Vision 2014 driving-student-loan-rehab-collection-efforts-with-scorecards

285 views

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
285
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Vision 2014 driving-student-loan-rehab-collection-efforts-with-scorecards

  1. 1. ©2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. #vision2014 Driving student loan rehab collection efforts with scorecards Christopher Magnotti Experian Alex Siotos Experian
  2. 2. 2©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Would your business be interested in knowing which student loans are likely to go on a repayment program?  Our session will focus on how predictive, for recovery, a collection scorecard is at determining a student loan account’s ability to go into a repayment program  We will focus on how predictive daily event based triggers are at determining a student loan account’s ability to go into a repayment program  We will also look at use cases for the collection treatment strategies Objective / purpose
  3. 3. 3©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Biographies Chris Magnotti joined Experian in 2009. Chris’s experiences include full life cycle risk management, P&L forecasting, stress testing, portfolio acquisition, international due diligence, and staff management and development. Chris has 18 years of experience in risk management and related analytics. Chris’s past experiences include working for a Top-5 portfolio in each of the following industries; bankcard, subprime bankcard and private label. Chris holds a Bachelor degree in Environmental Science from the University of Delaware. Chris Magnotti Experian Consultant Lead Alex Siotos Experian Consultancy Director Alex Siotos is a Business Consultant for Collections who works with clients in the financial services industry to integrate the right solution into their collection process with the goal of improving operational efficiency and shortening collection time. An expert in account segmentation, contact strategy, analytics scoring and operational efficiencies, Siotos has been entrenched in the collections market landscape for more than the past 10 years.
  4. 4. 4©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Quote for today The growing number of students who have defaulted on their federal student loans is troubling. The Department will continue to work with institutions and borrowers to ensure that student debt is affordable. “ ”– Arne Duncan Secretary of Education
  5. 5. 5©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Headline news stories Student loans continue to be a ticking time bomb NEXT BAILOUT: Student loans? The number of borrowers defaulting two years into repayment has increased six years in a row
  6. 6. 6©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. What are the students saying?
  7. 7. 7©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Nearly 20 million Americans attend college each year  60% of them borrow annually  There are 37 million student loan borrowers with student loan balances  There is somewhere between $902 billion and $1.2 trillion in outstanding loans ► $864 billion is federal student loan debt ► $150 billion is in private student loans Student loan statistics
  8. 8. 8©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Average loan balance is $24,301 ► 10% owe more than $54,000 ► 3% owe more than $100,000  Approximately 5 million federal loan borrowers are in default  Approximately 850,000 private loans are in default ► The price tag – $67 billion Student loan statistics
  9. 9. 9©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Student loan balances by age and delinquencies Age group Loan balance Delinquencies Under 30 33.9% 25.0% 30-39 32.8% 34.2% 40-49 16.4% 23.1% 50-59 11.3% 12.1% 60+ 4.2% 4.8% Not Known 1.4% 0.8%
  10. 10. 10©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Lowest Delinquency Rates ► Utah ► North Dakota ► Minnesota ► Iowa ► Pennsylvania  Highest Delinquency Rates ► Nevada ► New Mexico ► Oklahoma ► Texas ► South Carolina ► Mississippi ► Florida What states are best and worst? Unemployment is lower than national average (< -10%) Unemployment is higher than national average (> 10%) Unemployment by State as of Decemeber-2013 Highest/Lowest Student Loan Delinquencies by State Lowest Delinquency Rates Highest Delinquency Rates
  11. 11. 11©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Comparing delinquency rates 0% 2% 4% 6% 8% % of loan balances that are 90+ days delinquent Auto Loan & Lease Bank Card Mortgage Student Loan Student loan delinquencies are up 30% from 2006 Other loan delinquencies are down from 2006
  12. 12. 12©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Student loan analytics Christopher Magnotti
  13. 13. 13©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Background Analysis design and timing Starting population – all placements for eight monthly snap shots Aug 2012 / Sep 2012 / Oct 2012 Three-month performance windows Nov 2012 to Jan 2013 Feb 2013 to Mar 2013 Apr 2013 to Jun 2013 Performance periods Nov 2012 / Dec 2012 Jan 2013 / Feb 2013 / Mar 2013 Sep 2012 Credit archive Nov 2012 Credit archive Feb 2013 Credit archive Performance definitions: Non-Recovered Account did not enter a repayment program Recovered Account did enter a repayment program
  14. 14. 14©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Performance measured over three-month measurement window  Captures attribute at two different time frames and compares to impute a trigger Background Analysis design and timing 3-month measurement window June 2013March 2013 Triggers calculated
  15. 15. 15©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Scorecard models Christopher Magnotti
  16. 16. 16©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. The majority of payments are collected from a relatively small percentage of consumers Know which consumers have the ability to pay before applying collection strategies
  17. 17. 17©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Too many consumers, limited collection resources Working every account the same … is not efficient!
