A Litigation Recovery Strategy for the Current Regulatory
A Litigation Recovery Strategy for the Current Regulatory Environment Presented By: Rob Yarmo and Jason Nesbit TCPA Class Action Settlement! Audience Poll Raise your hand if you are responsible for or have a hand in managing the recovery of losses at your credit union Keep your hand raised if your credit union has losses that have not been collected Keep your hand raised if legal recoveries are an integral part of your strategy Keep your hand raised if you employ a robust legal selection and management process supported by a Compliance Management System
Industry Trends CFPB developing debt collection rules Uncertain political climate Agency and law firms are consolidating Debt sales and collection agency risk is increasing Credit Unions under increasing regulatory focus Shifting attitude in Credit Union space towards legal Headlines ---American Banker, Feb 9th, Ohad Samet ---Credit Union Times, Jan 31st David Baumann ---Wall Street Journal, Jan 24th Yuka Hayashi ---The Hill, Feb 17th Adonis Hoffman Operations Must Focus on Reducing Risk while Improving Results TCPA suits outpace FDCPA suits driven by potential damages Consumers shifting channels away from the telephone: emails, webchat, mobile Regulatory bodies will be slow to change their coursethey will continue to advance their agendas despite potential changes Where are the opportunities that can lower risk AND improve results?
Revenue Maximization Options Low Balance Early Stage Late Stage In-house Legal Internal Direct Forwarders Managed Model In-House Collections Outsource to Collection Agency Legal
Opportunity vs Risk Possibility of lawsuits or counterclaims valid or nuisance Brand/Charter protection Decision Economic conditions Cost of infrastructure to maintain various options Most Effective Model? Lots of industry noise among servicers is normal in an ever-changing economic and regulatory world...new ownership, mergers, closures, change in direction or core management, etc. Its not all doom and gloom well managed agencies and attorneys are adapting to the changing requirements Considerations: Do you have the right infrastructure in place to manage administrative
needs, recovery expectations, vendor management and compliance oversight? Can you demonstrate arms length meaningful engagement of your service providers? (Vendor Mgmt.) Most Effective Model? Most effective strategy combines a solution that delivers the highest net return and mitigates risk What do you gain or lose with each option? Cost consideration? Economies of Scale? Effectiveness? Specialization of function? Time needed to develop expertise? Control over process and customer experience? The least effective models are do nothing or passive multi-stream only agency placements The bottom line: The most effective recovery process is one that segments accounts and treats according to the inherent attributes at the account level. It combines: In-house handling for limited time for sensitive, high value or high risk accounts. Legal selection at charge off or post prime should be an important part of your recovery strategy along with multi stream agency strategy or debt sale for accounts that don't qualify for legal. Legal Recovery vs. Agency Recovery Rates
Accounts Qualifying for Legal Recover Up to Five Times Agency at 48 Months! Why the Legal Process is the most effective method: Psychological: it is the end of the line and a prime motivational tool Costly to defend and requires time commitment Most creditors deem judgments on credit bureau reports to be more detrimental when credit decisioning Can involve involuntary recovery methods- wage/bank garnishment, seizure/sale of property Delivers historically long recovery curves Considered less risky than agency or internal cycling Protects your statute rights! Benefits of a Robust Legal Channel Years of data demonstrate that a legal channel will liquidate significantly higher by selecting the right accounts and effective management when compared with control group or BAU models.
