RMA Blog

<< First  < Prev   1   2   Next >  Last >> 
  • 21 Oct 2015 7:50 PM | Anonymous member

    Folks, November will be on us soon, and that means all sorts of conferences.  In the credit industry, that means the annual Receivables Management Association of Canada’s conference in Toronto.  I’ve been in attendance over the last four years, so I’m definitely biased here, but why wouldn’t you get involved with your industry?

    Credit professionals have all sorts of challenges unique to their individual companies – each creditor has its own set of internal controls, their own unique client base, and their own measurements of risk.   Also, while folks might take courses through the Credit Institute of Canada, we are generally a fragmented bunch of general management folks (perhaps the last of our kind), who are not prone to sitting down with colleagues and sharing bad debt write-off ratios or poor client experiences.  Likewise we are caught in the middle between accounting, accounts receivable, sales, and boards of directors – our challenges are usually unique and not shared by the rest of our company.  We generally expect to solve things on our own.  At least, that was my experience when I was a credit manager.

    It was absolutely refreshing when the RMA came along – it’s a meeting of disparate individuals who can share challenges and issues that we all face, as well as look at problems across the credit cycle.  At last year’s RMA conference, I sat with the Director of Fair Trade from Alberta and a director of a non-profit credit counseling company, and had dinner with a bankruptcy trustee.  I compared notes about continuity of business plans with another collection agency owner, and I got some one-on-one time with a staff member from the Superintendent of Bankruptcy.  Where else would I get this opportunity?

    There are a number of speakers lined up this year I am looking forward to listening to, and I am going to have an opportunity to catch up with in person meetings with folks from across Canada and the US.  I can’t think of an event with bigger scope or opportunity for me to learn as an individual, as well as augment my company’s policies and methods.

    If you are able to attend, I’d encourage you to do so:

    RMA 2015 Conference
    E
    aton Chelsea Hotel, Toronto, Ontario|
    N
    ovember 18th, 8:00 am - November 19th, 3:30 pm
    www.rmaconference.ca

    If anyone has any questions about the RMA, or the conference, I’d be absolutely happy to give feedback on my experiences at previous conferences.  See you there!

    Blair DeMarco-Wettlaufer
    K
    INGSTON Data & Credit
    C
    ambridge, Ontario
    2
    26-946-1730
    bwettlaufer@kingstondc.com

  • 30 Jun 2015 3:25 PM | Anonymous member

    The Credit Institute of Canada is hosting a live webinar to enrich the skills of credit management professionals across Canada.  Please see the advertisement and link below:

     

    An Hour That Will Empower –Marketing yourself

    Wednesday, July 22 at 11:30am

     

    In today’s evolving economy professionals have to stay on top of their game in order to stay relevant. Marketing yourself and showcasing the assets you bring to an organization is a key component to success. The Credit Institute of Canada is offering you an opportunity to learn how you can best position yourself; both in the virtual world and beyond.

     

    Raffi Toughlouian, Vice President at Robert Half Canada has made a career of helping people land the right role. It’s not always what you know – it’s how you tell someone what you know. Raffi helps candidates achieve their goals of marketing themselves confidently to current and future employees.

     

    Hamza Khan is an award-winning digital strategist and entrepreneur. He is the co-founder of Splash Effect, a Toronto-based marketing agency, he and his team are set on helping clients interact, influence and impact in the virtual world. Raising an individual’s or brand’s profile is just the start. Hamza shows his clients how to make every view, click and message count.

     

    For more info visit www.creditedu.org

  • 31 Mar 2015 2:04 PM | Deleted user

    Anyone in business for any length of time has run into this situation.  A customer refuses to pay what they owe you claiming the company that owes went out of business.  They say it with a straight face standing in the same location, under a sign with the same business name, using the same equipment and supplies and employing the same people.  They refer you to their lawyer, likely the same person who advised them to carry out this common “legal” scam, I mean scheme, of incorporating a new company to replace the old one without paying the debts of the old one.

    You fume.  This can’t be legal!  They’ve just stolen my money!  They can’t get away with this!  But they do.  They’re counting on you being baffled by the legal moves they pulled and not being willing to spend the time, energy or money to find out what happened and hold them accountable.  And most of the time, they’re right.

