Category: Collection & Recovery

Recovery Rates have been consistent across the board.

KEY TAKEAWAYS

• Recovery rates in Estonia averaged 36% last month. For the last 3 quarters, Q4 of 2015 and the first 2 quarters of 2016, we are seeing an increase in recovery rates on a monthly and quarterly basis. Quarterly recoveries increase from 53% to 60% to 71%.
• Recovery rates in Finland average 102% versus 108% last month. Here we have a slight decline from the previous month. The last 3 quarters we have seen declining monthly recoveries although our recovery process is improving. The last 3 quarters saw recoveries of 26%, 34%, and 102% respectively.
• Recovery rates in Spain average 79% versus 95% last month, a slight decline. Like Finland, we are seeing a slight decline in recoveries over the last 3 quarters. The last 3 quarters in Spain saw recoveries of 43%, 34%, and 79% respectively. We just started using the legal process and litigating for recoveries here. We will be updating with how this process goes.
• Recovery rates in Slovakia for the loans still outstanding there are improving. Monthly we have an increase from 1% up to 23%. Quarterly recoveries are at 110%, 96% and 23% respectively.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Below you can see the recovery rates across markets per quarterly cohorts. The cohorts are made of loans that defaulted in that particular quarter. The data in the table is as of 12.09.2016.

Quarter	2014 Q1	2014 Q2	2014 Q3	2014 Q4	2015 Q1	2015 Q2	2015 Q3	2015 Q4	2016 Q1	2016 Q2
Estonia	56%	75%	78%	80%	122%	91%	45%	53%	60%	71%
Finland	38%	52%	32%	56%	74%	82%	24%	26%	34%	102%
Spain	N/A	19%	13%	19%	34%	28%	34%	43%	34%	79%
Slovakia	N/A	N/A	5%	11%	32%	17%	61%	110%	96%	23%

You can find additional related information about the recovery process from these articles:

• How are recovery rates measured?
• Why don’t you calculate the recovery rate on the principal balance?

Once again we bring you the monthly update on the performance of Bondora’s recovery process across four countries – Estonia, Finland, Spain and Slovakia.

KEY TAKEAWAYS

• Recovery rate in Estonia has averaged around 50 per cent while slowly but steadily rising under the current process. Legal litigation has recently been combined into the process to further boost recoveries.
• Recovery rate in Finland averages around 30 per cent and similarly to Estonia has been relative stable. Recent changes to recovery process have had a positive effect for the recovery rate. Legal litigation has replaced the debt collection process starting from August. All the debt cases under the old recovery process should be filed by September 2016. All the new cases are now filed automatically.
• Recovery rate in Spain has remained at around 45 per cent during the current process and is close to the performance in Estonia. Similarly to Finland, the recovery rate has seen a increase in the last quarters. Legal litigation will also be used in the future in a combined process to deliver highest possible recoveries. First cases will be filed in September.
• Recovery rate in Slovakia has remained high during the past year, averaging around 90 per cent. Slovakian operations were closed in first days of 2015. Since then the remaining portfolio has continued to be serviced. The 246 loans in default have been all been processed by one debt collection agency which started in the end of 2015. This month a second debt collection agency took over the portfolio that was not activated. The recovery team anticipates that legal litigation will be started for all cases that remain in the portfolio in Q4 2016. The priority today is to clear up the backlogs in Finland and Spain.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Below you can see the recovery rates across markets per quarterly cohorts. The cohorts are made of loans that defaulted in that particular quarter.

Quarter	2014 Q1	2014 Q2	2014 Q3	2014 Q4	2015 Q1	2015 Q2	2015 Q3	2015 Q4	2016 Q1	2016 Q2
Estonia	55%	74%	77%	79%	121%	92%	44%	52%	57%	57%
Finland	37%	52%	32%	56%	76%	84%	25%	27%	35%	108%
Spain	N/A	19%	13%	20%	35%	29%	36%	46%	39%	95%
Slovakia	N/A	N/A	5%	11%	33%	18%	62%	121%	92%	1%

HOW ARE RECOVERY RATES MEASURED?

