If you do, grab a triple espresso for this one. It took 12 months of research to put this together. Happy reading!!
The credit industry is very dependent on the survival of specialised debt recovery agencies. Otherwise, the costs of lending would make the activity prohibitive to financial institutions. A simple loan for a house would be a privilege only affordable to a few. Businesses would find the costs of their interest expenses too high to invest in future growth, thus hurting the Australian economy. It costs less for entities specialised in debt recovery to chase bad debts than the financial institutions themselves. This allows the latter to provide affordable loans.
Changing legislation is making it too costly for debt collection agencies to achieve this purpose. Consequently, operation costs have gone through the roof. The agencies need to borrow funds to finance the acquisition of financial institution’s debts. Interest rates have not gone down on the agencies’ loans. As a consequence collection agencies can operate at losses for a very long time or until they go out of business.
Other financial sectors have already increased the price of their services due to increased regulations. One has to be relatively wealthy to afford personal financial services. This is the situation in accounting as well as International standards prove too much to handle for small businesses.
This report analyses changing legislation and internal problems at X ltd, a collections agency. This is achieved through interviews, literature reviews, resulting opinions of the researcher, meetings and presentations with management. Possible solutions for the internal problems are provided. For instance, the study reveals that the relationship between different managers has a direct impact on revenue.
The report concludes with a remuneration plan for a department at the company, a current update on X ltd’s situation and overviews of presentations made to management. The project takes 10 months to complete. During this time, certain sad events will take place at X ltd. This will be mentioned in the report as it is further proof that the debt collection industry is indeed struggling to survive.
TABLE OF CONTENTS
TABLE OF CONTENTS. 3
PART A – EXISTING LITERATURE AND RESEARCH PERFORMED IN THE CREDIT INDUSTRY. 5
PART B – AN INSIGHT IN X LTD’S WHOES:. 9
Changing Legislation: 9
Issues with legislation : Restricting access to credit and other equally inadequate punitive measures. 13
A possible beginning to all problems at X ltd. 16
Relevance of Part C: 17
PART C – THE RESEARCH PROCESS:. 17
Current state of operations at X ltd. : 17
Problems with the non-financial performance measurement indicators (NFI): 18
Criticism of questionnaire as a pretest instrument: 20
Individual interviews: 20
List of main topics interviewed (or suggested and discussed by interviewees): 21
Management response: 24
Management responses to findings were positive. 24
Numbers required to manage collection efforts better and to know reality better. 24
Same conclusion – reality is different to what management thinks. 25
Management’s perception of the findings. 25
Measures are needed now to improve the current revenue situation. 25
Status quo will give same results or worse as life of debts increase. 25
Redundancies as X ltd not able to afford staff 26
Part D – Conclusion… 26
List of assumptions: 26
That the researcher did not try to direct the interviewees’ answers. He did not have any preconceived notions. 26
That the literature review was thorough and all available databases had been accessed. 26
That adequate resources had been provided to carry out research – finance and time. 26
Areas that need more investigation: 26
Bonus structure include skip data collecting: 27
Items implemented: 28
Concluding notes: 28
Appendix A:. 32
Appendix D:. 35
Targets proposed.. 35
An initial literature review on debt collection found very little. One article was published last month specifically on debt collection in general. The one before that dated back to 1986. There has also never been anything published on the internal management at debt collection agencies.
The aim of this project is to give as much information about the internal workings of a debt collection agency as possible. As a result, the researcher invested in a wide range of activities within X ltd, a collection agency. The researcher also looked at other fields that are related this industry.
First, a literature review was conducted revealing that close to nothing had been published on the debt collection industry in the past twenty years. However, knowledge on the credit industry, management and other fields can be applied to the collection industry.
Secondly, an analysis of changing legislation, the most important threat that the industry faces, was conducted. The changes had dramatically increased operation costs of debt collection agencies. This was so that the latter could not afford its interest expenses, which have stayed the same. Furthermore, there is proof that further legislation is only going to make it harder for debt collectors.
Thirdly, interviews, questionnaires and meetings with management were conducted to improve the effectiveness and efficiency of collection efforts at X ltd. In-depth interviews were conducted with experienced staff. Questionnaires tested for internal validity issues. Findings were reported and discussed with management before implemented. One such finding was that locating “runaway” debtors was essential to boost revenue figures.
All the three distinct parts evolved from the literature. The last part of the assignment involved the design of a bonus structure for a sector of X ltd, department Y, based on the review of the rate of “runaway” debtors located. This reward structure was based on literature on performance reward.
PART A – EXISTING LITERATURE AND RESEARCH PERFORMED IN THE CREDIT INDUSTRY.
- Studies showing attitudes of customer towards money are very important to the collection industry. This is because part of the collection’s industry is about acquiring debts from banks and other lending institutions. These debts are purchased in the millions. In 2004, about ₤2 billion worth of debts were sold to collection agencies in the UK (Credit Management, 2004). After their purchases, the debt collection agency proceeds to collect. It would be very helpful to have an insight into what kind of debtors make up a particular acquisition. This can help X ltd to be more accurate in evaluating its chances of recovery before making an acquisition. Knowing the make-up of these debts also helps the agencies plan the future allocation of their resources. The following phases are a typical part of the debts’ lives for these types of acquisitions – usually old bank or telecommunication debts.
Phase 1: Initially, collectors will go through these debts and work the accounts with current contact details. Only a few of the debts will have current details. This will go on for a while and require mostly strong negotiation skills.
Phase 2: Afterwards, the rest of the debtors will have to be located using the white pages and other basic search devices. Basic skip tracing and negotiating skills are required. Usually, this can be achieved by the first set of collectors without any further training.
Phase 3: Further down the line, experienced skip tracers will be needed to locate debtors where the white pages are failing to bring up current contact details. Most of the time, the people who possess the skip tracing abilities are not those with the strongest negotiation skills and vice-versa. A collector can acquire some of these skip tracing skills via training. There are specialised skip tracers as well.
Phase 4: Accounts are forwarded to the legal department and solicitors. This activity is constantly taking place during the whole collection process as well as many debtors do not pay for various reasons. However, it tends to intensify around and after Phase 3.
An organization has to plan these transitions carefully. This involves hiring new staff and relocating and/or training older staff. This also means that performance measures as well as management policies change. Budgets have to allow for these changes as some debtors will only be located by paid external field agents or intense training of collectors. Control and bonus structures change as well. For instance, in Phase 4, more resources have to be dedicated to the prosecution of debtors.