    What happened?  This situation often occurs where a business is an incorporated company operating under a trade name.  I’ll use a recent example we sorted out for a client of ours, a local utility company we’ll call HydroCo.  Their customer was a restaurant operating under a trade name, let’s call it “Tasty Taters.”  Tasty Taters was the registered trade name for a numbered corporation we’ll call OldCo.  OldCo had run up a number of bad debts, including $20,000 in hydro bills to our client.  One day a fellow shows up at HydroCo’s office saying OldCo has gone out of business and he would like to open up an account for a newly-incorporated numbered company we’ll call NewCo.  NewCo wants a new account for Tasty Taters at the same service address operating under the same name.  Our client opens the account for NewCo, but requires a hefty security deposit. 

    Not surprisingly, OldCo fails to pay the $20,000 owing on its hydro account. 

    HydroCo asked for our help.  We confirmed that OldCo and NewCo were in fact operating the same business under the same trade name at the same address.  What we didn’t know was if NewCo purchased the business from OldCo for a fair price.  It doesn’t matter. 

    Under the provisions of Ontario’s Bulk Sales Act and case law interpreting it, NewCo is responsible for paying OldCo’s creditors unless it obtains a certificate signed by 80 percent of OldCo’s creditors by dollar value agreeing to the sale.  We figured that with $20,000 owed to it, no such certificate could have been provided without HydroCo’s agreement.  So either NewCo bought OldCo for fair value but still had to pay OldCo’s creditors or NewCo just stepped in and pirated OldCo’s assets including good will (customers and trade name.)  Either way, NewCo owed HydroCo the $20,000.

    After hearing the results of our investigation and our recommendations, HydroCo said “go get ’em.”  We sent a demand to NewCo and were referred to the lawyer for OldCo.  The lawyer had no explanation, just spun a fairy tale that we interpreted as, “Umm, ah, no one has ever challenged us before when we pull this scam” and promised that the director of OldCo would pay the debt.  He didn’t.  On our advice, HydroCo took the $20,000 owed by OldCo from NewCo’s deposit and delivered a notice of termination saying hydro would be cut at the location if the $20,000 wasn’t replenished in the security deposit by a certain date.  OldCo paid.

    HydroCo was savvy enough to have taken the security deposit from NewCo so the money could be recovered without litigation.  However, if they hadn’t the law is clear that HydroCo could sue NewCo and win.  And since the business is operating and not going anywhere, the judgment would be enforceable.

    In my experience this NewCo-replaces-OldCo scam is common and succeeds in “legally” robbing many hardworking businesspeople of their money.  The scam is flawed in that it has no legal basis and is easily challenged and defeated.  The only barrier to recovery is the unwillingness of those fleeced to hold the scammers accountable.  Too often, it involves hiring a lawyer and paying by the hour to fight the scam.  The police won’t do anything about it because “it’s a civil matter.”  Unfortunately, the victims often end up feeling victimized twice because the legal bills exceed their willingness to pay them and they give up faced with certain high legal bills and uncertain success in recovering their unpaid debt.

    A new breed of lawyer is coming to the rescue though.  The legislation governing lawyers in Ontario was amended in 2002 allowing lawyers to charge a contingency fee instead of only by the hour.  Contingency fees are offered most commonly by personal injury lawyers, but the practise is expanding to general civil litigation as well, particularly to collection matters like this.  If you’re in this situation, look for a lawyer who will put her money where her mouth is; one who will back up saying your case has a great chance for a full recovery by offering to recover your money for a percentage of what she gets back for you.

    Todd Christensen is the principal of Christensen Law Firm in Cambridge, Ontario. His firm restricts its practice to unsecured debt collection and has been a leading innovator in mass litigation for large credit granters and providing access to justice for small credit granters.

    www.christensenlawfirm.com

    800-361-2980

  • 11 Jun 2014 7:54 PM | Anonymous member

    “The pauses between the notes – ah, that is where the art resides!”

