new regulations – rehabilitation, awg and plus adverse credit
TRANSCRIPT
New Regulations – Rehabilitation, AWG and PLUS
Adverse Credit
Collection Agency Perspective
Lynn HeinemanSenior Vice President
Account Control Technology, Inc.
Pre & Post 7/1 Regulation Changes
• # of activations (accounts into billing) have stayed status quo on ED, increased in guarantor side • Turn Rate of Activations into Rehabs has decreased since 7/1 regulation changes
Customer and
ActivationsActivations that Became Rehabs Sum of RateActivation Month
Client A 892 461 51.68%7/2014 225 82 36.44%8/2014 352 194 55.11%9/2014 315 185 58.73%
Client B 688 369 53.63%7/2014 203 103 50.74%8/2014 237 137 57.81%9/2014 248 129 52.02%
Client C 1336 751 56.21%7/2014 434 267 61.52%8/2014 466 258 55.36%9/2014 436 226 51.83%
Grand Total 2916 1581 52.49%
Credit Score to Balance Range
# OF ACCOUNTS
RANGE $0-$5K $5K-$10K $10K-$15K $15K-$20K $20K-$30K $30K-$40K $40K-$50K $50K-$75K$75K-$100K $100K+
650+ 131 213 212 138 176 94 66 82 16 10
600-649 98 165 151 112 128 72 32 55 11 14
550-599 186 280 204 117 129 81 37 60 13 19
500-549 524 583 384 226 280 145 91 91 32 27
450-499 1,587 1,460 813 488 584 306 170 230 49 12
400-449 3,170 2,920 1,532 833 951 519 316 358 47
350-399 7,529 6,914 3,240 1,745 1,885 974 542 613 85 1
300-349 11,331 10,508 5,085 2,577 2,569 1,297 730 786 106 2
250-299 11,010 10,499 5,821 2,616 2,668 1,215 651 710 102 2
200-249 6,661 6,865 4,453 2,204 2,277 958 508 522 61 2
150-199 2,938 3,273 2,278 1,268 1,346 648 328 323 44 1
100-149 1,872 2,063 1,314 781 888 495 257 317 24 2
Balance to Income Activations
Balance /
Income $0-$5K $5K-$10K $10K-$15K $15K-$20K $20K-$30K $30K-$40K$40K-$50K
$50K-$75K
$75K-$100K $100K+
90K+ 1.5% 5.5% 13.2% 17.6% 13.6% 16.1% 26.2% 17.9% 29.4% 33.9%
60K-90K 1.1% 3.3% 7.7% 12.1% 13.0% 16.1% 15.7% 19.7% 20.8% 18.1%
50K-60K 0.9% 3.6% 8.3% 11.9% 14.0% 14.2% 18.5% 18.4% 18.6% 13.2%
40K-50K 1.5% 4.6% 9.4% 12.1% 15.3% 18.4% 14.3% 19.2% 24.4% 17.1%
30K-40K 1.4% 4.8% 9.0% 11.9% 15.5% 14.8% 17.3% 19.3% 16.7% 20.7%
<30K 1.4% 3.8% 8.5% 10.4% 11.6% 14.0% 10.3% 10.4% 13.5% 13.9%
Total 1.3% 4.3% 9.3% 12.7% 13.8% 15.6% 17.0% 17.5% 20.6% 19.5%
Additional Changes since 7/1
• Changed our process to adapt to new 7/1 regulations• Enhanced technology to streamline the process, improved efficiencies• SignNow technology used where permitted by client
• Clients who have kept the process borrower friendly have better success in rehab
• Fall Out Rate since 7/1 has increased• We contribute this to the change in programs as middle class having to pay larger balances
under the 15% rule than pre 7/1 • Lose more at first talk off due to income & expense validation • Proof of Expenses is another area where fall out occurs
• NSF increases seen in the lowest bracket - $5 payments• Overall the percentage of payments to NSFs about the same
• Percentage of AWG Rehabs have increased since post 7/1• Many taking advantage of the suspension • 70-80% return on updated paperwork for those in this group
Impact of Income-Driven Repayment
Pre 7/1/2014 Post 7/1/2014
Inco
me
Inco
me
Balance Balance
Pre 7/1/2014 Post 7/1/20140%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
26%
4%
36%
6%
25%
5%11%3%
77%
4%
> $200
$100 - $200
$50 - $100
$25 - $50
$5 - $25
$5
% o
f N
ew
Rehab A
rrangem
ents
$114 average $29 average
Rehabilitation Payment Trends
Payment Range
Rehabilitation Completion Rate Trends
July August September0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
31% 33%
47%
24%
33%
30% (Est)15%
14% (Est)
10% (Est)3% (Est)
3% (Est)
Month 4 (120 Days)
Month 3 (90 Days)
Month 2 (60 Days)
Month 1 (30 Days)
% o
f S
etu
ps C
om
ple
ted
73%
83%
90%
Observations• All but the highest income borrowers can now qualify and afford their rehabilitation payments• The number of borrowers completing the rehabilitation program should increase as a result of these regulatory changes• Lower payments will likely mean a higher percentage of rehab agreements will complete the qualifying period • Even with AWG suspension rules, the rehab program remains attractive to garnishees• Due to the number of borrowers needing to utilize an income-driven repayment program, aiding a borrower’s transition to his/her new lender’s payment plan is increasingly important
Plus adverse creditBetsy MayotteAmerican Student AssistanceNovember 4, 2014
Background
• November, 2011 ED modified PLUS credit check
• Before change - 72% approved, 28% denied
• After change – 38% denied
• Some HBCU’s jumped 75%
PLUS Loan Definitions
• Charged off – debt written off as loss, still subject to collection action
• In collection – a debt sent to a collection agency or is subject to more intense collection efforts due to inaction or unsatisfactory action by the borrower
Plus loan – adverse credit• An applicant for a PLUS loan is considered to have adverse credit if they:
• Has one or more debts totaling more than $2,085 that• Are 90 days or more past due (as of date of credit report) or• Have been placed in collection or charged off within the last two years
• Has been subject to one or more of the following in the last 5 years:• Default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment,
or • Write off of a Title IV debt
Plus loan - adverse credit
• Maximum debt threshold will be adjusted if the change in the Consumer Price Index is $100 or more• Rounded up to the nearest $5• Changes announced in federal register
Plus loan - counseling
• Counseling available to all PLUS borrowers and endorsers• No later than 2015-2016 academic year
• Mandatory for borrowers who obtain loan due to appeal or endorser
Plus loan - counseling
• Voluntary counseling will contain• Repayment estimator• Repayment plan information• Budgeting information• Strategies to avoid delinquency and default
Plus loan - counseling
• Mandatory counseling will contain• Repayment estimator• Repayment plan information• Budgeting information• Strategies to avoid delinquency and default• Additional financial literacy information• Current debt level and estimated repayment amounts
Plus loan – other changes
• Credit checks will remain valid for 180 days• Default rates will be published “as appropriate”
Questions