How to Get Into Municipal Utility Collection

  • Written by Sam Eidson

eidson samThere are many financial products agencies collect on and each one of them requires an acquired niche. One of the most unique products in the collection industry is public and municipal utilities. Both public and municipal utilities offer a range of essentials including electric, natural gas, water, environment waste, telecommunications and cable TV/internet. If your agency is able to get into this sector it can be very rewarding and could lead to more clients within the same arena.

One of the biggest challenges for an agency is gaining the opportunity to represent one of these companies. Most utility companies have outsourced to agencies they are comfortable with and don’t want to risk their public image on an unfamiliar servicer, especially if the agency has limited to no experience working their line of business. Your reputation in the ARM industry could be the biggest selling point to one of the many utility companies interested in giving you a chance. Offering a champion challenger competition may help your agency get a foot in the door. Once you’ve been given the opportunity you must make the most of it with compliant and productive recoveries.

In order to be compliant you must do more than follow state and federal rules and regulations. You must also understand and meet your clients’ requirements in order to successfully earn their business. In order to understand client requirements it’s important to review their agency manual or, at a minimum, coordinate a meeting to discuss expectations. Next you must communicate their expectations to your team and properly train all departments including accounting, client support, compliance and collections. Timely remits, accurate balance reconciliations, proper treatment of special handling accounts and a professional collection approach are essential to customer satisfaction. In some instances, creditors lack knowledge of regulation in debt collection so they rely on us as the experts to guide them through the process.

Understanding the product you are collecting can be essential to your agency’s success. Below I have listed a few questions I ask when onboarding a utility client:

1. What are their disconnect/reconnect policies?
2. Are late fees assessed, and if so, when and how much?
3. Is there a fee charged when disconnect or reconnect occurs?
4. Was a security deposit collected?
5. Would repayment result in reconnection?

During the collection process there are a few common situations your agents should consider: the customer you are calling may have a current account at their new address, the customer you are calling may reside with a current customer or the spouse of a current customer may owe from a previous address.

The average size balance on utility debt is relatively small so it’s critical to implement a strategy that yields results while mitigating expenses. For example: if the client does not require an initial dunning letter at placement you may want to letter upon contact as the law requires. If the client expects letters upon placement, I suggest skip tracing to ensure you have the most current consumer address prior to sending the letter.

Now let’s talk about scoring for the highest propensity to pay accounts. Whether you use a credit score or recovery score, the numerical value assigned to each account allows you to segment the business in tiers. The accounts with a higher propensity to pay should receive a comprehensive dialing strategy while the accounts with a lower propensity to pay receive a lighter approach. A few other metrics to use when segmenting the business is payment history, last payment date, recent charge-off, balance size and how long the consumer had their account. Another strategy could include credit reporting. While most utility companies don’t report positive or negative data to consumer reporting agencies, some of them encourage the outsourced agency to report the unpaid debt.

Analyzing key performance indicators allows you to determine whether your approach is providing the results needed to outperform your competitors. Contacts, payments and dollars collected are a few of the most important metrics. You can divide total contacts by total payments taken to give you a closing percentage and divide total fee by total payments taken to provide an average size payment. In order to calculate goals that challenge your competitors’ performance, take the net amount placed with your agency and multiply it by the liquidation rate your competition has or projects to have. This will give you the dollar amount needed to collect in order to take over first place.

Sam Eidson is the Director of Compliance for Delta Outsource Group, Inc. He also serves on the Board of Directors for the Missouri Collectors Association.

16 Things Your Letters Should Have

  • Written by Sam Eidson

eidson samCollection letters have been a pain point for many agencies in recent years due to the constant change and new regulations. The FDCPA and multiple states have individual requirements that must be followed in order to remain compliant. Failure to comply can result in negative audit findings, fines and lawsuits. Most recently the New York State Department of Financial Services (NYSDFS) released a compilation of codes, rules and regulations including initial statute of limitations and substantiation disclosures, itemization, payment schedules, quarterly statements and email restrictions. Case law suggests that agencies itemize the initial letter to avoid unfair practices. It is recommended or in some cases required to have a collection attorney review your written correspondence annually for risk assessment. Below are a few suggestions:

1. The text of each letter should be in black ink and not less than 11 point font size.

2. The mini-miranda should be stated verbatim on all letters: “This communication is an attempt to collect a debt by a debt collector. Any information obtained will be used for that purpose.”