    -- Artur Schnabel

     

    You can say a lot, by saying nothing at all! When a Customer calls or in response to a request, says they cannot pay the full amount today, pause on occasion before you ask them to explain or begin your negotiations. If you are a seasoned collector, the odds are you know exactly what you're going to say next. However, when you pause (at least a count of five, and it's great if they ask, ‘are you still there’, it gives the debtor the impression that you are going, somewhat reluctantly, into uncharted waters. Also, if they have said they can't pay the full amount due, NEVER say, 'how much can you pay'. It puts them into the driver's seat. You are better off with "how much are you short of" and quote the full amount due.

     

    Granted, there may be an occasion when you ask, “how much are you short of the $1,500 and they will answer, $1,500”, however you will be getting much closer to the amount you want – the full balance due, than if you ask, “how much can you pay”. Another variation is “how much are you short of” and then again – quote the full balance.

    Tim Paulsen is an international specialist training credit and collection professionals.  He is the author of “Paid in Full” and “Tipping the Scale”.  He can be reached through his website www.trpaulsen.com 

  • 25 Feb 2014 10:47 AM | Anonymous member

     

     “Hold your breath and wait for a discounted settlement.”  This is how Mark Ball, President of the Receivable Management Association of Canada (RMA), describes the approach taken by debt settlement services (DSSes).  Mr. Ball and RMA members were the catalysts in bringing regulation of DSSes to Ontario.

    According to Mr. Ball, DSSes aggressively market to consumers across the country with promises to help eliminate their unsecured debts at a discount.  Seeing the impact that the DSSes were having on consumers, Mr. Ball and other RMA members felt obligated to share their observations with regulators in Ontario.

    After the first discussion between RMA and Ontario’s Ministry of Consumer Services in August of 2012, the Ministry quickly involved other stake holders including the Canadian Bankers Association, professional associations for insolvency practitioners and credit counsellors, collection agencies, large credit granters, and DSSes.  At lightning speed for a legislative process, a bill was drafted and passed in the Ontario Legislature, receiving Royal Assent on December 12, 2013.  Bill 55 – the Strong Protection for Ontario Consumers Act, 2013 amended the Ontario Collection Agencies Act to become the Collection and Debt Settlement Services Act (http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90c14_e.htm.)

    The process began with a “Proposals for Public Comment” document issued by the Ministry January 4th, 2013 (http://www.ontariocanada.com/registry/showAttachment.do?postingId=11742&attachmentId=18018.)     In this document, the government describes what it had learned about how DSSes operate and the negative impact they are having on consumers.  “A debt settlement service operator is typically paid to negotiate with creditors to settle a consumer’s debts on more favourable terms, in particular for a reduced amount.  Under a typical debt settlement plan, the consumer makes monthly payments into an account until there is enough money to make a settlement offer to creditors and pay fees to the debt settlement company. “  Describing its concerns about this process, the government states:

    Consumers who choose to use debt settlement services often find that their situation worsened if a settlement is not reached . This might happen if a creditor is not willing to wait until the debtor has amassed sufficient funds t o negotiate, or is unwilling to settle for a reduced amount proposed by the debt settlement service .  For example :

    ·   They may still have to pay fees to the debt settlement service despite not obtaining a settlement;

    ·   Their debts have grown as a result of no payments being made while interest and other charges accumulated;

    ·   Not making payments to creditors has also worsened their credit report, with a wide variety of potential negative outcomes ; and

    ·   They may be sued by creditors.

    The legislation resulting from the consultation process regulates DSSes by prescribing prohibited and required representations, fee limits, mandatory agreement contents, disclosure statements, prohibited practices etc.    While the act is now law, regulations setting out specifics are still being developed with stakeholder input.  The initial stakeholder meeting was held on February 4th, 2014 in Toronto and attended by DSSes, RMA, collection agencies, creditors and other interested parties.  There the government invited comment on specifics proposed for the regulations including,

    ·         limiting fees to 10% of the original debt,

    ·         no fees being charged prior to the debt being settled and the creditors being paid, and

    ·         information and warnings required to be in the agreement about impact on credit ratings, risk of being sued, cancellation rights, the date by which creditors will be approached, etc.

    The feedback received at this initial meeting will be incorporated into a consultation paper that will be posted on the government’s regulatory registry at www.ontariocanada.com/registry.   The timeframe identified for completing this consultation is “this winter” with a proposed three-month transition period for the regulations to come in force once they are filed.