We calculate the recovery rate by comparing actual principal cash flow (net of write-offs) that occurred after the default with principal cash flow that we would have expected from the loan in case it had paid according to the agreed schedule. This measure allows us to determine the expected capital loss on loans that default.

Data is aggregated to larger cohorts and recent data are excluded as otherwise outliers will skew the results too much (e.g. 1 customer repaying the full amount after default at once). On the Bondora level this means excluding the last three months of defaults and using country based quarterly cohorts. Data on individual portfolios should likely be viewed on a higher level either using yearly country based cohorts or simply quarterly cohorts across all countries.

HOW TO FIND RECOVERY RATES USING BONDORA STATISTICS?

You can easily find information on recovery rates on the entire Bondora portfolio through the Recovery Rate chart on Public Statistics. The same chart is also available for the portfolio of each individual investor in your Personal Statistics page. Simply adjust the period, country, planned, actual and group by filters to pull out the numbers shown above.

Some tips to help you master the Recovery rate chart:

• The period filter looks for loans that defaulted in the specific time range.
• The country filter allows to look at defaults from a specific country
• The status filter segments the data based on the loans current status (Defaulted = loan is still in default; Full recovered = the loan has been repaid in full; Restructured = a new payment schedule has been agreed; Sold = loans you have sold – this is only applicable to your private portfolio)
• The recovery status filter allows you to analyze the performance based on the latest high-level collection and recovery stage assigned to the loan
• Planned and actual filters make it possible to determine how the recovery rate is calculated. You can for example compare planned interest vs. actual interest received or planned principal vs. actual principal received.

HOW CAN I USE THE RECOVERY RATE?

The recovery rate helps you understand how much of the principal balance of loans in default you are likely going to receive. This figure can be used to adjust future cash flows and arrive at a risk-adjusted yield-to-maturity of your Bondora portfolio. You can do this for your portfolio through the Cash Flow page Settings section. The Forecast settings provide you recommended ratios calculated on your portfolio historic cash flow that can be used instead of taking them from recovery rate charts.

WHY DON’T YOU CALCULATE THE RECOVERY RATE ON THE PRINCIPAL BALANCE?

Some customers have criticized the recovery rate calculation stating that a borrower who defaults is liable to return the principal balance at once. This criticism is valid from a legal perspective but not from a financial. The right to demand immediate payment of the principal balance is stipulated in the agreements to make enforcing the contract economic. The cost of collection and recovery would be excessive if enforcement steps would need to be taken for each missed payment. This clause makes it possible to substantially reduce the number of steps necessary to enforce the contract and get the borrower to start making payments under the agreed schedule.

The right to demand immediate payment of the principal balance does not mean it is reasonable to expect this to happen. Consumers take out loans to pay for larger purchases in affordable monthly payments. Loans would not be required nor interest paid on them if people would have the capital available themselves. Borrowers having financial difficulties are even less likely to have this sort of capital available. Therefore the main objective of collection and recovery is to restore the cash flow, or part of it. The success of these activities are measured by looking how much of the cash flow was restored.

Our investors have continuously been interested in the topic of Bondora’s collection and recovery. So as a continuation of yesterday’s post we decided to give you more details about our current setup of servicing, collection and recovery and also what to expect in the near future.

HOW HAS SERVICING, COLLECTION AND RECOVERY PROCESS DEVELOPED IN RECENT MONTHS?

In March we informed you about substantial changes to our collection and recovery process. Since then our loan servicing, collections and recovery department has been continuously fine-tuning the process. Today we would like to go through the improvements made since March as well as changes that we’ll be introducing in the near-term. We would also like to take a step back and explain the full process again in depth.

KEY IMPROVEMENTS TO THE SERVICING, COLLECTION AND RECOVERY PROCESS

• Mandatory repayments over SEPA Direct Debit were rolled out in Finland and Spain in May. Process was later stopped in Finland as the SEPA Direct Debit had low coverage but in Spain it is working well.
• Only the best performing debt collection agencies were kept in each country.
• Legal cases are being filed against loans that had gone through the collection stage in Estonia. Old cases are expected to be filed by end of the summer and thereafter it will be an on-going process.

