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Helping Debtors Find the Money

  • Written by T. Steel Rose
  • Category: Guest Blog

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rose steelI had a lunch meeting with several financial advisors this week. A few lamented how their clients are not able to maintain a budget to live below their means. They mentioned the temptation to use credit cards was too great and the resultant high interest rates only exacerbate the problem. When I mentioned peer-to-peer lending sites to reduce their annual percentage rate by 10% they stared at me in disbelief, like it was too good to be true.

These types of loans accounted for $5 billion in loans last year. The question is not as much, when does it makes sense to use peer-to-peer lending to refinance existing debt, but knowing the costs involved. Regulatory and compliance considerations may provide an option for cash strapped customers. According to “The Economist” the rapid progress suggests big banks and credit-card companies may be disrupted in the same way taxi companies have been disrupted by Uber. The major platforms, Lending Club and Prosper, offer online loans of up to $35,000 for three to five year notes. Chicago-based Avant also offers personal loans up to $35,000 funded by institutional investors.

Companies like Social Finance emphasize student loans and mortgages as they are pitching student lending services. San Francisco-based lender, Earnest, uses an algorithm and 80,000 to 100,000 data points to lend money to students with little to no credit history.

This list goes on. LendingHome, another San Francisco start-up, offers mortgage loans and allows accredited investors to participate with at least $50,000. Los Angeles-based AssetAvenue targets non-owner occupied, first lien, mortgage loans, and is open to accredited investors in a few states.

The point is trying to help a customer by making them aware of options is always a good idea. For small balance customers, San Francisco-based LendUp offers up to $500 for 35 days at 272.73% APR (as of October 22, 2015). While it is clearly exorbitant to the point of being predatory, their stated mission is to help people establish credit who don’t have standard creditworthiness.

When working with consumers, there are some distinct advantages to using Lending Club and Prosper worth considering:

• A fixed rate of interest is probably one of the most compelling advantages.

• The term of the loan from major social lending sites is either three or five years.

• There is no pre-payment penalty. Customers can always pay off loans early without pre-payment fees. The application process is fairly easy.

• The online application can take just a few minutes to complete and a decision on the loan occurs quickly.

• Once they have a loan, monthly payments are automatically deducted from their checking account.

• Unlike a home equity line of credit, the loan is not secured by your customer’s home. While they are obligated to repay the loan, they are not secured by any of their assets. The general requirements borrowers must meet to qualify for these loans include:

• Must be a U.S. citizen or permanent resident.

• Must be 18 years old with a valid bank account and a valid Social Security number.

• Must have a FICO score of at least 660.

• Their debt-to-income ratio (excluding mortgage) must be below 35%. The total of monthly debt payments (e.g., credit card, school loan, car payments) divided by monthly income must be less than 35%.

• At least three years of credit history, showing no current delinquencies, recent bankruptcies (seven years), open tax liens, chargeoffs, or non-medical collections accounts in the past 12 months.

• They can only have six or fewer credit inquiries on their credit report in the last six months.

• Must have at least two revolving credit accounts currently open.

When customers apply, they are assigned a rating based on their score and credit that determines the risk to other investors. If accepted, the listing is published and investors can invest into this loan or several. Along the way they ask personal questions regarding the loan and why. They may use portions of credit reports available to them and some of the questions may be used to test a borrower’s integrity in answering them. They may also ask for the customer’s tax returns or paystubs.

Although I don’t recommend it, in the new world of peer-to-peer lending it is even possible to become an investor/ lender and finance your favorite customer’s debt.

Soaring Student Loan Bad Debt

  • Written by Angie
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Soaring Student Loan Bad Debt

As of September, 2012 11 percent of the $956 billion in student-loan debt outstanding was delinquent, higher than the 10.5 percent of credit-card debt. Delinquency rates on mortgages, home-equity lines of credit and auto loans are at 5.9 percent, 4.9 percent, and 4.3 percent. Overall student debt (largely taxpayer dollars at risk) keeps growing. After first surpassing credit-card debt in mid-2010, the amount of student-loan debt outstanding has become 42 percent larger than the $674 billion of credit-card debt outstanding. 