    Our office has had direct experience with DSSes and the negative impact they can have on consumers.  We welcome this new regulatory scheme.   From a creditor point of view, these debt settlement programs are easily defeated by creditors requiring financial disclosure before offering a discounted settlement and enforcing claims by legal action where a consumer can pay but refuses to.  It is consumers who will benefit from the mandatory disclosure, fee limits, and other protections that will soon be in force in Ontario. 

    Section 2 of the Ontario Collection and Debt Settlement Services Act exempts lawyers from its application.  It will be incumbent upon Ontario lawyers to regulate themselves to ensure any debt settlement programs they administer are in their clients’ best interests.

     

    Todd Christensen represents Christensen Law Firm -- http://christensenlawfirm.com.

  • 22 Nov 2013 2:07 PM | Anonymous member

     

    Hello everyone, I trust that everyone was able to recharge over this past week from the second Receivables Management Association Conference and take advantage of the nice weather that we had in much of the country.

     

    The response and the level of engagement from the attendees has been outstanding, and this speaks to the highly engaged and committed team that planned and executed this conference. We could have played it safe and gone with the tried and true. Instead, we pushed on the content and the speakers to add a degree of risk in order to make this a thought provoking and engaged event. Furthermore, we often wondered if we could surpass the success of our first conference. We succeeded on all accounts.

     

    There is a tremendous amount that we can take away from the conference as positives and foundational blocks that we can build on. This happens when good people surround themselves with other good people and make the magic happen.

    If you haven’t participated in our members survey, we would highly recommend it – we are stronger when our members participate.  A link to the survey is here:

    https://www.surveymonkey.com/s/SY97Y2Y

    People like Mike Ginsberg have already written about his experiences at the conference, which speak to the impact we had in two short days: http://www.kaulkin.com/connect/2013/11/young-association-in-canada-gains-traction/#!

     

    We will be making the presentations and attendee list available online shortly.  Stay tuned.

    Thank you all for your investment and sacrifices in making this an outstanding success. It all looks so easy and this is because of the hard work, dedication & commitment of everyone.

     

    Well done and thank you.

     

    Mark Ball, FICB, MBA,

    President, Receivables Management Association of Canada

  • 06 Nov 2013 4:08 PM | Anonymous member

    “It’s not about the money – it’s all about the money” – Margaret Johnson

     

    Credit counselling is an emerging social science that responds to a multitude of complex issues that include economic, psychological and sociological factors and an expanding legalistic framework that all impact enormously on individuals and families.

     

    As 50% of all families end in separation or divorce, a basic understanding of the rights of children to child support, exemptions legislation, separation agreements and bankruptcy law with respect to the property rights of debtors and creditors, is essential to be an effective credit counsellor.

     

    Credit counsellors need to know a number of provincial property laws like court order enforcement; Personal Property Security legislation and in particular, the rights of debtors and creditors insofar as the seizure of personal property is concerned. Credit reporting laws, debt collection legislation, consumer protection, landlord and tenant law are a few other relevant parts of the legalistic framework in which credit counsellors operate.

    A thorough understanding of lending rules and practices of the banks, credit unions and sub-prime lenders is also fundamental to be an effective credit counsellor. Credit counsellors constantly search for alternatives to a multilayered financial landscape with numerous twists and unique turns. We are in the solution business and strive to minimize negative results like a poor credit rating wherever possible. Consolidating debts and remortgaging property are useful tools for credit counsellors where the circumstances are appropriate.

    I use the term science to reflect an evolving methodology that incorporates the principles of neutrality, objectivity and transparency in counselling individuals and families. People put their trust in counsellors to listen, not pass judgement, to keep their personal information confidential and to operate in an open, honest fashion. This technique draws upon counselling psychology, a recognized social science and should be contrasted to subjective opinions based upon the counsellor’s prejudices, biases and closed back-room deals made in the middle of the night.

    I have often described credit counselling as a special window into human nature. We see the very best and the very worst in some of our clients. It’s amazing how the truth about a person’s character or their intentions is displayed on a financial profile – by their debts, their family budget, their assets (or absence thereof). In many respects the credit counsellor’s experience with money issues and human behaviour better equips them to decisively respond to some problems than social workers and psychologists.