UPCOMING MAJOR DEVELOPMENTS

• Experian credit bureau will also be implemented in Spain, similarly to Estonia, to notify debtors on our behalf. In Estonia this notification has a strong impact to the pre-default collection rate.
• Legal litigation in Finland will be started automatically when loan defaults as we have now developed an API to process the legal cases. The technology will be rolled out over the next month and thereafter all old cases will be filed and new cases will be filed automatically.
• Legal litigation will also be started in Spain for cases that have gone through collection. We expect to file the cases during August and thereafter set up a recurring process.
• Different alternatives to file cases against Slovak delinquent portfolio are being explored. We will aim to process the entire portfolio by end of Q3.

HOW ARE LOANS SERVICED BY BONDORA?

Bondora AS (Bondora) provides (or procure the provision of) servicing, loan administration, collection and recovery services in respect of the loans originated by Bondora and later sold through the Bondora.com marketplace platform (managed by Bondora Capital OÜ). The servicing is made through a bank account in the name of Bondora, but segregated from its assets, that will receive SEPA Credit and Direct Debit Transfer payments from borrowers as well as payments from third party payment gateways.

Bondora has established a bank account in its own name but for the benefit of the investors (and Bondora Capital) and directs borrowers to pay interest and principal repayments into that account. The funds on the dedicated account are not be co-mingled with Bondora’s assets.

Investors get daily, loan-level performance and payment information in respect of the loans they own via Bondora.com.

WHAT HAPPENS IF LOAN REPAYMENTS ARE NOT MADE ON TIME?

Bondora´s collection strategy focuses on efficiency, time, quality and customer satisfaction. Bondora´s philosophy is to strive for successful debt collection by being responsive to its borrowers’ changing financial circumstances yet having largely automated standard operating procedures. The ultimate goal is to restore as large percentage of the planned cash flow as possible whilst maintaining a strong reputation. This strategy has resulted in relatively high recoveries on defaulted loans.

Payments are handled via either SEPA Credit Transfer, SEPA Direct Debit Transfer or online payment gateways. The standard servicing process is continued until the outstanding balance is recovered, the amount awarded by a court repaid or the amount agreed in settlement repaid. Any claim reductions (gaps between claim balances calculated by our system and the amount the customer is supposed to pay under a settlement or court order) are shown as write-offs in your account reports. It is unlikely that a loan will be discharged in a legal process, as personal bankruptcy typically does not allow debtors to walk away from their loans, including unsecured consumer loans.

WHAT ARE THE COLLECTION AND RECOVERY COSTS?

Collection and recovery costs are not paid separately, but deducted from the gross cash flow recovered in connection with the servicing of the delinquent portfolio. Currently this cost on average is 15% of cash flow received in respect of delinquent loans but it may change in the future. There are no costs charged if no payments are collected. These costs are shown as write-offs in your account reports.

The collection and recovery costs are deducted from the cash flow received in respect of delinquent loans. The remaining amount is transferred to the investors within one business day of the date of receipt of the relevant amount of cash flow generated by the delinquent loans, including payments on account of principal, payments on account of interest, and all other proceeds of any other legal or insolvency proceeding or recovery. The transfer may take longer if cash is received without proper documentation or references.

WHEN AND HOW ARE EXISTING LOAN AGREEMENTS MODIFIED?

All borrowers have the statutory right to:

• withdraw from the loan agreement within 14 days from the loan issue date;
• repay the loan early; or
• repay part of the loan early.

The borrower is required to pay interest for the time the principal was outstanding, regardless if they repay the loan early or withdraw from it. In case they withdraw from the loan agreement, the contract fee paid to Bondora will be refunded.

Borrowers using B Secure are able to adjust their repayment schedules to:

• take up a principal payment holiday;
• make the length of the loan schedule shorter or longer; or
• change the monthly payment date.