The average college student who graduated in 2011 had $26,600 in student loans, according to a new report, which estimates two-thirds of last year’s college graduates had student loan debt. More than five million student loan borrowers have at least one loan past due. 96 percent of graduates from four-year, for-profit colleges took out student loans, borrowing 45 percent more than graduates of other types of colleges.

Is a Good Debt Collector “Born With It” or Taught?

  • Written by Dean Kaplan
  • Category: Guest Blog

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A few months ago on LinkedIn there was an interesting discussion about the source of a collector's success.  Many people chimed in that there were certain personality traits that are typically critically important for being a successful collector.  Others focused on techniques that people can learn to better achieve desired outcomes and all of the laws and policies you need to learn.  As an offshoot of this discussion, our commercial collection agency compiled a list of actual debt collector job descriptions from the internet to see what qualities were listed as desirable by employers.  Not surprisingly, the job descriptions reinforced what was said in the LinkedIn discussion.

Some key debt collector personality characteristics cited were:

·         Perseverance;

·         Doesn't take things personally;

·         Organized and able to analyze complex situations;

·         Independent and self-motivated;

·         Not easily ruffled, particularly when dealing with irate debtors.

In the training arena, several key skill areas were identified as critical to a collector's success:

·         Salesmanship;

·         Customer service;

·         Thorough knowledge of company policies;

·         Understanding of basic accounting principles, particularly those related to the accounts receivable function;

·         Claim research prior to debt collection;

·         Skip-tracing techniques.

When thinking about the daily life of a debt collector, the personality characteristics seem like must haves for a collector to thrive.  Without at least some of these qualities, it seems hard to imagine why a person would want to do the job of debt collections and even more difficult to see how that person could be successful doing this type of work.  Personality traits such as perseverance and self-motivation cannot easily be taught.

At the same time, there is a lot a collector has to learn with respect to legal compliance and following company policies and procedures.  Many people are not natural collectors, but they can learn techniques to motivate people and understand which techniques are typically less successful.  So even if someone is born with great collector skills, they need to be teachable to be an effective member of your team.

Reducing Costs While Improving Service

  • Written by Heather Taylor
  • Category: Guest Blog

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Reducing Costs While Improving ServiceConsultation Review Request 

Commonwealth Financial Systems Inc., is a growing regional collection agency based in Pa. In 2009 they considered several collection letter providers with two primary goals: they wanted a collaborative, strategic partner who understood their unique needs and they wanted to reduce their overall collection letter costs.

"It seems counterintuitive to expect more attentive, engaged customer service and pay less for it, but that was our goal," says John Kotula, CFSI's president.

DANTOM partnered with CFSI long before the first data file was sent. The implementation followed a detailed project plan to ensure consistency regardless of who was completing specific tasks. The implementation was led by Linda Woodward, DANTOM's enterprise project director, who is a certified Project Management Professional through the Project Management Institute.

CFSI was assigned a dedicated Customer Service Representative and Sales Representative who learned the goals, needs and unique strengths of the organization. A relationship was built over time enabling the DANTOM team to provide even better service that aligns with CFSI's goals and business model. 

Over an 18 month period, CFSI realized a 15 percent savings on its collection letter costs. DANTOM employed multiple tools to achieve these significant savings that went straight to CFSI's bottom line. Using the National Change of Address and Address Element Correction from the USPS, CFSI suppressed letters that were known to be undeliverable. Removing these letters before they were printed and mailed, eliminated costs that would otherwise have been a waste of money.

In addition to saving the cost of a wasted letter, CFSI was informed of the need to locate a good address. Instead of waiting weeks for return mail to arrive, CFSI can now maximize the window of opportunity for collection.

Additional savings were achieved through DANTOM's ICL Letter Householding service which combines multiple letters to one responsible party in a single envelope.

Today, CFSI is delighted in the ongoing partnership with DANTOM Systems and on the positive impact to their bottom line. "Our entire organization has been impressed with the DANTOM team and their ability to achieve both goals."