Transcript Debt Recovery Program

MANAGEMENT OF HARDCORE
DELINQUENT ACCOUNTS
Debt Recovery Program
Session Objectives
• Learn the basics of debt recovery and its
importance
The Debt Recovery Program
Debt Recovery Program
• A strategy to recover accounts written off by the bank
• The objective is to minimize the bank’s potential losses
by recovering as much of past due loan balances as
possible through restructured payment schedules with
borrowers
• Funds recovered through the Debt Recovery Program
are booked as revenue and as such generate regular
cash inflow for the bank
Processing Accounts for DRP
1. Develop criteria to classify, or qualify accounts for
the Debt Recovery Program.
2. Identify potential hardcore delinquent accounts
that would qualify for DRP based on set criteria and
guidelines.
3. Provide debt-counseling services in determining
the type of repayment scheme/s where a potential
account will be enrolled
4. Provide an alternative recovery effort for problem
and written off accounts minus the legal options
An Alternative to Collection Agencies
or Legal Options
• The Debt Recovery Program is a strategy that
can be employed before endorsing a loan to
collection agencies or resorting to legal options.
Guidelines and Criteria
Debt Recovery Program
Guidelines & Criteria
1. The DRP is available only to clients whose
account had been written off. The bank must
refrain from informing the client about the
status of her account (written off).
2. The bank should focus on determining the
client’s capability to pay the loan.
Guidelines and Criteria
Debt Recovery Program
3. The bank must determine the following:
– Client’s income source (stable & fixed);
– Disposable income available to apply toward
outstanding balance
– Available assets to apply toward the
outstanding balance
– Other existing debt or obligations that may
affect the restructured payment schedule
Guidelines and Criteria
Debt Recovery Program
4. The bank initiates a new loan agreement with the
client documenting the restructured payment
plan. An amortization schedule is included and
agreed upon by the client.)
5. The bank must fixed the amount due from the
client, i.e., based on the Statement of Account
during the write off date.
Guidelines and Criteria
Debt Recovery Program
6. The bank must assess only additional interest on
the account based only on the Statement of
Account
7. For records and internal control purposes, all
accounts that are enrolled with the DRP should
be properly recorded, monitored and validated
by the bank’s audit group.
Guidelines and Criteria
8. Subsidiary ledgers or, an MIS generated reports
(recommended) should be prepared that
provide listings of the accounts in the Debt
Recovery Program.
Alternative Debt Recovery Options
There are alternative debt recovery options for
accounts that do not quality for the Debt
Recovery Program. Those accounts can be:
•
•
•
Classified as uncollectible and dropped from the loan
portfolio
Endorsed to collection agencies
Recommended for legal action (i.e. endorsed to a
retained or contracted lawyer or law firm).
These are other collection strategies at the bank’s
disposal