The borrower has to have made at least 1 full monthly payment according to their active schedule before being able to modify it again. In case the borrower has unpaid fees, interests or other debts at the time of making changes to the repayment schedule (either changing the monthly payment, taking the payment holiday or changing length of your repayment schedule), they must pay all overdue amounts with the first payment of the new, modified repayment schedule.

Loan modifications are all borrower-initiated and executed through their self-service portal. Loan modifications are allowed in order to be able to adapt to borrowers changing financial circumstances as well as to avoid defaults. In case a borrower defaults then local courts or bailiffs can enforce loan modifications that are considerably less lender-friendly than modifications agreed with the borrowers directly.

HOW ARE BANKRUPTCY PROCEEDINGS STARTED?

Bankruptcy process is only initiated if bailiff has not been able to collect the debt after freezing the borrower’s assets and accounts whilst the borrower still has marketable assets. Bondora will either initiate the bankruptcy process on its own or join an existing bankruptcy filing. Borrowers may also file to start bankruptcy proceedings.

Bondora has had only a limited number of bankruptcy cases over the duration of 5 years. Personal bankruptcy is not common in continental Europe as discharging debt will take up to 7 years depending on the country. Therefore, borrowers with marketable assets and recovery potential typically repay debt under a new payment plan rather than opt for a bankruptcy process. Bankruptcy process would not yield any additional benefits against borrowers without marketable assets.

HOW QUICKLY ARE PAYMENTS PROCESSED?

Bondora banks with Swedish SEB’s Estonian subsidiary SEB Pank AS. Bondora has an automated payment gateway with SEB Pank AS to receive credit payment details and issue debit payment instructions. Bondora processes incoming payments automatically if the payment has a reference number or is coming from an IBAN account registered on the borrower’s account. A small number of payments are reconciled once a day manually if there was no reference number and the payment arrived from an unknown IBAN account.

Every SEPA credit transfer customer delivers to their bank before the cut-off time of 14.30 hrs. CET is guaranteed to be processed within one business day.

SEPA credit transfers delivered before 15.00 hrs. CET will be processed on a best efforts basis. These payments will be debited from borrower’s account the same day, but sometimes they cannot be sent to Bondora’s bank the same day. If so, they will be sent on the next business day.

Bondora uses authorized payment service providers to process its SEPA Direct Debit mandates. Debiting the borrower will take 5 business days and the payment order must be created 3 days before that (6 days in case of first collection with SEPA CORE).

WHAT DOES IT ALL MEAN FOR ME?

Loan servicing, collection and recovery is an on-going process that develops in time. There are continuous tests being made to identify the most effective and efficient process for each customer segment and country. Changes in legislation and technology often create new boundaries whilst also opening up new opportunities. Bondora will aim to continue improving its processes to adapt with the changing environment as well as investor demand.

KEY TAKEAWAYS FROM COLLECTION AND RECOVERY PROCESS DATA IMPROVEMENTS

• We have now developed and implemented the reporting system to reflect the write-off amounts for each payment and claim in our collection and recovery process. This way investors can see both gross and net payments. Until today it was only possible to see the net payments and gross claims as write-offs were handled outside the system.
• Write-off is any amount deducted from gross cash flow received in respect of delinquent loans or reductions of principal and secondary claims (interest, penalties). Write-offs are applied to the gross cash flow received from the debtor or the gross claim calculated by the system. This reduction of cash flow is already projected in the loan interest rates and therefore expected returns via lower recovery rate assumptions. Expected recovery rate has been calculated on net, not gross cash expected to be received.
• Write-off means that the amount expected to be received from the debtor is reduced and the debtor is not requested to repay this amount. It does not typically mean a loss in itself as the respective debtors make payments often in excess of the capital invested. Cases that go through formal bankruptcy proceedings are exceptions to this.