Any source of information of debtor behaviour is important. All the debtors are or have been credit-seekers. Consequently, research on the credit industry usually reveals demographic relationships that can be useful to debt collection agencies. Also, they can help reveal the make-up of the debts that a debt collection agency will acquire. Research in the credit industry covers a wide scope of issues. There is information on demographics, credit consumer behaviour and other topics as well.
- Finding out what trends exist among impulse buyers and demographics show which particular trend will help making forecasts. For instance, an impulsive buyer will have a higher likelihood of owning and using several credit cards (Roberts & Jones, 2001). This person will also have a higher likelihood of not being able to service his or her debt, thus decreasing chances of recovery. Compulsive buying has also been shown to be on the increase (Roberts & Jones, 2001). Older consumers are also likelier to have collateral. Consequently, it can be expected that younger people will be less likely to be able service their debts. Adequate research can be performed to try to establish whether or not older consumers develop compulsive buying tendencies later in life. Also, younger people often have less access to refinancing their debt. This will help a debt collection agency focus its resources towards the right demographics.
For instance, if a debt acquisition of thousands of accounts consists of mainly younger debtors, a collection company can construct a better model to evaluate the multi-million dollar purchase of these debts accordingly. This is important as it allows a collection company not to pay dearly for their debts. This is only one dimension that can be examined.
Gender has also been proven to be influential when it comes to financial management practices. The latter was less affected by attitudes toward acquiring credit. Female students on college surveys were shown to employ a greater number of financial practices than males (Hayhoe et al., 2000). This type of information will not be found in the limited research that has been done in debt collection. Gender differences were recorded across a range of relevant behaviours such as financial stress, attitudes towards credit and the number of credit cards with a balance.
The level of financial stress, reported in credit industry literature (Hayhoe et al, 2000), is important to collection agencies as they lead to bankruptcies and other outcomes that are extremely negative. Collection agencies receive payments in various forms. In one of them, the debtor will provide the whole amount of the debt in one go and may be granted a discount. Otherwise, the debtor is put on various monthly or weekly arrangements. Owning many credit cards with a balance means that the debtor can only be put on a lower arrangement. Otherwise, the debtor is taken to court to shift his or her priority – an expensive process.
Before matters escalate, collectors constantly ask debtors to refinance their debts. Refinances constitute a large percentage of the revenue of collections agencies. Debtors often say that they have been jaded by the credit system. That is one of their main objections to refinancing. Certain consumers will use credit to make more money or other types of progress. Another kind of consumer will use it to supplement their income as college students do (Hayhoe et al., 2000). Being able to distinguish between the two is an advantage that researching similar articles will also provide. Literature on such financial management practices can provide an insight into the psychology of the debtor. This leads to knowing which debts to buy or not from a bank. More realistically, it influences how much debt collection agency should be willing to pay for a bank’s bad debts.
Older, married, female students were more likely to have a written budget. Gender and age was seen to have an effect on certain aspects of personal finance management (Hayhoe et al., 2000). Knowing what can affect personal finances is important to collection agencies. At X ltd, part of the day is dedicated to calling people who have broken their payment arrangements. These collectors are trained differently than those required to locate “runaway” debtors. Being able to forecast the amount of broken payment arrangements will help with budgeting for training as well. Furthermore, it helps collectors formulate an opinion as to how likely their debtors will pay and what amount of pressure needs to be applied. It can also help in forecasting legal fees if debtors will need to be prosecuted.
- Any study of changing attitudes towards money is of great importance to the collection industry. This is because debt acquisitions involve millions of dollars even for small collections company. Thousands of debts are bought at a time. Even a fractional knowledge of their new debtors attributes will make a difference.
- This is quite clear at X ltd. Management did not expect Phase 1 and Phase 2 to be over so quickly. Hiring or training skip tracers is a very painful and lengthy process. Phase 3 has been further delayed as management now struggles to meet cash flow needs. Long-term performance is being sacrificed to keep the business afloat in the short term. Insight in the make-up of the acquisition would have minimised this problem. Part of this vital information can be found in research already performed in the credit industry (Hayhoe et al., 2000). There will be external validity concerns as there are differences between the credit industry and debt collections. Irrespective of these differences, it has long been proven that failure in short term forecasting leads to even bigger problems (Lowe & Shaw, 1970).
X ltd has certain controls in place that are supposed to signal the end of a particular phase. Staff easily manipulated these controls to present the wrong picture to management. Although there was a high level of information asymmetry, there was no matching level of autonomy among the supervised staff (Claus & Neta, 2004). Management only used the biased information from their controls. As a result, the different phases happened before management thought they would.
This report was constructed with debt collection professionals as an audience in mind. Footnotes have been included to aid a person foreign to the collection environment to be able to navigate the various sections. As acknowledged by X ltd’s management, the research findings provided useful insights into how to improve daily operations.
The initial research attempted to figure out areas of debt collection not explored yet. However, literature in this field is scarce. It seems not much was done past the seventies and a few in the eighties. Comparisons with older literature are particularly hazardous, as collectors then did not have access to the technology available today. They experienced certain challenges that are irrelevant today. For instance, there was never really a question of how to put the 21st century technology to best usage. This would be a relevant issue to managers of debt collection agencies as choosing the right software is difficult with so much new technology available. Back in the 1980’s, debt collectors were still trying to figure out how to develop softwares to automate processes (ABA Banking Journal, 1986).
Furthermore, the older research was not very relevant as it was before the onslaught of credit cards and other easily accessed means of obtaining credit. Debt collection literature past this point in time is centered on international trade or bankruptcy policies. These relate to sovereign debts that do not share many similarities with Australian debts. Journal articles have never been published on improving internal activities of collection agencies.
Most managers at X ltd were well-read as all had university degrees. The availability of academic research would have eased their tasks. However, part of this project will try to show that research done in other fields can be useful. Most of the literature review consists of research on aspects of the credit industry and management.
PART B – AN INSIGHT IN X LTD’S WHOES:
Many threats to the debt collection industry were uncovered by working in the industry and seeing events unfold as well. The following is definitely not a comprehensive list:
- High employee turnover.
- Changing legislation.
- Rising operating costs because of new market entrants.
- Lack of skilled labour.
- Economic cycles.
None of these threats had such a severe impact as present and changing legislation. This issue is researched and explained across various dimensions to provide a comprehensive understanding of the threat. This one was chosen as being the only one on which there was existent empirical data. Also, it was one claimed to precipitate the end of debt collection (The Age, 2005). This position is also supported from a historic point of view by Adkisson and McFerrin (2005). English bankruptcy law used to view debtors as “quasi-criminals”(www.wisbar.org). Bankruptcy was a weapon for creditors, not a relief for debtors. Nowadays, the law limits the effectiveness of collection efforts (Adkisson & McFerrin, 2005).
