Loan Collections with Daryl Jones

Lending has been a challenge, not only on the growth and loan side, but also on the delinquency and collection side.

So I’ve asked Darryl Jones to join us to talk a little bit about what’s going on in lending, specifically around collections.

So, Darryl, what are some of the challenges? Obviously, delinquency has been ticking up. I know on the credit card side they’ve been ugly. What are you seeing out there?

Yeah, sure. I know delinquencies are up, charge-offs are up for a lot of lenders out there, and it’s starting to become a challenge.

The main thing is just, how do we staff it? How do we deal with that volume? And I know the biggest question we’re getting from a lot of lenders is, how do we look to outsource providers to help us with that? Is it staff augmentation? Do we fully send something out to them and have them do it?

But it’s an interesting dynamic. We actually just did a collection study the first half of this year, and it was interesting, the conversations that we had with the participants, because there was a pretty even mix just in terms of the strategy.

So it’s like, when you partner with a provider like that, do you have them do equity? Do you do it by product?

Right.

Do you have them take equity? Do you have them take indirect? Or do we do it based on delinquency?

Right. So is it 30- and 45-day and under, or is it...

Back book?

Yeah. Or is it 30-, 45-day-plus? How do we break that up?

Yeah. And some lenders, you know, they have the strategy that most of the volume is front-loaded, so I’ll send them that and have them work through the volume.

Yeah.

But a lot of lenders are like, well, why would I do that? Those are the ones most likely to self-cure, so why would I pay a vendor to do it?

To do it, right.

So you can kind of flip it around, though. Some that prefer that approach say, well, they have the tech that we don’t. They can do the automated email, the automated texting, all the things that we can’t.

Yeah.

So it’s a pretty even split.

Even outsourced, they could be more efficient just because of the technology they’re leveraging.

The other thing is, there’s almost a relationship and expertise component to it. For the later delinquency stuff, you want folks on your team that maybe are more well-versed and successful with this, as opposed to maybe relying on a third party to deliver that. Or is that...

It could be. I think there’s some to that. I think that we see that a lot more with our credit union clients.

Okay.

They’re more prone potentially to do that.

Okay.

Not to say one way is right or wrong, for sure. But it’s a pretty even split, honestly, in terms of what we see happening with that.

But one interesting thing on the study that we saw was that when we dug into the overall blended cost, because everybody’s doing some level of outsourcing for the most part...

Sure.

Like we’re taking everything pre-charge-off and up.

Yeah.

But if we look at the staffing expense for that, along with all of the outsourced expense, we’re running, from the study that we just did, $16 per delinquent loan per month.

Woo.

That’s a blended amount, all in.

That’s expensive.

Yeah.

Almost seems like that justifies some of those late fees that are out there.

Yeah.

Volumes are going up and up and up.

Yeah. And I think some lenders are really struggling with how to manage that. Is it affecting the credit decisions on the front end? Are folks making different underwriting decisions, you think? Or are they still just trying to...

Yeah, I mean, I think there are probably pockets of that, and certain lenders are taking that stance, but by and large, I haven’t seen a whole lot of that.

Okay. So really, it just comes down to figuring out your strategy for insource versus outsource, staff the resources up against it.

We just talked about potential growth in the space as well. Sometimes it doesn’t hurt to outrun your delinquency a little bit too.

Right.

So if we can get a little bit of growth in there, that helps. But overall, there are definitely some strategies around collections we think can be beneficial.

Yeah, for sure.

Awesome. All right. Anybody who wants to talk about collections, what’s everybody doing out there? Let us know in the comments what your strategy is and how it’s working for you.

And certainly reach out to Darryl.