FULLY PAID OFF LOANS WILL NOW BE WRITTEN-OFF AND REMOVED FROM YOUR ACTIVE PORTFOLIO

Loans that have been fully repaid under settlements but where the reductions of the claim are not reflected in our system will be shown as repaid. Deductions made in accordance with the settlement will be shown as write-off together with the reason for such write off. For most of these cases the principal and initial planned interest has been recovered fully and reductions are done from the overdue interest. Usually these cases are the ones where there was a settlement with the debtor (for example the debtor has asked for interest reduction) or where bankruptcy cases have ended. These cases (currently shown in Write-off stage) will be updated in the system over the coming months and closed.

PARTIAL WRITE-OFF WILL BE SHOWN FOR EVERY PAYMENT

Write-offs on delinquent loans in active collection or recovery are shown in the loan schedule as payments come in. Fees will be deducted only from the overdue payment if the borrower recovers fully and makes next repayments on deadline. Data from April has been input to the system and data on new partial write-offs is populated automatically.

WHERE TO LOOK UP THE LOANS THAT HAVE BEEN WRITTEN-OFF?

WRITE-OFF-S ARE REFLECTED IN THE FOLLOWING PRIVATE REPORTS:

• Income Report (column names WriteOffPrincipal, WriteOffInterest and WriteOffPenalties)
• Monthly Overview (row names WriteOffPrincipal and WriteOffInterest)

ADDITIONALLY YOU CAN SEARCH THE WRITE-OFFS FROM THE FOLLOWING PAGES:

• Cash flow (added extra columns and graphs. You can set these up from the settings.):

• Investments (possibility to add extra columns from the settings and use search filters for looking up the loans where write-offs have occurred):

• Secondary Market (possibility to add extra columns from the settings and search the write-off amounts from the loan schedule and collection events):

• Dashboard (principal balance will reduce as much as the write-off for principal amount was)

INVESTORS HAVE EVEN BETTER OVERVIEW OF THE STATUS OF THEIR PORTFOLIO

To conclude, the improvements made to the collection and recovery process gives you the overview of the exact amounts that has been written-off as well as the reason behind the final write-off, e.g. paid off according to judgement, abatement of bankruptcy etc. You can use this information either for planning the future cash flow of your portfolio or making decisions on purchasing from the secondary market.

Please note that cash (principal or interest) received should not be further reduced by write-offs as these have already been deducted from there. Adding together write-offs and net cash received will allow you to see the total gross cash flow.

IN SHORT

• We have implemented a more aggressive strategy to deal with overdue loans. One of the key strengths of this new process is that we will hand over the overdue loan to a local debt collection agency (DCA) already after a week after missing a payment. This will deliver quicker results and improve payment behavior.
• We have professional debt collection agencies and legal partners in every country where we operate (in Estonia, Finland, Spain) and they are experienced in tracking down the debtor and reaching an agreement with them.
• The DCAs that we continue working with have proven to be effective.

When CEO of Bondora, Pärtel Tomberg was invited to speak at Investeerimisraadio’s podcast in January this year, he also spoke about Bondora’s plans for 2016. Among others was this goal: “This year we want to improve the loans quality in all our markets. We strive for a more secured but faster loan processing and take steps towards a more aggressive debt collection process.”

A more aggressive collection strategy
We set out to improve our collection process and proceed with a more aggressive approach. The new process consists of three stages, it is largely automated, used across all markets where we operate and is continued until the full overdue amount is covered or the claim is written-off. Our aim is to prevent customers from defaulting on their debt obligations. We work towards reducing roll-rate between stages and increasing recovery rate in Spain and Finland.

Fast and efficient recovery process

STAGE 1 – COLLECTION
Collection without legal litigation

We start this stage with sending out in-house emails and text messages with payment details and use automated phone calls to find a solution. If the above has not been successful, we hand over the claim to a local debt collection agency (DCA) who takes over the communication with the goal to collect the debt and agree on a new payment schedule with the debtor. During this time we also forward the debtor’s information to the official debt registry. The overdue loan stays with the first DCA until the loan defaults. If the first DCA was not successful on agreeing on a new schedule and receiving at least one payment from the debtor, the claim is handed over to a second DCA. The second DCA will have 90 days to activate the debtor before we pass the case to the next stage.