According to the Office of the Federal Privacy Commissioner, the financial sector (mostly originating from credit collection agencies) was responsible for 29 % of perpetrated privacy breaches in 2004 (Australian Financial Review, December 2004). However, regulators and legislators seem to be biased in their perception of debt collectors. ASIC executive director Greg Tanzer claims to believe debt collection “a legitimate and necessary business activity” (The Advertiser – Finance, 2004). However, his actions tighten the vice over an already suffocating industry. Together with the Australian Competition and Consumer Commission, there are many efforts to further regulate debt collection. Money is also being spent to educate debtors by sending out brochures and advertising the various means that complaints can be registered. Recently, access to electoral rolls was denied by the ACCA. This resulted in debt collection having to pay for the information – not in debt collectors not having access to the information (Australian Financial Review, June 2004). One of the most common problems in debt recovery is that debtors avoid to be found to avoid litigation. The Privacy Acts have made it much harder and costlier to locate debtors. Nothing has been done to support debt collection as debt collectors go out of business. Restricting access to electoral rolls caused a big dent in business for debt collectors, drastically increasing operating costs (Australian Financial Review, June 2004).
While Debt Collection Agencies do not have access to adequate resources, Consumer Associations are heavily biased against them. Harassment of debtors is a popular subject on many TV shows such as Current Affairs. Consumer Organisations such as the CCLC are conducting surveys with doubtful integrity and publishing their results and lobbying the government (NSW Consumer Credit Legal Centre, 2004). This impacts legislators’ view of the industry. There has to be a better way to protect well-intentioned debtors without disadvantaging the debt collection process. Also, some debtor behaviour is criminal and has very negative impacts.
Growth in credit use seems unsustainable for the average consumer. This is because alongside this growth, the number of Australian experiencing difficulty servicing their debts is increasing (Griffith 2000). At X ltd, in one department surveyed, over 14,000 debts are between $1000 and $150,000. About 80% of these debtors are in a queue that is called a skip queue i.e. they are actively evading collection efforts or have done so in the past and have made no efforts over a period of 2-5 years to contact the lender or X ltd. The Trade privacy act makes it hard for even the police to act with warrants. Private detectors are ineffectual as well (The Age, 2005). Those are the figures from only one bank client. As a result, pricing of risk in lending is non-optimal as enforcement of these contracts is nil. Eventually it catches up to the market and credit providing becomes a prohibitive process as enforcing debts costs skyrocket. For instance, a bank, knowing that eventually there is no reliable way to recover the money, will charge more interest to everyone of its good debtors. It has been proven that “individuals with a low risk of default subsidize individuals with high risk of default” in current banks’ models of credit-seekers (Lawrance, 1995).
In effect, good debtors end up paying for bad debtors as a result of legislation. Government Regulations are supposed to benefit a minority group only if it imposes small costs on the rest of the community (Keneley, 2004). Due to similar increased compliance issues in the US in the financial sector, financial planners have already hiked fees and are only helping those “who can afford to pay for them”(Opiela, 2005). Changing regulations are very costly and pose a “serious threat of the FSI going out of business due to non-compliance” (Garcia, 2004).
For a SWOT analysis or Enterprise Risk Management (ERM) purposes, new legislation and regulations have to be considered one of the more serious threats to businesses. This is already the case for other industries. Many small businesses are outsourcing their accounting. The introduction of International Standards will otherwise cost them the salary of an experienced Finance Controller at about $150,000 a year (Business Review Weekly, April 2005). Similarly, the Trade Practices Act (TPA) practically cripples collection efforts (The Age, 2005) without leaving collection agencies the luxury of outsourcing. Varying perception of harassment push legislators to become a major obstacle to the process of debt collection.
However, one does not have to wait for legislations to be passed and then to react to the new situation. There are signs of where such hurdles can arise. There is a considerable body of biased literature on this topic. Legislators do not get to hear both sides of the story. A proactive and lobbyist attitude can help the essential debt collecting industry.
As part of ERM services provided by Deloitte, new privacy legislation issues are already among the top worries of CEO’s worldwide (www.Deloitte.com). There are now organizations such as Preventsys whose only business is to help organizations face changing legislation and its prohibitive costs (Press Release, April 2005).
In a survey conducted by the NSW Consumer Credit Legal Centre (CCLC), debtors complained about debt collection agencies violating the TPA. The surveyed debtors said they had requested statements from the debt collection agency (CCLC, 2004). The latter cannot have access to the statements for many good reasons. Oddly, strictly regulated financial institutions such as banks claim they cannot reveal further information about debtors because of the TPA. Usually, debtors have evaded collection efforts for so many years it is impractical to retrieve such old information. Legislators do not seem to have access to this side of the story.
The law also states that defending oneself against a debt is the debtor’s onus. X ltd will immediately close an account upon receipt of statements proving that a debt has been paid. However, these cases are very rare but the CCLC claims otherwise. In one year of working thousands of bad debts, the researcher came across 2 or 3 that tried to provide supporting documents that the debts had indeed been paid. Generally, disputes are settled at court. The debtors are summoned, acknowledge the debts and promptly make larger payments that “non-court” arrangements usually yield.
Most of these articles, as typified by Choice – Australian Consumer’s Association, New South Wales, try to paint a picture of debtors willing but not able to pay their debts (www.choice.com.au). However, in most cases and after having gone few years without having to service their debts, most debtors are able but not willing to pay their debts. This can be verified by the vast majority of accounts being sent to court being paid hastily by debtors – or debtors willing to come to arrangements. These numbers are far greater than arrangements obtained via simple phone calls or letters.
Most of collection centre’s time is spent on trying to locate debtors. For instance, on observing workers at X ltd., it was observed that out of an 8 hour day, a collector would spend over 7 hours skip tracing. It is a very high-pressure environment where every minute counts and thousands of accounts are involved. These accounts are usually from different clients, banks, telecommunication companies and others. Besides making the whole activity unprofitable, it is unfeasible to try to request the millions of pages of statements that would be required to substantiate every debt as stated by the CCLC and current regulations.
Debt collectors are also quite aggressive. This is because persuasion is usually required to make people pay their old debts. In older debts, able debtors have to find themselves forced to pay the debt or face consequences to be willing to pay. Older debts would have gone through other collections agencies and the financial institutions collection department as well before arriving at X ltd. For instance, all of the acquired bank-related debts at X ltd would have already been tried by the financial institutions’ collection department. When collection failed at that point, the debts were “referred” to X ltd for collection. Other debts would be sold to X ltd. When all these collection measures had failed, X ltd would acquire them for a percentage of their costs.