    To respond to the anxiety of an impossible debt problem, to find a solution to an incessant collection process, the fear of losing their credit rating or family assets or relief from guilt, shame and blame most often frees people from the shackles of anguish and despair. There is no feeling like solving a financial problem.

    When I refer to a Credit Counsellor, I mean a Licensed Credit Counsellor who adopts the kind of policies and methodology as outlined above. This is what I do and it makes me proud to be a part of this industry.

     

    However, one thing this Industry is sadly lacking is Government Regulation!

     

    I think it is about time we all joined forces and really worked together to financially educate and assist Consumers, after all, this really is about helping people.

  • 23 Sep 2013 10:07 AM | Anonymous member

    No matter what you think of the new regulations placed on the credit industry, you can’t really blame the government.  While the Canadian banking system is one of the best in the world, I believe the new regulations are a “warning shot across the bow”. 

    As lenders, we are caught in the delicate position of needing to be profitable, and also having a fiduciary responsibility to the consumer to not over extend credit for basic borrowing needs.  We are in a very tight competitive market that has seen credit limit increases based on a consumer making minimum monthly payments without proper notification and, in some cases, improper qualifications.

    This is a complex issue.  I shouldn’t be my ‘brother’s keeper’.  Where does consumer responsibility come in?  Unfortunately, in the litigious non-accountable society that we have in some cases, the consumer responsibility argument will only hold water if they have been properly educated on the products and services without us falling back on the statement, “it’s in the fine print”.  When was the last time you read all 40 pages of an online agreement before clicking, ‘ I agree’?

    Here’s an example that I saw all too often before the new regs came into place:

    Let’s start with the caveat that you aren’t a lender or a banker.  I have seen a mother/father come in to co-sign for a credit card for their child, who has just been accepted into university.  These parents think they’re doing something to set their child up with their first credit rating, and provided them with financial literacy education.  The student uses the credit card responsibly, making minimum payments along the way.  Over the course of their four year education, their approved co-signed credit limit increases from $2,400 to $15,000, or higher.  Because the statements are delivered to the student, mother/father was not aware of the impeding financial disaster.  When the student leaves school, not only do they have a sizable credit card debt, they also have large student loans that need to be repaid.  Initially we only contacted the child for repayment, but before credit goes to write off, we contact the unsuspecting parent.  The parent was not aware that the limit had been increased beyond the original $2,500 and are outraged, not at their child, but at the financial institution for putting them in this predicament without notification.   How would you as a parent feel about having to pay off this $15,000 debt to restore your good credit rating?   Who did we have a responsibility to educate and consult along the way?

    The regulations for joint statementing and notification of any changes to credit limits to all responsible parties fixed the above problem.  The government stepped in to protect the consumers where, if we had provided proper notification, it wouldn’t have been required.

    My solution to stopping governments from imposing further expensive, inefficient, profit-limiting regulations can be summarized in one word – education:

    • Educate consumers on proper credit usage and our lending policies. 
    • Educate ourselves.   When we make decisions, we shouldn’t’ look at it through the eyes of a lender, we should look at it through the eyes of a 18-year old or a new immigrant might not  have a deep understanding of credit.  We need to treat them like we would want to be treated in such unfamiliar, and somewhat dangerous, territory.

    Finally, I understand the flip side of regulations is to secure votes for governments under the premise of “we did something”.  Some of the regulations did nothing to protect the consumer, and fall into that category.  Fortunately, for the government, they don’t have the same ethical or fiduciary responsibilities to educate the voters on what they do.

    Steven Archambault
    Managing Director Operations - Card Services

    ATB Financial
    403-541-4971

  • 22 Aug 2013 10:42 AM | Anonymous member

     

    A few months ago, on April 16th, the Credit Directors’ Association of Montreal held a luncheon with guest speakers and attorneys-at-law Jean-Louis Renaud and Danielle Pelletier from the Consumer Protection Office (CPO).

     

    The one-hour presentation covered certain statistics regarding the treatment of files by the Office and provided an overview of the Act respecting the collection of certain debts (ARCC) as well as prohibited practices in general.