STAGE 2 – RECOVERY
Legal litigation started

In case the DCAs have not been successful without using legal litigation then a court case will be filed with a local court unless for some reason the case has to be written off (read below). Court process length is dependent on the country and the local court. The case is handed over to a local bailiff after a court makes a decision. The speed of recovery will thereafter depend on the income/assets of the debtor and their other debts. During the stages the debtor has the possibility to file for debt restructuring where the court creates a payments plan for the debtor and the debtor is required to pay according to the new schedule.

STAGE 3 – WRITE-OFF
Claims unlikely to be paid back

Under the stage 3 we mark all the claims that are unlikely to be paid back. In most cases this stage consist of cases where the debtor has filed for bankruptcy, has deceased or the debtor or related claim is under criminal investigation. This stage also covers cases where the borrower has repaid the entire amount required under a settlement but it’s not enough to cover the full claim amount that we have calculated. This difference is caused by reduction of the claim or costs associated with recovery that are not reflected in the system. We are continuing to improve our system to make all recovery information available to investors.

Bankruptcy process is only initiated if bailiff has not been able to collect the debt after freezing the debtor’s assets and accounts or if the debtor itself has filed for bankruptcy. In general personal bankruptcy is not common in continental Europe as getting out of debt will take up to 7 years depending on the country.

We are on the right track
So far our collection & recovery process has proven itself, even though kicking it off properly has taken some time. After we started using the DCA services in June 2015 our investors have received over 1 million euro. Combining our new, more aggressive collection and legal litigation with the previous process will further improve our recovery performance across all markets.

Our latest blogpost on collection process received a lot of attention. We gathered together the most hot comments and highlighted the answers in a separate post.

1. Why is the success fee % so high in Estonia?

In Estonia we are testing 4 DCAs to understand if higher collection fees offered by some of them will result in higher recovery. However, all of the DCAs will be evaluated based on the net payout (amount collected less the fees).

2. How will Bondora handle overdue on auxiliary claims such as borrower failed to pay the management fee? If there is a recovery coming in how will this amount be distributed between Bondora and the investors?

The recovered amount is distributed in the following order: a) principal, b) management fee, c) interest. Thus, we will collect the management fee only in case the full amount of principal is fully recovered.

3. How will Bondora keep the investors updated on the progress of recovery?

Investors can use the “Recovery Statistics” report to track the performance of the DCAs. Thus, all loans passed to the DCAs will stay under Stage 1, and in case DCAs are not successful and we turn to court, the status will change to the Stage 2.

4. Can you please briefly compare the new process to the previous model?

The difference to the previous process is that after 90 days of non-payment we attempt to collect using DCAs, while previously we turned to courts right away. We will involve up to two DCAs and each of them are given 90 days to collect (DCA #1: days 90 – 180, DCA #2: days 180 – 270). In case none of them collect the due amount, we turn to court.

The reasoning behind the change is that we expect higher net collection by involving DCAs before engaging in a lengthy and irreversible process of collecting through courts.

5. Why the collection process cost are not paid by the borrower?

Passing the collection costs is either already prohibited or will be prohibited soon by the regulators. The regulator in this case sides with borrowers to protect them from aggressive practices used by some lenders.

6. Will you guarantee that all principal will be paid back (if the DCA collects enough) and there are no fees until all principal is paid back?

The agency is paid a success fee based on the collected amount, and all net proceeds (collected amount less the agency fee) are first used to repay the principal until either a) the principal is repaid in full or b) the borrower settled the claim.

7. Is Bondora going to adjust its management fees downward to account for reduction in its costs?

We have considerably lowered our management fee recently (August) to make Bondora loans more affordable to the borrowers. At the same time we have kept the interest rates to Investors intact.

8. Are there any loan recovery statistics?

You can see the “Recovery Statistics” report for your portfolio under “My Investments” -> “Statistics”, or you can use the Loan Dataset if you want to get a more detailed overview.