What are the considerations in selecting the right accounts? Data driven decisioning supplements human selection Age of account (Statute of Limitations) Balance in consideration of court costs at state/county level Demographics- state, county and zip Absence of negative attributes from Recovery Score Assets confirmed including POE Right party contact info confirmed Media availability Do You Have ALL of the Media/Documents? Requirements by state vary significantly. To commence legal action you will/may be required to produce the following: Auto deficiency example: Pay History or Statement of Account Contract Deficiency calculation Copy of title Right to Cure letter
Proof of mailing Repo Bill NOIS (Notice of Intent to Sell) Auction Sales Receipt Do You Have ALL the Media/Documents? type AUTO ADEF ADDF LDEF LEAS ADEF ADDF LDEF AUTO LEAS AUTO LDEF ADEF ADDF
LEAS AUTO LEAS ADDF ADEF LDEF AUTO ADEF ADDF LDEF LEAS AUTO ADEF ADDF LDEF LEAS STATE AK AK AK
AK AK AL AL AL AL AL AR AR AR AR AR AZ AZ AZ AZ AZ CA CA CA CA
CA CO CO CO CO CO Docs Required CTR,SOA CTR,DFN,RTC CTR,DFN,RTC CTR,DFN,RTC CTR CTR,RTC,NOI,ASR,DFN CTR,RTC,NOI,ASR,DFN CTR,RTC,NOI,ASR,DFN CTR,SOA CTR CTR,SOA CTR CTR
CTR CTR CTR CTR CTR CTR CTR CTR CTR CTR CTR CTR Deficiency Copy of Right to Proof of Calc Title Cure Mailing DFN DFN DFN
RTC RTC RTC DFN DFN DFN RTC RTC RTC Aff of Repo Repo Bill Notice Auction of Intent Sales to Sell Receipt
NOI NOI NOI SOA SOA ASR ASR ASR SOA SOA RST SOA DFN DFN DFN
NOI NOI NOI DFN DFN DFN NOI NOI NOI DFN DFN DFN NOI NOI NOI SOA
SOA Legal Recovery Channel Options 10 9 Managed Network Model 8 Forwarding Attorney RECOVERY 7 Forwarding Network
6 5 Direct Attorney 4 3 2 Agency 1 1 2 3 4 5
6 RISK MITIGATION 7 8 9 10 Options For Implementing a Legal Strategy Agency driven legal program Direct attorney Regional attorney Forwarding attorney Forwarding company Managed solution partner Challenges of a Robust Legal Channel
What does effective management mean? Having full transparency at the portfolio, strategic and account level! Pre-legal phase Legal phase pre-suit Legal phase post suit Legal phase post judgment Vendor Oversight & Compliance Requirements Protect the Charter Against Potential Negative Consequences Steps necessary to protect from regulatory scrutiny: Create separate compliance team Develop comprehensive monthly management process, audit program and gain vendors buy-in Audit program should be modeled on CFPB and CUNA models Formalize your complaint management process internally and with vendors (timeliness, resolution and trends) Institute annual audit program, including 1-2 day site visit Develop affirmative action strategies for non-compliant vendors
Or Outsource the process to a team of experienced professionals that specialize currently doing the above Are Both Defect-Free Compliance and Superior Recoveries Possible? Both goals are certainly attainable if you have committed sufficient resources to either build out an effective infrastructure with experienced auditors (and travel budget!) or hire a highly qualified partner(s) to whom you have outsourced the process A commitment to either option will ensure that revenue maximization is realized, your brand is protected, youve mitigated possible nuisance lawsuits/counter-claims and that you have a competitive edge in your marketplace Four Take-aways 1. Dont even think about litigation unless you can confirm availability of 100% of media/documents 2. Dont rely solely on collector selected accounts* 3. Attorney activity must be managed* 4. Implement a lock-down CMS* *CONSIDER OUTSOURCING TO A SPECIALIST
Summary A well managed legal recovery strategy will net many multiples in incremental recovery Develop a consistent, disciplined legal account selection process Set realistic recovery expectations, its a long, profitable runway if managed effectively Develop infrastructure to support and manage attorney activities, track/report results, support compliance OR outsource to a competent partner that has the infrastructure in place Keep the wolves at bay by implementing a proven CMS OR outsourcing the function to a competent partner(s) This can become a reality! About Harvest Strategy Group Exclusive attorney and collection agency management network Performance management for pre-legal, legal and agency streams in the CU space for 10+ years ProScoretm Account Selection Model Robust reporting suite Compliance management
Full and complete audits of each network partner Contact Information Jason Nesbit Rob Yarmo [email protected][email protected] (303) 531-0627 (416) 669-5490 www.harveststrategygroup.com www.harveststrategygroup.com
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