3. The consumer name and address should be the only thing visible through the window envelope.

4. Settlement offer letters should state the following language after the offer, “We are not obligated to renew this offer.”

5. Avoid using 1099c or IRS reporting language.

Required disclosures have increased at the state and federal levels as a way to protect consumers from unfair, deceptive or abusive acts or practices. In addition to the 30-day validation disclosure, agencies are also required to include specific state text, credit reporting, obsolete debt and in some cases safe harbor language. Below are some examples of the required disclosures.

When collecting debt that is 1) beyond the statute of limitations, 2) not too old to credit report or 3) you are credit reporting the account to one or more credit bureaus, your initial communication letter should contain the following disclosure on the front side of the letter:

6. The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it. If you do not pay the debt, we may continue to report it to the credit reporting agencies.

When collecting debt which is beyond the statute of limitations and too old to credit report, your initial communication letter should contain the following disclosures on the front side of the letter:

7. The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it, and we will not report it to any credit reporting agency.

If the consumer is being charged any fee for any reason, including a convenience fee, vendor fee, payment processing fee, the letter referencing the fee should contain disclosure which is truthful, clear, and prominent of the following information:

8. The fact a fee will be charged.

9. The amount of the fee.

10. The number of times the fee will be charged.

11. The reason for the fee.

12. How consumers can avoid paying the fee.

In preparation of the CFPB’s final rules, I have created a list of items from their proposed rules. Agencies should be prepared to satisfy the requirements below and will need to work with their letter vendor to ensure the necessary changes won’t impact timing of working accounts.

13. The CFPB has proposed updates to the validation notice.

14. The CFPB has proposed requiring a Statement of Rights be sent in the initial communication and after 180 days if no confirmed consumer contact.

15. Are versions available in Spanish?

16. Proposed disclosures for time barred, intent to sue and credit reporting on obsolete debts.

The expense and time invested to create, manage, update and send letters affect overall profit margin. Agencies typically have two options: 1) send only the required letters by law or 2) create a series of letters to be sent during the lifecycle of an account. Agencies should analyze what letter strategy works best for their organization considering many factors including the type of account, duration of placement and return of investment. I suggest having a dedicated number assigned to your letters in order to fully understand the return on investment. Having a dedicated number allows you analyze key metrics such as right party contacts, number of payments and revenue generated. Divide the revenue generated by the cost of the letters to determine whether you are behind or ahead on cost.

Sam Eidson is the Director of Compliance for Delta Outsource Group, Inc. He also serves on the Board of Directors for the Missouri Collectors Association.

Protecting the Client's Brand in Telecom Collections

  • Written by Sam Eidson

eidson samHave you seen the commercials where a cell phone provider offers to buy out your contract, even going as far as cutting your bill in half with a sword? They make it sound like all you have to do is sign up with them and they’ll take care of the rest. In some cases the consumer finds out months later the new provider did not do everything they promised. In fact, if the consumer doesn’t comply within a certain amount of time they won’t even get the buyout money. Eventually the consumer receives a dunning letter and even collection calls for the unpaid balance or the contract buy out amount. That’s where we come in and try to assist the consumer in resolving their unpaid balance.

Often we have to overcome objections before we can even attempt to collect the debt. Whether the charges are for data, service, equipment or cancellation, the consumer was under the impression all is well and could be receiving collection calls for the very first time in their life. How the collector handles the call is crucial to what happens next. The call can result a few different ways including payment, dispute, fraud or even worse, a complaint. It’s important to make sure your agents are trained on how to properly handle the call if the consumer objects. If the consumer claims their current provider promised to buyout their contract I suggest asking the consumer if they received a gift card to cover the buyout amount. If they didn’t receive a gift card they may not have complied with the fine print of the agreement. If the consumer adamantly disputes then the collector should back off and offer to provide invoice copies. Once the consumer understands what the charges are for it makes our job as collectors easier. If they claim they were a victim of fraud the service provider should have a process to follow.