However, the issue remains how a collections agency finances its acquisitions. The financiers will set the payment schedule. A certain amount of interest will have to be paid on a monthly basis. This will force debt collectors to squeeze more money out of debtors than they would in other financial situations. There are other signs as well indicating that Australian consumers were truly not coping with their debt-servicing abilities (Griffith, 2000):
- In 2000, the Australian economy had its largest numbers of consumer bankruptcies ever recorded.
- Unstable job markets.
- Unemployment, blamed as primary cause of consumer bankruptcies.
This demonstrates that this sector needs reform. However, caving in to consumer associations and passing whitewashing laws to increase the economy’s costs of debt recovery will not resolve the matter. Currently, the law does provide adequate punitive measures.
Issues with legislation : Restricting access to credit and other equally inadequate punitive measures.
Restricting or temporary denial to access credit can prove inadequate in ensuring debt commitments. Although Bondi and Krishnamurty (2004) raise the issue for sovereign debt, the same is true for individuals with debts. As witnessed and acknowledged by collectors, threats of credit listing only rarely elicit a favourable response. This could be because debtors are under the assumption that they are automatically credit listed when they default on debts. Further threats of credit listings do not change anything. Or it could be that they have been burned by the stress and anxiety of being in such difficult positions that they do not wish to re-enter the credit system. Consequently, they do not care whether or not they are allowed to apply for credit again. Still, some debtors never intended to pay their debts in the first place. A credit listing was felt by debtors to be a small price to pay for the credit obtained.
When a debtor does not provide a forwarding address for a long time after he or she has moved, the individual is listed as a clearout by X ltd and other collection agencies as well. A “clearout” is only 2 extra years of restriction from credit markets. A payment default by itself results in 5 years of listing. This is a vastly ineffective measure when debtors did not care about the 2 extra years, contributing to the fact that 70% to 80% of debts are skips.
Once a debtor is located and he or she pays the debt, their credit listing is updated allowing that person to gain access to the credit market immediately – irrespective of whether or not there was a clearout listing. This update is a service that the debt collector is forced to provide as an incentive as otherwise, it is highly unlikely that the debtor would pay at all. Besides seeking an expensive judgement on an account, the prevailing legal system has effectively put collectors in a position where they do end up literally imploring debtors to pay their debts.
Also the law was not written to allow people to use it to escape their obligations to pay legitimate debts. That is how most of the skips avoid their debts, hiding behind the privacy act; others behind the Trade Practices Act (Australian Financial Review, 2005).
Referees are provided by debtors as a means to verify details of debtors. However, a collector is not allowed to disclose to the referee why the collector later wants to get in touch with a debtor. This raises doubts in the mind of the referee why the person on the phone would want the debtor’s current details. It usually results in referees refusing to give out current details or contact numbers for debtors. Most of the time, the referee is covering for the debtor.
Furthermore, three points of identity are required before a collector is allowed to discuss the matter with a debtor on the phone. Failure to comply with this rule results in thousands of dollars of fines for both the collector and the debt collection agency as well. This simply results in the debtor refusing to identify himself whenever the collector tries to reach him. In similar cases, it is very unusual for a debtor to provide a postal or residential address. This makes it impossible to sue the debtor and collect the debt. There is no legal or other reprimand for this kind of behaviour either. Where the evidence is documented, examples have to be made as the credit system depends on enforcement of contracts.
Certain authors criticise the Trade Practices Act with arguments about how debts have to be substantiated or documented (Schulman, 1985). First of all, under the restrictions already imposed, collections agencies find it hard to survive (The Age, 2005). Increasing the financial burden of these companies can bankrupt them. This will adversely affect the economy as credit-providing structures will be threatened without the means of credit collecting. Enforceability of financial contracts will decrease, threatening the credit markets. Collecting debts will become increasingly expensive as less specialised financial entities try to collect their own debts. This will in turn make credit provision very expensive with soaring interest rates and costs, jeopardising all economic growth.
Secondly, during one year of working at a collections agency, the researcher only came across one case where the debtor was right about a dispute. However, disputes happen on a daily basis. It is impossible to provide documentation every single time it is demanded. This is a way that most debtors use to delay further actions against them or to pay their debts. It is a quite popular excuse heard in this industry. Generally, debtors refuse to put their disputes in writing as per legal requirements.
The act also specifies that individuals should be treated in civil or reasonable way whether owes debt or not. However, the act does not have any provision protecting a debt collector from the abuse of irate debtors. The latter react angrily even when their rights have been respected. Debtors are abusive for the following reasons observed:
- They have been located after having tried to cover their tracks.
- They are made aware that they will be taken to court. Individual debtors were observed calling X ltd over 10 times within the hour just to abuse collectors.
- They have been found to be lying about whether they are able to service their debts or not. Usually in such cases, they will abuse the debt collector copiously.
A debt collector under such circumstances cannot retaliate and must act professionally. Knowing this, debtors will make an abuse of the situation. There is no easily applicable law or standard legal process that stops this kind of behaviour.
For instance, this is a direct excerpt from a website that upholds stricter legislation against debt collection agencies, “Have you heard the one about the debt collector who rang a consumer out of the blue, told him he owed thousands of dollars from a finance company debt seven years ago, refused to give any more details about the debt, and told the consumer he had to prove he didn’t owe the debt or they would take him to court?”(www.choice.com). A couple of things are wrong with this statement.
Debt collection agencies do not have the details of bad debts transaction for the very reasons that their clients refuse to provide them. The other reason is also that most debtors that are contacted by collection agencies will dispute debts or simply refuse to identify themselves, terminating the call. The Trade Practices Act allows for both kinds of behaviours to occur unchecked. The website claimed that this practice was common place at debt collection agencies (www.choice.com)
Also, a debt that is over 6 years old is statute-barred, meaning the collection agency cannot and do not collect on these debts if defended. When it takes 7 years to find the debtor, it also means none of the referees on the application would have cooperated when contacted. The employer did not help find the individual as bound by the Privacy Act or acting in connivance. Active searches by highly skilled skip tracers and field agents were also not able to find the individual.
Contrary to the CCLC’s insinuations, the researcher at X ltd. noted a fair amount of time was given to debtors who wish to dispute their debts. As explained to the debtor by an X ltd. Collector, all it takes to dispute a claim is a written notice. Less than 1% responds or takes appropriate actions after that time has expired. To date, as far back as the researcher could investigate, none of the legal accounts have been disputed in court.