     

    We learned that in 2011-2012, the Office opened 38 statements of offense for 103 counts and obtained 38 judgements on 90 counts plus $62,970 in fines. In 2012-2013, however, only 2 statements of offense were opened for 6 counts and 30 judgements were obtained for 66 counts with $45,123 in fines.

     

    We were reminded that the ARCC gives the Office power to pursue administrators and representatives deemed to have prior knowledge of the offense being committed. Although, generally, fines are assigned, among the mecanisms available to ensure compliance with the laws, the Office can go so far as to revoke permits although that’s rare.

     

    The question period was rich with content! Much was said regarding the dual-edged sword of recorded calls and about collection agencies expanding their service offering with call center operations where they are acting, transparently, in the name of the lender/client rather than their own.

     

    Very informative.

     

    All in all, as far as I’m concerned, we are all familiar with the requirements of the laws and we do our best to abide by them. Some will say –nostalgically- that the «good years» are behind us…but there isn’t much point looking back unless that’s the direction you’re headed.

     

    Nowadays, we do business with consumers who may not always respect the terms of their commitments but are much more informed of their rights. Among them, there will always be the slick ones, those who abuse and/or are just plain ill-intended. We must choose to see them as a challenge! Otherwise, regardless of being right, if we don’t operate within the confines of the laws, we are going to end up being wrong!

     

    The good news is that there are so many tools available, technological and otherwise useful in coaching agents and managing adherence to call protocol that monitoring is greatly facilitated. The more creditors are wary of reputational risks, the greater the expectations are towards collection agencies.

     

    To err will always be human. Our business is one where emotions run high for many consumers, but «knowledge is power». It’s up to us to avoid the pitfalls that can undermine our success and according to statistics, we are headed in the right direction.

     

    Carol-Ann St-Onge

    Vice-Présidente adjointe, Stratégies de Perception

    Banque Laurentienne du Canada

  • 02 Jun 2013 9:45 PM | Anonymous member

     

    The Lowest Bidder Hurts Us All

    By Blair DeMarco-Wettlaufer

     

    I was at a credit management conference recently, and the subject of an RFP recently advertised came up.  Apparently a consumer collection contract was awarded to a collection agency ... for about 13%.  This portfolio, if it compares to others in its industry, has an average balance of $250, and a potential liquidation of 30%.  Clearly the winning bidder and the procurement department that put out this RFP don't realize they have both just hurt our industry and themselves.

     

    In the contingency-fee world, the liquidation of a program and the rate assigned are crucial, key elements in determining the potential revenue for a program.  These revenues are not guaranteed, but with some experience and projection can establish a rough rule of thumb for return on effort.

     

    Now, this isn't the first or last time someone has undercut a contract to the point of non-profitability.  Early on in my career, a couple of decades ago, I was assigned as a collector on a second placement credit card portfolio ... at an 18% commission rate.  This is about half of what this industry would normally award for a program like this on a contingency basis.  The program had been worked heavily by the creditor, and then by the first assignment agency for nine months before it came to our agency, and our team gave 100% effort to liquidate about 4%.  It didn't matter that we collected $100,000 a month in gross dollars, it only resulted in about $18,000 revenue ... for four staff members.  That works out to under $4500 a desk.  In the contingency world, that's not a successful ROI.

     

     

    Let's Look At the Math

     

    Here's the secret to all collection work plans.  This is the prime magic formula that tells the third party collection vendor the profitability and expected revenue flow of any given program.  I'm going to share it with you.

     

    (NUMBER OF FILES PER MONTH) x (AVERAGE BALANCE) x (EXPECTED LIQUIDATION) x (CONTINGENCY RATE) = ROI

     

    That's it.  That tells us the manpower needed, the amount of infrastructure and support services we can give to the team working the program.  Simplicity.

     

    So ... taking what we have learned above, let me show you how 13% is a horrible, horrible idea.  Let's assume, for the moment, that 300 files will be assigned per month.  On a manual collection program, that requires roughly 1 FTE (or Full-Time Equivalent person) to work, trace, and manage client support.  So, if we assign a collection staff member to this program, what sort of revenue should it generate on average, after about 60-90 days, each month?