We have received numerous questions about the changes to the collection process that we introduced earlier this year. In order to address those, we have compiled a detailed overview of the collection process for both delinquent and charged-off loans.

Process overview

Bondora has developed a standardized, largely automated collection process that is used across all markets with only minor differences. The process is continued until the full overdue amount is covered or the claim is (partially) written off by a local court.

Loan modification policy

Bondora offers borrowers to extend repayment period (to a maximum of 60 months) if the customer is facing financial difficulties or simply wants to reduce their monthly payment. Interest, penalties and other secondary claims are never reduced, and the outstanding interest and penalty debt are put into the next scheduled payment.

Bondora also offers principal grace (maximum 12 months) to the customers with interest continued to be paid during this period.

Loan charge-off policy

Loans are charged off after an account has been overdue for more than 60 days and the amount overdue is larger than two monthly payments. This policy is defined in the loan agreements and is the most aggressive policy allowed by law in most of the jurisdictions in order to allow DCAs to quickly start recovery actions.

Collection channels

Collection of delinquent accounts is handled in-house according to the process set out above (please see “Process overview”).

The post charge-off collection process is handled by Debt Collection Agencies (DCAs) active in our loan markets. As of September, 2015 there are multiple DCAs in each market, each managing a portfolio of roughly equal size.

• Estonia: 4 companies
• Spain: 3 companies
• Finland: 2 companies
• Slovakia: 1 company

We have carefully selected a mix of partners in all markets which include local smaller unsecured consumer credit focused debt collection agencies, as well as large international receivables management companies. There is no data yet to determine if the size (small vs. large) and scope (one market focus vs. multi-national) of the firm has an effect on the performance of the post charge-off recovery process.

The list will DCA partners will continue to grow and change, as more DCAs are tested over 90-day debt collection cycles described above.

Cost related to collection

The costs related to servicing and collection of delinquent loans are covered by Bondora and charged to the borrower.

Costs related to post charge-off collections are deducted by the DCAs from the amounts collected. The current fees differ per country and DCA with limited uniform pricing. DCAs are evaluated on net cashbacks (collected amount less collection costs) and only DCAs with best metrics will eventually be kept. The range of fees are shown below:

The legal collection costs average between 100 to 500 euro per delinquent case depending on the size of the loan and jurisdiction.

Collecting on borrower’s security interest, collateral or assets

All loans issued on the marketplace are unsecured. However, Bailiffs have rights to freeze debtor’s assets and bank accounts and deduct payments from debtor’s bank accounts to cover their debt. In addition, assets of the debtor can be liquidated, regardless if they were set up as collateral or not, as part of a bankruptcy process.

Borrower bankruptcy

Bankruptcy process is only initiated if bailiff has not been able to collect the debt after freezing the customer’s assets and accounts whilst the customer still has marketable assets. Bondora will either initiate the bankruptcy process on its own or join an existing bankruptcy filing.

We have had less than 10 bankruptcy cases over the duration of 5 years. Personal bankruptcy is not common in continental Europe as getting out of debt will take up to 7 years depending on the country. Therefore customers with marketable assets and recovery potential typically repay debt under a new payment plan rather than opt for a bankruptcy process. Bankruptcy process would not yield any additional benefits against customers without marketable assets.

We are extending our C&R (Collection and Recovery) efforts with the help of specialized collection agency services.

For the past six months or so we have worked on enhancing and simplifying the C&R efforts to maximize your returns. We have automated messages going out with payment reminders as well as overdue notifications with email, SMS and also in regular mail. We also implemented automatic phone calls to customers in debt. Continue reading “Extending our Collection and Recovery efforts”

As per request from many of our investors, we are now also adding two more rows to the Recovery Statistics table, that highlight the amount that has been recovered so far.

The first new row will show the amount of principal that has been recovered after the loan defaulted and the second one shows the amount of interest and late charges received by the investor.

This will add another layer you can use to gauge how effective the recovery process for your investments has been and how far along they are in the progress.