Increase Recoveries with Debt Sales
June 19, 2018
Today’s lenders are starting to see loan losses increase at the same time they are feeling pressures to increase revenues. In the past, debt sales were an opportunity to increase recovery, however, in recent years, the OCC risk management guidance issued in August 2014 raised the associated costs of executing a debt sale, which in combination with low losses, has led to fewer organizations selling debt. We expect that to change.
Debt Sales can be executed in a compliant, cost effective manner:
The reason for avoiding debt sales? Lenders have uncertainty with being able to comply with the regulatory expectations and low losses just didn’t dictate a need. Regulators have set high expectations of the application of a consistent methodology for due diligence, the rigor around additional information regarding each debt sold at the time of sale, and the adequacy of customer account information transferred from banks to debt buyers. Couple this with the need to conduct regular monitoring activities and costs can escalate and greatly reduce margins.
Many lenders have inventories that have been building for years and could be missing an opportunity to bolster their recovery numbers by not getting back into these pressures. The risk has just been too high. Until now.
Steps to Getting Back to Debt Sales:
There are several steps that need to be taken to mitigate risk to sell debt:
- Validate that appropriate internal policies and procedures are developed and implemented to govern debt-sale arrangements consistently across the organization.
- Ensure that information regarding the debts is accurate and comprehensive.
- Institute a due diligence scorecard, ensuring the right partner is in place if you are going to ensure that your customer will be properly treated and the actions taken by the buyer are in line with your organizational values.
- Implement a monitoring and oversight process to measure customer experience needs like complaint levels, disputes, and overall buyer adherence to stated practices. Remember, the regulatory guidance has been clear: You own the customer experience for the life of the account regardless of whether the debt is sold or not.
Want to Get Back into Debt Sales Compliantly?
Bridgeforce has developed a comprehensive end-to-end debt sale program that can be implemented in 3-6 weeks. The program was developed in 2013 and has undergone several rounds of client and regulator feedback to fine tune efficiency, effectiveness and to ensure compliance to regulator expectations. The Bridgeforce proprietary Debt Sale Program establishes robust evidence-based governance and oversight processes that can be executed consistently by resources with varying levels.
Bridgeforce Debt Sale Program – High Level Elements
- Ensuring Buyers can Meet your Minimum Requirements Prior to Due Diligence
- A Thorough Due Diligence Examination
- Quarterly Oversight Designed to Monitor Activities to your Standards
- Supporting Materials Designed to Document the Program and Help it Run Efficiently
Bridgeforce can train your team to use the program, run it for you, or review your results once completed. Feel at ease knowing you have highly experienced individuals who have executed numerous debt sales for clients in a compliant, profitable manner.