Further incorrect assumptions are made about the collection industry by organizations who favour stricter regulations. For instance, the report by the NSW Consumer Credit Legal Centre in 2004 was based on the fact that debts are usually paid on time. This is not true. At X ltd, out of 14000 debtors on one portfolio, about 80% are skips i.e. they are actively evading the debt or will not contact or respond to communications from the debt collector. Out of the remaining 20%, a minority pays their arrangement on time.
The report is also based on the principle that debts are serviced unless there are good reasons why debtors cannot come up with the money. However, only debtors that state they cannot or will not pay their debts are sent to court where they pay the debts at rates that collectors never attain via negotiations. At X ltd., collectors who were allowed to sue their debtors reached their targets. Collectors who could not have recourse to litigation rarely achieved their targets.
Also, the CCLC report relies on its principle “that lending money or extending credit is a commercial decision that is made on the basis of assessing and pricing risk.” However, as the same report will state, there has been a lot of consolidation among collection agencies. Debt collection is an increasingly difficult industry because of opposing legislation (The Age, 2005). X ltd., due to similar cash flow issues, had to consolidate its entities and list itself on the ASX. It has been years since the formation. However, the company has been operating at a loss so far. Assessing and pricing risk have nothing to do with the lending process.
X ltd is forced to increase efficiency and effectiveness because of rising operation costs due to changing legislation. Currently, the company is experiencing problems in these areas and the researcher would qualify their performance as below average. It needs to address current problems to survive in the short term and then to demonstrate above average performance just to assure its long-term survival. The following section researches the current circumstances and promulgates advice based on literature reviews, interviews with the staff at X ltd, meetings with management and personal opinions from having worked at X ltd for a year.
A possible beginning to all problems at X ltd.
Legislation raised the operation costs of X Ltd and also decreased revenue in certain areas to trickles. This affected the company’s ability to repay its interest expenses. Due to high demands for bank debts from an increasing number of collection agencies, the price of these acquisitions had sky rocketed (Credit Management, 2004). This section provides an explanation of how this took place.
Borrowing constraints arise when companies face investment opportunities or short-term cash flow crisis. These constraints exist as a company has limited liability and the capacity to default. Debt repayment cannot be perfectly enforced. Loan contracts will specify an initial loan size, future financing, and a repayment schedule. These factors then determine future growth, the firm’s future borrowing capacity, and its ability and willingness to repay (Albuquerque & Hopenhayn , 2004). This happens exactly so at X ltd; we can see how the way money was borrowed, through a chain of events, deeply affects the day-to-day business activities of the company. Most collection agencies have a “burning need to cover the purchase cost” of acquired ledgers (The Australian – Finance, 2005). Monthly targets of revenues are set by the agency’s creditors as per their interest requirements and not the actual industry reality. On a management level, this translates to an unachievable month revenue target per individual collector. On an employee level, this becomes a daily target that has to be reached and is monitored via a Team Leader. Inadequate decision-making and leadership issues that placed X ltd in these financial throes replicate themselves across all sub-managers or supervisors and even at the employee level as predicted by Carrot & Kell (2005).
This results in times of crisis where the company is forced to get rid of even relatively well-performing staff when downsizing their operations. The company can be forced to sell their recently acquired debts because of un-achievable interest payments. This also sets an unrealistic aura about the company’s abilities. This aspect of X ltd’s culture transcends through the whole company, at all levels of management, down to its front row employees (Kell & Carrot, 2005). Everyone has unrealistic expectations of everyone else.
Revenue targets are not met in months. Sometimes only half the revenue ascribed is collected. All of this can be related back to the fact that the debts acquired by the collections agency were not adequately financed. The factors explained by Albuquerque and Hopenhayn(2004) show definitively how the borrowing constraints affected the firm’s dynamics. Furthermore, they state that default gives the firm an outside value which increases with the amount of capital financed and the current revenue shock.
In extreme cases, (Fernández and Rosenthal, 1990), default constraints put a limit on repayment schedules and can make it infeasible for the borrower to credibly commit to paying back the loans received. In a moderate example of this scenario, X ltd has been operating at a loss for quite some time now.
Relevance of Part C:
Part of the relevance of the last part of the assignment is that material of similar nature is not available anywhere. It is rumoured among managers at X ltd and old employees of other companies that research on debt collection agencies management has been done internally by individual companies. However, due to the secretive and highly competitive nature of the debt collection industry, nothing consistent has been published.
Although prior literature on management in general may be of some use, the collection’s industry presents a unique environment with unique challenges. As a result, the same efforts from management will not yield similar results as in management textbooks. For instance, literature on customer service management may be deemed relevant. However, in a collections environment, managers find themselves drilling to collectors that “this is not customer service”- demanding a harder approach when communicating with debtors. Collections in certain areas is cyclical such that staff needs to be retrained every three months to perform other duties as well.
The internal processes of a collection agency are examined with the aim of shortening the training period of new staff and increasing efficiency across the board. It also aims to uncover any problems that management is failing to observe via flawed current management controls. This activity can seriously improve the bottom-line of the company by increasing performance.
PART C – THE RESEARCH PROCESS:
Current state of operations at X ltd. :
The following narration provides details of the processes in action at X ltd. This gives the reader the setting in which the research is conducted.
Department Y at X ltd has purchased bank debts to collect. That is, the company is not collecting on the bank’s behalf but for its own profit.
A department Y collector maintains a very unique relationship with a debtor. At one stage, the collector may try to befriend the debtor and coax him or her to try to refinance the debt or borrow the money elsewhere. Substantial discounts are often offered as incentives to pay the debts in a timely manner. When the debtor does not have access to credit, the collector has to negotiate a payment arrangement. Afterwards, when the debtor breaks the arrangement, a collector takes a threatening position. At the end of the relationship, the collector initiates legal proceedings. These activities take place under highly regulated conditions.
The biggest challenge remains to locate the debtor. In department Y, with 14000 accounts purchased, only a couple of hundreds of debtors are in touch. The constantly evolving skills required in such a set up of scenarios vary drastically from customer service, finance and credit providing environments – distant cousins of debt collection.
No adequate body of literature exists as to how collection agencies function. Nothing has been written on the various styles of management that exist in these unique environments. As a consequence, there is no way to compare the following studies to obtain even a vague notion of external validity. Attempts to generalise the following findings may have serious weaknesses if consideration is not given to the many limitations of the following research.
The researcher expected to find out how to improve efficiency and effectiveness by interviewing and observing experienced staff who were achieving both at a collections agency. There was information asymmetry in department Y, with staff having little independence on how to conduct their work. Barriers to achieving targeted revenue had been scoffed at by management. As a result there was also a communication gap and there was no valuable feedback from employees – communication that exists in high performing groups (Credit Management, August 2004).
