Introduction to Collecting FFELP Loans

1
Introduction to Collecting FFELP Loans

• Linda L. Viau
• Associate Director, Claims and Collections
  Vermont Student Assistance Corporation

2
About VSAC

• Relatively Small Guaranty Agency
• Default Portfolio Size 56.6 Million
• Approximately 4,500 Default Borrowers
• Total Collections FY07 14 Million

3
About VSAC

• Utilize 4 Outside Collection Agencies
• Approximately 200 accounts placed within each
  agency
• 2 East Coast Locations
• 1 Midwest Location
• 1 West Coast Location

4
About VSAC

• 8 Staff
• 1 Supervisor
• 5 FT Collectors
• 2 PT Collectors
• 1 Sr. Customer Service Rep
• Each FT collector has approximately 650 accounts
  in their bucket
• Each PT Staff member has approximately 300
  accounts in their bucket

5
Collections Operations/Tools

• Developed Several Training Pieces
• Collections Training Aid
• Working Your Tickler
• Collecting Strategy Reminders
• Skiptracing
• Corporate Acronyms/Log Shorthand/Collection
  Letter List
• Websites

6
Collections Training Aid

• Contains a phone script a tool which helps
  collection staff when they are successful in
  getting a borrower on phone
• Script Directs them to first confirm all
  demographic information on borrower file
• Phone Number
• Address (home or email)
• Place of Employment / Telephone Number

7
Collections Training Aid

• Identifies possible avenues that the borrower
  might pursue to pay in full family resources,
  retirement funds, investments, home equity loan,
  inheritance, etc
• If these avenues are not options available to
  the borrower, work at setting up a monthly
  payment plan that will repay the debt in no more
  than 10 years
• Advises borrower of collection fee that will be
  added on the 61st day after date of default
• Advises borrower of negative credit bureau
  reporting and its possible impact on their
  ability to obtain future credit
• Advises borrower of Tax Offset and
  Administrative Wage Garnishment as collection
  tool possibilities

8
Collections Training Aid

• If borrower can demonstrate that he/she cannot
  make the minimum payment to repay the loan in 10
  years (by means of a completed Financial
  Disclosure Statement), then VSAC collection staff
  will work with them to set up a mutually
  satisfactory, reduced monthly payment plan
  (maximum of 6 months in length to be examined
  at that point to determine if it warrants being
  extended further)
• In some cases the borrower demonstrates that
  he/she is unable to repay anything however,
  each situation must be accompanied by
  documentation to support that position by means
  of
• Paycheck Stubs
• ANFC documentation
• Unemployment documentation
• Disability or SSI documentation

9
Collections Training Aid

• If borrower is successful in demonstrating that
  he/she cannot pay, then their file would be
  clearly documented with the rationale for that
  decision and the account would be set for follow
  up with the borrower each month thereafter for
  on-going evaluation of the borrowers financial
  situation and ability to repay
• Some borrowers might say one of the following
• Not working in the field they were trained in
• Dont owe the debt or dispute the balance due to
  a school refund issue
• Tax Refund already being offset
• Have filed bankruptcy
• The training aid provides dialogue scenarios on
  how to respond

10
Collections Training Aid

• Addresses commonly asked questions with answers
  that can be used to respond
• Addresses specialized programs
• Loan Rehabilitation
• Loan Consolidation
• Renewed Title IV Aid Eligibility

11
Working your Tickler

• Contains specific guidance taken directly from
  federal regulations that address the required
  guarantor due diligence
• Plan of action
• Calling borrowers residence or work number
• Calling references
• Call town clerk or tax assessor for owner of
  property
• Letter to landlord
• Pull credit report
• Trace any and all leads
• Use internet sources
• If/when POE is found and payment arrangements
  have not been arranged, submit the account for
  AWG (Possible scenarios are listed based on
  action or inaction of borrower)

12
Working your Tickler

• Directions to provide when given circumstances
  that involve situations that deal with
• Death
• Disability
• Overcoming borrower objections with possible
  responses that can be used by collector

13
Collection Strategy Reminders

• Use first names when addressing people
• Identify who you are and the company you are
  calling from
• State why you are calling, move quickly to
  asking for payment in full
• Listen carefully, dont interrupt
• Determine borrowers intent and ability to
  repay
• Make the borrower willing by making it matter to
  them
• Stress the consequences of default
• Tips for making mailings to borrowers more
  appealing
• Techniques to get borrowers read our letters

