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Before discussing the results of the test, let’s review what we were testing. In November 2007, 74 loans that would have been included in the December Debt Sale were selected for a test of applying a legal collections strategy. These loans had an outstanding principal balance of approximately $705,000. They were placed at Hunt & Henriques, a prominent California debt collection law firm.

Once placed with the firm, these accounts were sent a “demand letter” stating that the balance would be accelerated in 30 days if an acceptable payment arrangement was not negotiated.  Continue reading The Results From the Legal Collections Test

One of the key challenges in collecting on unsecured installment loans is providing the borrower an incentive to continue to making payments when they come under financial distress. If you don’t make a payment  on a credit card you can’t keep charging on it. In the case of a house or a vehicle loan, the lender can repo/foreclose on the secured asset. On an unsecured loan, the borrower has already received the funds – so there is no loss of utility when they stop paying.

One way Prosper has been successful incenting distressed borrowers to pay is by Continue reading Collections – Hardship Arrangement are Benefiting Lenders

[Opening Note: This is a two part blog – in the second part, which will posted shortly, we do a general review of the Legal test].

Unfortunately the wheels of justice move slowly. We first announced the “New Agency Test” about 23 months ago. We filed suit 18 months ago. We finally had our first scheduled trial of a contested case last week. Continue reading Legal Test Update - “Judgment in favor of Plaintiff”

Today’s topic focuses on what in the industry is called “Recoveries”. A recovery is the amount of money that you can extract from a debtor once a loan has been charged off and the value of the asset has been written down to zero. Although effective collections on charged off loans can reduce the impact of credit losses, Continue reading Collections Series - Part 2: Debt Sales and Charge-off Collections – Status and Plans

Collections.  A subject close to everybody’s heart. Over the next two or three weeks, I intend to publish a number of posts discussing various aspects of collections – the status of the legal test and evolving legal strategy; debt sales and collections on charge-off accounts; additional plans for collections strategy and reporting. Continue reading Collections Series - Part 1