Only a group of 7 collectors was selected. This was because of time constraints. However, they were also the only ones considered to have outstanding performance by their peers. Interviews lasted from half an hour to an hour.
Problems with the non-financial performance measurement indicators (NFI):
There was a set of NFIs to measure the performance of individual collectors. This performance measurement was coupled with their monthly revenue figures. There was a team revenue figure and an individual revenue figure. Together, they all constituted the Key Performance Indicators(KPI) used at X ltd. The NFI’s consisted of measures such as:
- The number of phone calls they made.
- The number of debtors they located.
- The number of accounts they worked.
- The number of promises-to-pay arrangements they made.
NFI’s have been significantly associated with future financial performance and “contain additional information not reflected in historical financial measures” (Banker et al, 2000). However, the NFI’s were used solely as a stick and not as a diagnostic instrument. When the number of phone numbers of an employee fell, a team leader would only try to exhort that person to make more calls. Such practices resulted in indicators being used for the wrong purposes and only contributed to wasting company resources (Stivers, 1998). From the basic rationale of a balance scorecard, NFI’s should grow from a specific company’s strategy (Kaplan & Norton, 1996). There was failure to attach clear functional intentions to the KPI being used (Rutherford, 2000). Skip-tracers were aware that debtors needed to be located before payments are received. However, they failed to see that there was a relationship between the high-performers’ number of locates and their revenue figures. This was evident when employees are interviewed as to how their fellow workers achieved their revenue targets. No one mentions their skip locate rates or had a clear idea how the high achievers constantly out-perform them.
There was no overall strategy at X ltd to use the NFI’s other than an indicator of the perceived laziness of employees. The KPI’s were off the mark although there is evidence that is the case at most organizations (Kaptein & Tulder, 2003). There was also no reward for attaining NFI targets – a common practice (www.deloitte.com).
NFI’s vary for different industries (Ittner & Larckner, 1998). At X ltd, they should have varied for different departments as well. For department Y, there were certain relationships between current NFI’s and future revenue. Some of the NFI’s only applied to other departments but were still used in Department Y. As confided by management, it was proving to be frustrating to come up with a specific metric to measure the wanted behaviour (Bryde & David, 2005). Over a period of monitoring of about a year, no relationship was observed between those variables and revenue. A lack of understanding the bottom line impact of non-financial measures is a barrier to corporate leaders providing more attention to non-financial drivers (Kaplan & Norton, 1996).
A pre-test instrument (Ticehurst & Veal, 2000) was used to find out whether more experienced and well-performing collectors would respond and give honest opinions without fear of management retribution. Certain fields were chosen across which the opinions of the staff were already known. These opinions were known as they were common issues often discussed among themselves but rarely mentioned to management. The researcher had been part of the staff for 1 year and knew how staff generally felt about management issues. A questionnaire was designed asking the workers how they felt about these issues. Partial anonymity was guaranteed. A total of seven questionnaires was issued and collected (See Appendix A). The small number was because only so many were to participate in the in-depth interviews i.e. the next phase of the research process. Except for one interviewee, most staff did not seem to care even if management did find out they had adverse opinions. This sentiment was further reinforced in the in-depth interviews. For instance, collectors revealed how some of the freedom allowed to themselves while at work actually worked against overall performance.
Satisfaction and agreement across the following items on the questionnaire were measured:
- Immediate and higher level management.
- Efficiency of human resources management.
- Individual team targets.
- X ltd’s flexibility with annual leave.
Certain items were repeated using different wordings at different times throughout the questionnaire. This ensured that opinions were not changing as a result of reading the questionnaire.
Criticism of questionnaire as a pretest instrument:
- they could have still given biased responses when it came to interview questions as they may have known that the researcher was well-aware of their opinions on questionnaire issues.
- The questionnaire offered anonymity whereas the actual interview process did not.
Subjects were asked broad and open-ended questions. They were allowed and encouraged to talk as long as on the subject or related subject to collections. They discussed quite a few issues they thought could improve collections. Ideas were generated along those views. Depending on what each had to say, questions were selected accordingly. This was the modus operandi as one collector would have more to say on a particular topic than another. Collectors were then asked about the best ways to implement their ideas while the researcher questioned the efficiency of their proposed solutions.
List of main topics interviewed (or suggested and discussed by interviewees):
- Ways on how to shorten training period. (Human Resources department claimed that it took 6 months before new in-experienced staff could perform their duties properly)
- Skip tracing and locating debtors.
- Assertiveness on the phone.
- Team leader issues.
- Level of knowledge about company’s financial position.
- Managing large number of accounts.
- Grey areas in privacy act.
- Hiring process.
- Comparing a well-performing team to others.
- Ways on how to improve training quality.
- Role-plays for skip tracing.
The collectors had many interesting arguments to propose. The researcher was only allowed a limited time with them and only a few of these ideas were probed. The interviewee was asked for details and proposed means of implementation as well. Most of these collectors were much older than management itself and were quite experienced. However, feedback by itself may lead to performance declines and does not always result in improved performance (Silverman et al, 2005). Here is part of their input:
- Allow more authority to their Team leaders to instigate changes. Allow them to spend more time training and monitoring staff. Team leaders have to ensure the same mistakes are not repeated by new staff. They also have to ensure that new directives are adopted in a timely fashion. This ensures that if a solution to a problem is found, it gets a fair chance at improving the situation. Decision-making was found to be too centralised.
- The relationship between Team leaders of different teams has to mirror those of more effective teams. Duties have to be split in ways that have been proven to work. Find revenue-generating behaviours and reciprocate across all teams.
- Some accounts require assertive debt collectors; others require trained people in locating skipped debtors. The ratio of debt collectors to skip tracers has to match the respective numbers of each type of accounts. For instance, if we have twice as many skip accounts, we should have twice as many skip tracers.
- Maintain control of conversation with debtor. Otherwise, a collector has to terminate the call or proceed with legal actions.
- Collectors have over a thousand accounts each to manage. Notebooks, calendars and excel spreadsheets have to be actively used by them to monitor their accounts. They have to be trained to be able to achieve just that.
For instance, one must organise follow-ups. Collectors must diarise multiple calls throughout the day if the debtor cannot be reached. They must know exactly when which debtor is paying. Collectors must be trained on how to organise their time and their numerous accounts. Accounts with phone numbers must queued together and easily accessible.
- Remuneration structures were seen as inadequate. Specifically, good performance was not being recognised. In a human resources blunder in 2004, the Human Resources department of X ltd paid under-performing staff thousands of dollars more. This was because they had shown improvement. However, even after they had improved their performance they were still performing less than the top collectors who were not paid half as much in terms of bonuses and overall pay. This happened a month before the interviews.
