A debt collector’s primary goal is to claim the delinquent funds in their queue.
A rent to own queue (a list of delinquent accounts) might contain $100,000 a month in total receivables and your number one goal is to capture as much of it as he or she can, hands down. Take note that this is a total balance owed and not all customers are past due. Your queue however is your past due accounts only. Not trying to get too sidetracked but ion the rent to own business you are managing an entire book. It’s not like you’re just managing past due customers.
I’ll tie together current customers and past due customers as wee move on, but its good to know that as an account manger you should know the big picture, and that means to get good at what you do you want to not only understand how to work your past dues but know how to work your entire book including current customers.
As for your past due customers, you really want to focus on contacting your customer first.
You do this by making right party contacts otherwise known as RPC’s.
There are inbound RPC’s and outbound RPC’s and as you can guess. One is reaching a customer by calling out of the call center and one is when the debt collector answers their phone.
Long story short, you really wants the outbound RPC because you want to let the customer know they can be found.
Why’s that? Because a debt collector doesn’t want his past due customer’s thinking they can walk all over the business. And with Rent-to-Own customers, people that are naturally high risk, will test you more than any other customer.
So the number one rule is get your money, but the second is to be persistent because once you lose contact your customers tend to vanish and take your money.
On that note it’s a good idea to continually analyze your buckets, also known as concentrating on how far past due your customers are. Because your delinquency rate will start to rise quick if you’re now aware of the big picture. Big picture meaning you have to always know how late all of your customers are on your delinquency report.
Looking at Buckets
When we look at an account we first start by taking at a snap shot of the amount of money each customer owes from what period of time they started falling behind on their bill. This is a little term called delinquency.
A delinquent account is easy to manhandle, however; you have to be willing to understand the numbers.
For a bill collector, calculating the numbers on how to pull an account current is based on a pretty easy concept to understand called looking at the buckets.
The easiest way to explain a bucket is this–you have an allocated amount of money for each month your behind which includes your payment (principle plus interest) and the fees that are attached to the payment.
So if it’s May 2014 and you missed your bill in April, you have one bucket that shows your regular scheduled payment plus the fee you have for the month of April. However that fee will not accrue until your next billing cycle. So technically, that late fee incurred in April will be attached to the next payment due in May.
Let’s take look the buckets concept if you have missed multiple payments.
- 3/1/12 $100 Bucket 1
- 3/8/12 $135.00 Bucket 2
- 3/15/12 $135.00 Bucket 3
- 3/22/12 $135.00 Bucket 4
Notice in this example that although we accrue a late fee for the payment missed in March, the late fee accrues to the April bucket.
In this quick example, I also want to point out that once you start applying funds to your delinquent account, each time a payment is made it’s applied to the oldest ‘bucket’!
In other words, if you look at paying off your delinquent account from the perspective of how much you’re behind altogether, you’re wrong to think like this.
You need to understand that when you’re dealing with financial institution there is no room to look at general numbers. Know that accounting plays a huge part in this business. So whenever a payment is made on your account, it’s applied to the specific date your payment is due.
It’s extremely important to understand the concept of rollback and how rollback decreases the amount of days your account is delinquent.
In laymen terms, every time you apply the sufficient amount of money to a month you went past due, your account will roll back 30 days.
To give you an example, if your account is 120 days past due and you make a payment on your account that will clear your oldest bucket on file, your account will now stand at 90 days past due.
This is important to know. Why? Because you have to realize that your account is continually being reported to the credit bureaus if your account is beyond 30 days past due. More importantly, you never want your account to reach 120 days past due because that means your loan is about to go into default. And that means charge off, friend.
* 120 days past due is the charge off deadline for installment loans and lines of credit only!
* Credit cards charge off after 180 days.