  18. 18. 18©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 38.3% 13.7% 0.0% 10.0% 20.0% 30.0% 40.0% PriorityScore Traditional Recovery Score KS% Score Card KS Values KS values 180% lift
  19. 19. 19©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 99.3% 89.8% 70% 80% 90% 100% PriorityScore Traditional Recovery Score %Scoreable Score Card % Scoreable Records Scoreable percentage 10% more scoreable accounts
  20. 20. 20©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0% 20% 40% 60% 80% 100% Cumulative%ofAccountsEnteringRepayment Cumulative % of Accounts Cumulative % of Accounts Entering Repayment Program PriorityScore Traditional Recovery Score Cumulative recovery rate Top 50%, 81% repayments captured 30% liftTop 50%, 63% repayments captured
  21. 21. 21©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0% 10% 20% 30% 40% 50% 60% 70% Cumulative%ofAccountsEnteringRepayment Cumulative % of Accounts Best Scoring - % of Accounts Entering Repayment Program PriorityScore Traditional Recovery Score Best scoring capture rates Note: It is preferred to have more #s recovered in the best scoring populations 94% lift in accounts entering into a repayment program baseline baseline baseline
  22. 22. 22©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0% 10% 20% 30% Cumulative%ofAccountsEnteringRepayment Cumulative % of Accounts Worst Scoring - % of Accounts Entering Repayment Program PriorityScore Traditional Recovery Score Worst scoring capture rates Note: It is preferred to have fewer #s recovered in the worst scoring populations baseline baseline baseline 8% of the accounts entering into a repayment program are left
  23. 23. 23©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0% 4% 8% 12% 16% 20% %ofAccountsEnteringRepayment Twentiles (Score Intervals) Interval % of Accounts Entering Repayment Program PriorityScore Traditional Recovery Score Interval recovery rate 110% lift in accounts entering repayment
  24. 24. 24©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 Balance Twentiles (Score Intervals) Average Balance on Accounts Entering Repayment Program PriorityScore Traditional Recovery Score Average balance $25,986 average $972 average
  25. 25. 25©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0% 20% 40% 60% 80% 100% Cumulative%ofRevenueDollars Cumulative % of Accounts Cumulative % of Revenue $ Dollars (revenue = (rehab balance * 70%) * 11%) PriorityScore Traditional Recovery Score Cumulative revenue rate 92% revenue dollars captured 68% revenue dollars captured % of repayments that complete the 9 month payment program % of repayments balances that turns into client revenue 35% lift in revenue captured
  26. 26. 26©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0% 8% 16% 24% 32% %ofRevenueDollars Twentiles (Score Intervals) Interval % of Revenue $ Dollars (revenue = (rehab balance * 70%) * 11%) PriorityScore Traditional Recovery Score Interval revenue rate 183% lift in revenue at top 5%
  27. 27. 27©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Daily event-based triggers Christopher Magnotti
  28. 28. 28©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Background Consumer’s life cycle No ability to pay Diminishing ability to pay Full capacity to pay A consumer’s cycle of delinquency Consumer 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
  29. 29. 29©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Daily event-based triggers 7.3% 11.8% 15.1% 0.0% 4.0% 8.0% 12.0% 16.0% Total Population Total Trigger Population Top Triggers % Accounts Entering Repayment Program 107% lift in account recovery 10% of total population 3% of total population
  30. 30. 30©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Daily event-based triggers Top selected triggers 13.7% 12.9% 14.3% 13.7% 18.8% 7.3% 0.0% 4.0% 8.0% 12.0% 16.0% 20.0% Credit Available Inquiry Lien/Civil Action New Trade Positive Improvement Total Population Avg % Accounts Entering Repayment by Trigger Group for Top Triggers 157% lift 87% lift
  31. 31. 31©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Daily event-based triggers Top selected triggers Trigger Group – Trigger Description Account Entering Repayment % Positive improvement – current was foreclosure 40.0% Positive improvement – current was 120 30.3% Positive improvement – paid was 120 25.0% Inquiry – business loan inquiry 23.1% Positive improvement – paid charge-off 22.2% Positive improvement – current was 90 21.9% Positive improvement – current was 150 21.2% Positive improvement – settled dispute 20.5% Positive improvement – paid was 180 20.0% Positive improvement – paid was 90 20.0% Lien / civil action – civil action: satisfied, suit dismissed, wage released or vacated 20.0% Positive improvement – paid recreational merchandise 20.0% Positive improvement – current 30 was 120-180 20.0% Positive improvement – current was 180 19.8% Positive improvement – current was 60 16.9%
  32. 32. 32©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Conclusion Christopher Magnotti
  33. 33. 33©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Our analysis shows that the scorecard PriorityScoreSM and daily event based triggers are both very predictive in determining which student loan accounts will enter a repayment program  Scorecards alone cannot achieve the highest levels of recovery, incorporating daily event based triggers in with your collection strategies would make recovery more effective and valuable  These are tools that can be used for any student loans types like department of education, private, or state issued loans Conclusion If you are looking for 100+% lift in top-performing accounts entering a repayment program, then PriorityScoreSM and Collections TriggersSM are the tools you need to consider for your collection strategies
  34. 34. 34©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. For additional information, please contact: Christopher.Magnotti@experian.com Alex.Siotos@experian.com Hear the latest from Vision 2014 in the Daily Roundup: www.experian.com/vision/blog @ExperianVision | #vision2014 Follow us on Twitter
  35. 35. 35©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Visit the Experian Expert Bar to learn more about the topics and products covered in this presentation.

×