14
Skiptracing Tip Sheet

• If borrower calls in, verify number on in-house
  phone system
• Internet Skip Tracing
• Credit Bureau
• DMV Letters
• Letters to Post offices to verify address
• References
• Secretary of State web page, licensing, etc.
• Directory Assistance
• Landlord/Assessors Office/Town Clerk

15
Corporate Acronyms/Log Shorthand/Collection
Letter List

• Listing of all corporate acronyms used within
  the corporation
• Listing of common log shorthand tips
• Listing of letters that can be ordered from our
  Collections System

16
Websites

• Acceptable time to call can be verified
• Area Code Lookup http//www.thedirectory.org/pref
  
• World Time Zone http//www.timeanddate.com
• Time Zone Converter http//www.timezoneconverter.c
  om
• Validation of a borrowers death
• http//www.rootsweb.com
• http//www.vitalrec.com/usmap.html (Death
  Certificate Requests)
• Corporate/Employer Information
• http//www.manta.com
• http//www.finance.yahoo.com/search
• http//www.hoovers.com/free

17
Websites

• IBM Employee Directory Search
• Area Code Lookup http//www.ibm.com/contact/emplo
  yees/us
• Canadian White Pages
• http//www.whitepages.ca/
• Borrower Information
• http//www.google.com
• http//www.ask.com
• Identifying who called you provides the name
  of caller
• http//whocalled.us

18
Websites

• Listing of OTR (Over the Road) truck drivers
• http//www.driverfacts.com
• Self Employment or Military Enlistment
• http//www.usa.gov
• Federally incarcerated debtor confirmation/contac
  t information
• http//www.bop.gov

19
Collection Philosophies

• Collection Agency contracts
• Revised in January 2007
• Placements based on revenues derived for the GA
• Type of recovery is key i.e., Rehabs yield the
  highest revenue for the GA
• Agency recovery rates shared monthly to
  encourage a greater level of competition

20
Impact of New Regulations

• Will result in reduced revenue 23 to 16 on
  collection retention
• Reductions to our collection agency percentages
  has not occurred at this time, although we are in
  the process of evaluating whether such action
  should be taken
• In the meantime, it is business as usual

21
Post Default Collections in FFELP

• Todd E. Mosko
• Vice President, Loan Assets Management

22
In-House vs. Outside Collection Contractors

• Inventory Control
• Staffing / Technology
• The Results
• Revenue Under Current GA Funding Model

23
Borrower Approach

• Determine intent and ability to pay
• Stress good listening skills
• Balance In Full Lump Sum Payment
• Leverage Costs Credit Reporting
• Recurring Debit
• Ultimate Goal Default Loan Rehabilitation

24
Administrative Wage Garnishment

• Ultimate Leverage for Voluntary Repayment
• Mining your Garnishment Inventory

25
Skiptracing

• Online Sources, Batch Processing
• The Value of Reference Calling
• Employment Information vs. Address/Telephone

26
Employee Performance

• Measurements
• Core Competencies
• Incentives
• Call Monitoring

27
Technology

• Predictive Dialing Blended Calling
• Best Time To Call Software
• Call Recording Software
• Interactive Voice Response (IVR)
• Automatic Recurring Debit

28
Collector Contractor Management

• Performance Measurements
• Competitive Placement
• Commission Rate Structure
• Alignment of Goals Incentives

29
Default Prevention

• Communication
• Financial Literacy
• Early Intervention

30
Early Awareness
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32
Introduction to Collecting FFELP Loans 3rd Party
Perspective

• Christopher Nye
• Director of Training
• US Recoveries
• NCO Financial Systems, Inc.

33
Challenges

• As a 3rd Party Agency, we have different
  compliance obstacles to overcome when contacting
  the borrower in the collection process.
• FDCPA-Total compliance
• HERA-Retention reduction
• State Regulations-Vary and change
• Privacy Acts-Cell phones, e-mail, etc.
• Client needs-Vary and change

34
Resolution Tools

• The proper order of business for resolution is
  always client driven.
• Order may differ based on the GAs collection
  philosophy, financial model or changes to HERA.
• Collection strategy.
• Outside collection agency performance
  measurements/score cards.