     

    300 (files) x $250 (avg bal) x 30% (liquidation) x 13% (contingency) = $2925


    What does this tell us?  It tells us that a collection agency assigning a full time person to this program is going to lose money, with the cost of the staff member, the postage for the initial mailings (even if there was only one letter), the telecommunication costs, and the other overheads needed to maintain a legal collection agency.

    So what will the winning bidder do?  They'll have to cut corners, not send out collection notices required by law, fail to attempt to trace the files, not call files under a certain dollar amount, assign the most inexperienced staff member to the program, throw the files in a slush pile with other programs on a predictive dialer, or whatnot.  And because they'll do that, they won't achieve 30% liquidation.  They'll probably liquidate 15-20%.  This destructive cycle isn't just bad management of the assigned portfolio, it directly hurts the client in a real, financial way.

     

    If the agency had received 20% contingency and liquidated 30%, the recoveries would have been $22,500 a month less $4500 fees, for a net back to the client of $18,000.

    Instead, the agency will receive 13% contingency and liquidate 20%, for a recovery per month of $15,000, less $1950, for a net back of $13,050.


    That's a shortfall of about $5000 per month, or $60,000 a year.  I'm betting that's pretty comparable to the salary of someone in the procurement department.  With one decision, that procurement manager just eliminated a revenue stream that paid for one of their staff.

     

    So Why Is This Bad?

     

    Decisions like this hurt our industry.  They make us look collectively incompetent because we don't liquidate the full potential available to an industry group.  They hurt us because we are inviting creditors to take us for granted.  Once a rate is set, it's very hard to raise it again, and other companies in the same industry vertical will often mimic the existing standard that's been set.

     

    The problem with a competitive market that is solely based on price, is that someone, somewhere is going to set a price that will run at a loss, or a significant degradation of service.  And while the experienced people in our industry might get together at conferences, shake our heads and grumble at each other, no one is proactively talking about it.

     

     

    Conclusion

     

    The collection industry needs to work together and not devalue their services.  The collection industry needs to maintain professional standards and explain to their clients what they should expect for a net back result with professional representation.  The collection agency needs to offer transparency for our industry, because they should not be held to unrealistic ROI values.  Occasionally agencies overcharge clients, but that is somewhat internally policed by competition -- but when collection vendors undercharge and provide a substandard liquidation it will leave an impression with the client long after they have closed their doors because they were not running a viable business model.  This needs to be fought with proactive discussion and education to the creditors on what is an acceptable ROI model for their vendor, and what is a reasonable expectation for liquidation.

     

    I believe we should all be having honest, transparent discussions about expected return rates for creditor and collection roles, and a reasonable range for a contingency rate structures.  If you would like to speak about this further, please feel free to reach out to me.  I can be reached at my office at Kingston Data and Credit at 226-946-1730.

     

    Blair DeMarco-Wettlaufer

    Kingston Data and Credit
    Cambridge, Ontario
    226-946-1730

    bwettlaufer@kingstondc.com

<< First  < Prev   1   2   Next >  Last >> 

This site is best viewed in 1024x768 resolution using Microsoft Internet Explorer 8 or higher
© Receivable Management Association of Canada Inc.
The RMA Canada logo is a trademark of RMA Canada. Unathorized use of the RMA logo or RMA content is strictly prohibited. Please contact the president at president@rmacanada.org to first obtain written permission.
Ce site est optimisé pour une résolution de 1024x768 avec Microsoft Internet Explorer 8 ou supérieur
© Association Canadienne de la Gestion de Créances Inc.
Le logo de ACGC Canada est une marque déposée de ACGC Canada. L'utilisation non authorizer du logo ACGC ou le contenu de l'ACGC est strictement interdite. S'il vous plaît contacter le président au president@rmacanada.org pour obtenir une autorisation écrite.

Powered by Wild Apricot - Membership management database, online event registration,
integrated website for associations, clubs, charities and other non-profits.

Site optimisé par Wild Apricot - base de données pour la gestion des adhésions, inscription en ligne aux événements,
sites Web intégrés pour les associations les clubs, les organismes de bienfaisance et d'autres types d'organismes sans but lucratif.

Powered by Wild Apricot Membership Software