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.
The best practice tells us that the most effect can be achieved when working with the overdue accounts as early as possible. This means loans that are overdue for up to 60 days. After collecting some data between these stages to understand the effect so far, we are planning on working to improve on this further.
On the other hand, we have also been working on improving the processes on the recovery side – that is, what happens after loans default – in our case 60+ days of principal overdue.
You have seen the change in reporting where we have structured the recovery into 5 simple steps – process started, in court, decision received, in collection and closed. Whereas we still have some minor data discrepancies here and there – notably some specific loans in Stage 5 – this has considerably simplified the understanding of where the defaults actually are in the recovery process.
However, this process has heavy reliance on legal recovery – using the legal means (courts) to reclaim overdue payments. This takes a lot of time from the moment the process is initiated to the point where there is legal opportunity for specific institution (i.e. Bailiffs) to start the actual collection process.
Depending on countries, it can take anywhere from 4-6 months (in Estonia) up to 1.5-2 years (in Spain). Since in some markets we have only operated about the same length of time or less, this explains the limited number of successful full recoveries.
That said, we have now gone the full circle in all countries and are ready to add another layer – collection agencies – to the mix. Therefore, from this week you will see fewer cases directly sent to court and instead they will be handed over to specific collection partners in different countries for pre-legal recovery attempts.
We will first start a 3-6 month test project to estimate the efficiency of this process, so there will be no immediate changes in the reporting, but all accounts that are defaulted (Stage 1) will be immediately handed over to collection agencies to be worked on from now on. Effectively the goal is to increase the number of recovered loans within the first 6 months after default, which is the prime time for collection.