35
Resolution Tools

• Order of Business for resolution may vary,
  typically
• PIF/BIF
• Compromise
• Repayment Plan Options Several options to repay
  the loans by making monthly payments including
• Standard Repayment fixed monthly payments of at
  least 50 with up to nine years from date of
  assignment to repay in full
• Graduated Repayment monthly payments will begin
  low and increase gradually over time
• Extended repayment lowers monthly payments over
  a longer period of time and has a predictable
  payment schedule
• Income Contingent and Income Sensitive Repayment
  monthly payments are calculated as a percentage
  of the borrowers income
• Rehabilitation
• Consolidation-FFLEP WDF
• AWG

36
Roles

• As a collector, we have to play many different
  roles!
• Financial advisor
• Counselor
• Sales person
• Psychologist
• Coach

37
Ten Step Collection Process(Third Party
Perspective)

• Opening the call
• Listening to the borrower
• Acknowledging
• Asking questions
• Verifying demographic information

• Money sources
• Resolutions
• Negotiation
• Words
• Closing the call

38
Opening the Call

• Identify borrower
• Identify yourself
• FDCPA
• Mini- Miranda
• Debt collector discloser
• Thirty day validation period
• State the purpose of the call
• Request PIF
• Pause

39
Listening to the Borrower

• Listen to what the borrower has to say.

40
Listening to the Borrower

• Many collectors lose the phone call and payment
  by not listening to what the borrower has to say.
• Be professional with the borrower.
• Attack the debt, not the debtor.
• Find out what motivates the borrower.
• Concerned about credit history.
• Concerned about not paying back the federal
  government.
• Wants to stop annoying collection calls and
• letters.

41
Listening to the Borrower

• By listening to a borrower a collector finds out
  what their current situation is.
• I dont owe the money because I never attended
  the classes.
• I am currently unemployed.
• I thought my parents were going to pay for my
  education.
• I didn't know this was a loan, I thought this
  was a grant.
• Remember attack the debt, not the debtor.

42
Acknowledging

• By acknowledging the situation the borrower feels
  like their side of the story is being heard.
• This is the first step to building a relationship
  or a rapport with the borrower.
• I understand what you are saying. I have talked
  to many people in a similar situation and here is
  how I helped them resolved it
• I understand what you are saying and there are
  programs to get this issue resolved.

43
Verifying Demographic Information

• We have to verify and update our records to make
  sure we have correct contact information for the
  borrower.
• Home phone number.
• Work phone number.
• Other contact phone number (cell phone).
• Address.
• Place of employment.
• Marital status.
• Number of dependents.
• Rent or own.
• Utilities.

44
Asking Questions

• By acknowledging the situation, the door is open
  for the collector to start asking questions.

45
Asking Questions

• Collectors must ask open-ended questions in order
  to receive information.
• Which bank holds your checking/savings account?
• How much equity do you have in your home loan?
• Who or what source are you going to borrow the
  money from?
• How much do you have available on your visa or
  master card?
• Which institution holds your 401K?

46
Asking Questions

• The point of asking the open-ended questions is
  to verify money sources.

47
Money Sources

• Credit Cards
• Checking and Saving Account 
• 401K, Stocks and Bonds 
• Relatives and Friends 
• Employers
• Deferment of a car payment or mortgage payment
• Spouses Employment
•  
•  

48
NegotiationTime Vs. Money

• Remember the resolution tools
• Always generate an offer using the proper order
  of business.
• We are the professionals and we will have to
  explain to the borrower what is required.
• Setting deadlines for repayment options bases on
  order of business.
• Creating a sense of urgency and importance of
  payment with voice tone and wording.

49
Words

• Positive words-
• Now
• Today
• Important
• Will
• Able
• Confident
• Thank you

• Negative words-
• Maybe
• Cant
• Dont
• Wont
• Unable
• Impossible
• Please

50
Closing

• Confirm what the arrangement is going to be.
• Receiving urgency payment with secure funds.
• Setting up rehabilitation or consolidation.
• Getting a second voice on the call if necessary
  from a supervisor.

51
THANK YOU!Please be sure to complete your
conference evaluation forms after the conference!
Linda L. Viau Associate Director, Claims and
Collections Vermont Student Assistance
Corporation802.654.3770 ext 223 Todd E.
Mosko Vice President, Loan Assets
Management American Educations Services tmosko_at_aes
Success.org / 717.720.2532 Christopher Nye
Director of Training, US Recoveries NCO
Financial Systems, Inc.