When collecting for a service provider it is imperative to protect their brand by treating the party on the other end of the phone with dignity and respect. The last thing you want to do is leave a bad taste in their mouth due to an unpleasant experience. Not only because they may never come back to the provider but also because anyone they speak to about their experience whether it be friend or family may think twice about using your client in the future. I’ve found it to be more difficult to train pre-CFPB collectors because of the old saying, “you can’t teach an old dog new tricks.” Ideally I look for collectors with less than five years experience. We take a customer service approach and focus on the fundamentals. Showing empathy, thanking the consumer and recapping the call are all good ways to provide the customer service approach.

From a strategy standpoint, you must be cautious with how you attempt to reach the consumer. The service number could have been ported over to the new carrier by the consumer or reassigned to a third party so manual dialing is crucial in order to remain complaint under the TCPA.

If it’s a commercial account I would start with accounts payable. Your approach must be professional and assertive but remember it’s not their debt. If you are unable to get anywhere with accounts payable check the agreement to see if there is a personal guarantor and attempt to reach them. If all else fails I attempt to reach the owner of the company. The owner may not be reachable at the office so you may have to skip trace in order to find their home or cell phone number. I use Accurint and search the businesses name then click on the “People at Work” feature. Once you make contact with the owner remember to take a soft approach. In most cases the owner of the company isn’t aware the debt is unpaid and more than likely isn’t used to receiving collection calls. The purpose of calling the owner is to notify them of the amount owed and get them to instruct their accounts payable department to pay the debt. Owners are used to giving orders not taking them so handle with care.

Sam Eidson is the Director of Compliance for Delta Outsource Group, Inc. He also serves on the Board of Directors for the Missouri Collectors Association.

Compliance vs. Operations

  • Written by Sam Eidson

eidson samRemember the days of collecting money first, the days when compliance was an afterthought? Things sure have changed over the last 40 years due to the FDCPA to the last five years of the CFPB. Now every word spoken or written is critiqued by clients, regulators and plaintiff attorneys. Most collection laws and rules are ambiguous and can be left to interpretation which enables attorneys to send mass TCPA and FDCPA demands or file lawsuits with the hopes of no resistance. I guess I can’t blame them so long as our courts are allowing this. Why not pick the low hanging fruit? Unfortunately, many courts are split on what practices are legal, unfair and deceptive leaving much uncertainty within the credit and collection industry.

Regulators, courts and most politicians don’t care about what’s unfair to businesses because it’s all about consumer protection. Industry practices such as blitzes and closeout are becoming a thing of the past because collectors shouldn’t press harder due to the time of day or month. There’s really no such thing as a least sophisticated consumer with today’s technology, internet, social media, attorney billboards, TV and radio commercials. Collectors are at a disadvantage and must be aware of their every move. Collectors have been given a bad stigma for years and while there are bad actors, most licensed and insured agencies are ultraconservative and provide a professional, respectful service to consumers and clients while playing a major role in our economy.

Five years ago creditors and agencies had to create compliance departments ultimately affecting their bottom line. Some ended up going out of business because they couldn’t sustain additional overhead. Those who were able to survive reaped the benefit of less competition and a pool of collectors needing employment. Even some collectors were not able to transition to the new way of collecting and had to find a new line of work. Most incentive plans are no longer based on how much is collected but also how the money was collected.

As the years have passed creditors have heightened their oversight in order to mitigate risk and protect their brand. Regular call calibrations as well as monthly, quarterly and annual audits have become the standard. Even client scorecards have incorporated compliance to ensure they are monitoring how agencies are collecting. An agency’s performance can be affected if it takes too much of a conservative approach. While you can never let the tail (compliance) wag the dog (operations) both are essential in today’s environment. Most agencies constantly struggle to balance compliance with their operational goals.

In order to ensure collectors are compliant you must develop them into what you expect. This includes side-by-side monitoring, call listening sessions, random call monitoring and classroom training. Scheduling training can be difficult for compliance departments because operations has goals to achieve and most of the aforementioned training requires the collector to be off the phone.

Compliance departments must work with operations and schedule certain times throughout the month where training can take place. This dynamic is crucial for your company to be successful and it takes the leaders of your organization to make it work. I deem compliance violations as one of two things, ignorance or intentional. If the violation was due to ignorance, meaning the collector didn’t know their actions were a violation, the collector can be coached on how to properly do their job compliantly. If the violation was an intentional act, you may have to make a decision as to whether the employee is the right fit for your organization.