Currently, the reward system has been revised to reward performance. This time, X ltd is using an advanced mathematical equation to calculate each employee’s reward. As a direct result, none of the staff currently know what they get if they reach their revenue figures. This is perceived as a de-motivator as they cannot relate rewards to efforts. Furthermore, rewarding certain behaviours have positive outcomes in the short-run but actually have negative impacts on performance in the long run (Kohn, 1996).
- The privacy act does not allow for skip tracing to be effective. Its various twists are easily exploited allowing debtors to hide indefinitely. This gives rise to a grey area. Ethical behaviour is not usually upheld but skip tracers avoid illegal practices. This is because, even if a company were willing to use the best equipment and softwares to do skip tracing, debtors would not be found.
Some collectors are of opinion that future staff and employees have to be made aware of this double standard. Creative means have to be improvised to get around the privacy act without breaking the law. Some skip tracers have as much as thirty years of experience under their belts. For them, it is not so much of a creative process anymore but rather a repetitive process. This means that it can be taught to others in a matter of months. The researcher experimented on himself by sitting in with a more experienced skip tracer and saw his skip locates double.
- The largest and most consistent feedback from the interviewees was on how to train new staff. Ideas were brought forward on how to shorten the training period to have new recruits up and running in less time.
Training at X ltd consists mostly of three steps:
Step 1: There is a formal training period akin to a lecture.
Step 2: This is followed by sitting in with collectors to see how he or she works before trainees is gradually allowed to work on their own.
Step 3: Finally, there is ongoing training and monitoring by Team leaders. This also includes role-plays.
Interviewees provided ideas for improving existing processes as well as new ideas.
Role-plays were thought to be lacking real life stimuli. Collectors spend most of their time interacting with hostile debtors on the phone whereas currently role-plays are done in friendly atmospheres and face-to-face.
Skip tracing requires a high attention to details. A vague informal checklist exists. However, a more appropriate and comprehensive checklist was mentioned. Leads include references on applications, neighbours of previous addresses, workplaces and possible relatives. A checklist of what to say when talking to each of these types of leads would be helpful.
Opinions varied on the training lectures. Those in favour mentioned that it needed to be longer and be much more comprehensive – not only covering how to operate the in-house softwares. The lectures should have been about possible scenarios that collectors face. Others said that a higher level on interaction was needed for training to be effective.
New staff was deemed to spend too long sitting-in before they could actually work on their own. X’s collectors felt that trainees lost interest after a short time. Trainers wished the trainees would perform some of their duties in an increasing level of complexity. For instance, the trainees could make a few calls and a few decisions on accounts as the sitting-in progressed. This would keep the process interactive and give the trainees a taste of what is to come. Collectors who do this type of training do it as they work. There are no set guidelines by management as to what has to be taught to the trainees during this phase of training, further undermining its efficiency.
Management is currently trying to increase the quantity of call monitoring in an effort to improve the quality of interactions between collectors and debtors. Feedback is then provided. In this case, there had been set guidelines as to how such conversations have to proceed.
Two problems arose. First of all, management is not fully aware of problems faced by collectors. Therefore, the guidelines are not really relevant to drastic and much needed increase in revenue. Secondly, management is not generally effective in enforcing new directives.
Two main ideas were then presented to management to ask for opinions. The researcher discussed ways as to how to implement, troubleshoot and monitor progress. Findings were numerous. A few were selected and a presentation made to senior management (See Appendix B). A second presentation was made to the X ltd’s trainers and staff coaches (See Appendix C). The rest of the ideas would not fit in the presentation time and management accessed them through a report.
Management responses to findings were positive.
Certain findings of the project were areas that management had already started to investigate. Enforcement of new directives among staff was one. Another one was “sitting-in” with experienced skip-tracers. However, no solid plans had yet been formulated to address the lack of skip locates.
Numbers required to manage collection efforts better and to know reality better.
There was no adequate representation of what was really going wrong with collection efforts and lower-than-expected revenue figures. Reports being run by management were not providing useful information. There were complaints that there was not enough collected and organised data that drew a picture of what really happened in department Y. Efforts towards that direction had had a weak start and nothing concrete had been done.
Same conclusion – reality is different to what management thinks.
As result of the lack of quantitative data to help management make better decisions, expectations and forecast were claimed to be unrealistic by the operations manager.
This was acknowledged to be an issue transcending all levels of management in the company. There was no real awareness of what the real problems were. Therefore, improvement measures and solutions undertaken were falling short. In a ripple effect, new management directives were not improving revenue figures and performance. Ignorance of the real problems meant that they were not input in forecasts. Consequently, expectations were also based on inadequate forecast measures.
Management’s perception of the findings.
The researcher approached management with the findings. The latter was receptive and estimated the research to be along some of the individual management staff’s lines of thought. They were satisfied with the resources they committed to allowing and facilitating the project. However, no new measures have resulted directly out of the findings. This raises further concerns.
Measures are needed now to improve the current revenue situation.
Management admits that the situation should have been changed 12 months ago. New guidelines developed in this project were claimed to be in dire need. Some staff had started leaving due to management addressing issues that were not problems. Others were planning of leaving because real issues were not being addressed. Both these types of employees were collectors that had generally provided above average performance. Overall, revenue performance was only peaking at 60% of expectations and even lower in other areas after changes brought around by management. There had been marginal improvements at high costs – dedicated staff leaving the company.
Status quo will give same results or worse as life of debts increase.
As more time goes by, debts become harder to collect. The value of the debt also decreases as collection agencies do not apply interest or back interest depending on the legislation of various states.
X ltd’s creditors set the company’s expected revenue figures. The creditors have drastically increased their expectations as the debts have become older. This further reinforces the notion that the company and its creditors are not aware of the reality in which it operates. Management tries to reach the monthly targets but have not usually cleared the 80% mark, with lows around the 50% mark. This shows how the “reality factor” affects even top management, where financing decisions are made.
Redundancies as X ltd not able to afford staff
This had happened a few years ago when revenue dropped sharply. Even experienced collectors had to be laid off. Upon questioning, it was found that not many of the current staff knew that had happened. It was mentioned once at a general meeting.
Part D – Conclusion
List of assumptions:
That the researcher did not try to direct the interviewees’ answers. He did not have any preconceived notions.
In this case, the researcher had worked at the company for a year, under various management influences. Also he had had personal minor clashes with management and staff.
That the literature review was thorough and all available databases had been accessed.
