

79. The common ground shared by all
banks that have managed to turn
the credit crisis to their
competitive advantage is a DCA
willingness to invest in technology.

80. Opt for a system that covers end
to end in terms of:
Time
Product Line
Location & organisation
DCA

81. Time:
From pre-collection to early collection to the prelegal
stage, followed by legal proceedings and eventual
write-offs (and sell-offs) of portfolios, a consistent
strategy is best accommodated by a single system.

82. Product line:
Retail products (consumer loans, car loans, housing,
credit cards) with or without collateral, small business
loans and corporate loans, factoring, leasing, and other
products should all be covered by a coherent strategy,
implemented through the use of a single system.

83. Location and organization:
Centralized or distributed management, based on a
single system, is the approach that best serves the single
authority principle, for one company or for a group.

84. For further information please contact:
Mr. Chris Maranis
+30 210 7450300
chmar@exus.co.uk
www.exus.co.uk
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