As a compliance officer I seek first to understand and then to be understood. Why are changes being made? How are they benefiting our organization? Once I understand everything in its entirety, I seek to be understood and ensure the consequences don’t outweigh the benefits. Anyone can come in and tell you what you can’t do. It takes a true leader in the field of compliance to come in and tell you what you can’t do while overshadowing that with everything you can do. If you take a tool out of one’s toolbox, replace it with another. As we all know, compliance is here to stay and so long as we embrace change we can successfully build the lives of employees and consumers by turning difficult circumstances into positive experiences.

Sam Eidson is the Director of Compliance for Delta Outsource Group, Inc. He also serves on the Board of Directors for the Missouri Collectors Association.

The Sensitive Nature of Medical Collections

  • Written by Sam Eidson

eidson samAs we continue to age it becomes more difficult to have a clean bill of health. Whether it be you or one of your loved ones that experience a medical hardship, it can be very difficult to cope. It seems inevitable that an unexpected health issue will arise leading to a visit to a medical professional followed by bills. While both medical and credit debt can affect your credit report, there are a few unique differences between the two types of debt. Patients don’t always have a choice when it comes to healthcare like they do when applying for credit. The medical service is needed in order to get well again. In most cases there isn’t a contract or predetermined payment plan when one incurs medical debt. Once the bill is sent the balance is due in full unless an arrangement is made with the provider. Patients are faced with using their savings accounts, taking on credit card debt and even bankruptcy in order to resolve their unpaid medical debts. The biggest difference for a consumer is: medical debt can only negatively affect their credit rating.

Over two decades ago I began my collection career working as a collector for a mom and pop medical collection agency. I quickly began to realize medical debt applied to everyone. While at the agency I collected on debts owed by professional athletes, friends, family and even a schoolteacher I had growing up. Their account could have been placed in collections for many different reasons: lack of insurance, billing errors or not understanding how their deductible and copay works. It was my job to find out why the account had not been paid and find a solution to resolve the patient’s account. Once the reason for delinquency had been identified I would either educate the consumer as to why they were responsible to pay the debt or I would file a UB92 form with their health insurance provider. The UB92 has since been replaced with the UB04 and while most healthcare providers and insurance companies continue to use the UB92, Medicare and Medicaid will no longer accept the older form.

How we collect medical debt has changed quite a bit over the last couple of decades. Collectors have to carefully determine if the consumer has a legitimate billing issue due to how their insurance or financial assistance claim was filed. If not, they must overcome the consumer’s objection while avoiding a potential complaint. Collectors still want to take an empathetic approach, show compassion and remain respectful but also be assertive and well versed in financial assistance programs offered by the provider, charity programs, insurance billing and all healthcare regulatory requirements. It’s our job as collectors to turn difficult circumstances into positive experiences.

If you’ve visited a medical professional over the last few years you may have noticed service providers’ office personnel will check for healthcare coverage and even collect their copay prior to providing treatment. The healthcare providers have had to train their personnel in order to increase the likelihood of getting paid for their service. I’ve listed a few suggestions for agencies and their collectors to remember when collecting medical debt:

• Collectors and their agencies must comply with 501(r), which prohibits extraordinary collection activity before making reasonable efforts to determine whether a patient is eligible for financial assistance. A few examples of extraordinary collection activity include legal action, reporting adverse information to the credit bureau and selling the debt.

• It’s important to properly train collectors on the Health Insurance Portability and Accountability (HIPAA) Act which was created to protect patients’ private information. You should frequently monitor how collectors document patients’ account and communication with third parties including spouses and attorneys to avoid disclosing personal or private medical conditions.

• The Health Information Technology for Economic and Clinical Health (HITECH) Act was put in place with the purpose of implementing the use of electronic health records. While collectors do not directly fall under the scope of the HITECH Act, it’s still important that we protect the privacy and security of all electronic health records.

• Create a culture in your organization where your collectors show genuine empathy, professionalism and respect to the individual on the other end of the phone. We have found those three traits not only help avoid complaints but they also help increase collections.

Sam Eidson is the Director of Compliance for Delta Outsource Group, Inc. He also serves on the Board of Directors for the Missouri Collectors Association.