There is related research that had not been accessed as belonging to private and professional bodies. There was no access to competitors’ data and this made cross-referencing impossible. Furthermore, research performed in management would be relevant to a certain degree to debt collections as well. For instance, mistakes in rewarding staff performance performed by Human Resources would have been easily avoided by reading the appropriate management literature. Management literature was hardly reviewed.
That adequate resources had been provided to carry out research – finance and time.
Neither was available to the satisfaction of the researcher. Certain aspects of the research work would have needed quantitative backing only available with the adequate finance. Time available with the interviewees was quite limited. Furthermore, this issue is one which needs to be evaluated at least every year for 4-5 years before any conclusions draw. The research only covered one year. The researcher will not be there to see if the predictions claimed verify themselves.
Areas that need more investigation:
All the other threats mentioned before need further investigation. For instance, the economic cycle (varying around Christmas shopping and tax filing) can be made more predictable.
An independent researcher, working at another collection agency, could invest in a similar project to compare findings. Also more interviews are needed to start seeing a pattern in responses.
Banks indulge in credit risk profiling and modelling. There is literature on this subject in academic journals. Also, there are textbooks that cover the subject. It is important to put a figure on the increased costs of individual debts in an effort to substantiate defaults increase borrowing cost.
Management literature has related know-how to offer the debt collection industry. This literature would be highly valuable if comparative analyses have been performed to eliminate external validity concerns as much as possible.
Bonus structure include skip data collecting:
Currently, the bonus structure only takes revenue figures into consideration. The researcher was asked by management to develop a bonus scheme to include a Non-financial performance indicator measure (NFI), the number of skip locates per collector. NFI’s are also claimed to be a good indicator of long-term financial success (Banker et al, 2000). That would probably be the real benefit of this control system.
Rewarding behaviour in an effort to increase performance is a controversial subject. Rewards can be perceived as bribes and manipulation or as “offering salt water to someone who is thirsty” (Kohn, 1996). Sprinkle (2000) believes he has empirically proven that “incentives enhance performance and the rate of improvement in performance by increasing both: (1) the amount of time participants devoted to the task, and (2) participants’ analysis and use of information.” This control had other benefits as well. It was an appropriate NFI for department Y.
The bonus structure to be set is for the number of debtors located per month. The researcher collected data for the past 4 months to have an idea of how many skip locates were achievable and by how many collectors (Fig.1). This was done to have an idea how much the incentive plan would cost. The costs and other details of the bonus structure are shown in Appendix D.
|Number of locates, x
||Number of skip tracers
|x < 10
|10 < x < 15
|15 < x < 25
|x > 25
Fig1. Averages for 4 months
For instance, the first row of the table reads there are 14 skip tracers that find less than 10 debtors a month.
The bonus structure has rewards for the last three rows. Skiptracers locating less than 10 debtors are up for further training.
Three presentations were conducted based on this project. The operations manager at X ltd sponsored this project. The project lasted 8 months and he was constantly advised of its progress and consulted on related issues every few months. At the end of the project, two of the main findings were presented to him in a meeting with ways on how to implement the new ideas as well:
- Shortening initial training time of new staff.
- Improvements for team leadership of Department Y.
The second presentation involved X ltd. main staff training coordinator. All the findings were presented in an effort to address X ltd’s problems holistically.
The third presentation involved the development of the bonus structure for Department Y. The pros and cons of the reward system were presented to the manager of the department. Its design was agreed upon after a few consultations with the view to implement it the following month.
- Reward structure is set for implementation for next month.
- Trainers will focus training on skip tracing.
- Employee feedback is given more credit.
- Call monitoring quantity and quality is emphasized.
This project started with a literature review. Research was found to be almost inexistent in debt collection. The researcher showed how research done on other industries, such as the credit industry, can be useful.
The second stage of the project analysed the biggest external threat to the debt collection industry i.e. changing legislation. Also, it analysed firms’ inability to service interest expenses due to sharply rising operation costs as a result of changing legislation.
The third stage looked at improving internal efficiency and effectiveness. This was done by conducting a project based on indepth interviews of the best performers at X ltd, a debt collection agency. It was followed by presentations to management and trainers whereby findings were agreed to be implemented.
The fourth stage of the project involves designing a bonus structure for Department Y, where the researcher worked for over a year. The implementation of the bonus scheme was agreed for the following month.
X ltd filed for external administration two weeks after a consensus had been reached upon what degree to enforce the results of this project. One of the largest players of the Australian debt collection industry has thus collapsed. This project obviously will not benefit X ltd. Before this project, there was no other such research done on the debt collection industry. Its findings remain consistent as the environment at other debt collection agencies share similar characteristics.
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 Currently, a few accounts are provided to X ltd as a sample. This is used as a measure of all the debts that will be acquired.
 When debtors are not in contact with or avoiding collectors and their whereabouts are not known, the debtors are called skips. Skip tracing is the process of trying to locate the debtors. When a debtor is found, it is called a skip locate.
 Currently, X ltd is struggling as recent debt acquisition was not efficiently financed. Interest costs are drowning the company who has not reported a profit yet.
 A whole section of the project is dedicated to this factor as it plays a large role in the survival of a collections agency.
 This journal article had not yet been published when the research project was started.
 This is also true because collection agencies are more specialised than collection departments at banks. As a result recovery is cheaper when through a collection agency.
 Financial Services Institution.
 This is what most debtors say when they are asked to refinance their debt.
 This is another popular response when asked to refinance their debt.
 Furthermore, this scenario is particularly true when credit is obtained in absence of collateral.
 X ltd often finds itself in this position. In the past, they have had to cut down staff. As of now, the company has not declared a profit ever and there are no signs of improvement.
 Human excrement has been found at various locations of X ltd.
 Revealing the name of the department reveals the name of the client Bank.
 The NFI’s were indicating that collectors were having trouble locating new debtors. Revenue fell accordingly.
 The researcher finally set up a bonus structure for that purpose.
 Workers who seem to perform well according to NFI’s measurements still brought in dwindling revenues.
 Searches are done on whitepages.com.au on surnames in the same neighbourhood to try to locate possible relatives.
 The reason behind this is that management is out of touch with what’s really going wrong. This is explained in further sections of the report.
 Ideas in how to help management enforce new measures are discussed in other sections of the report.
 Debtors move from one place to another without letting creditors know. That is the case with 90% of all bad debt accounts held at X ltd. A skip locate is when one of the debtors is located.
 With over 30,000 accounts, reports and running statistics are the only ways of analysing problems and forecasting.
 WA and QLD do not allow applying interest to debts, even if legal recourse has to be sought.
 Skip locates are when “runaway” debtors are located and contacted.
 Appendix C was presented to management and approved.
 Both set of slides are in Appendix A and B.