Delinquencies and Charge-Offs On the Rise, ELFA Survey Says



The seventh annual Collections Effectiveness Survey was presented at the ELFA’s 2016 Credit and Collections Management Conference and showed that delinquencies and charge-offs are increasing.

The survey was started in 2010 to bring collections professionals together to talk about important issues and learn from each other. Each year the survey results are presented at the conference in an open forum to allow attendees to discuss the findings together.

This year, the moderators who presented the survey findings were Brett Boehm of TBF Financial and Jim St. Clair of DLL. In addition, Barry Ripes of PayNet opened the forum with a slide show of the current trends in the equipment finance industry pertaining to delinquencies. These industry experts compiled and analyzed the data with the assistance of Bill Choi of ELFA.

The data collected was grouped by company, ticket size and organization type, while capturing information pertaining to aging of receivables, productivity measures, resources assigned to collection activities and outsourcing strategies.

PayNet forecasts an overall increase in defaults in 2016, with specific industries such as transportation, mining, information and construction leading the way. While 2016 defaults are expected to reach a peak since the recession, PayNet’s analysis projects that default will decline a bit in 2017.

Highlights from the Collections Effectiveness Survey include:

  • 2015 Delinquencies: In 2015, 31-90 day delinquencies increased, but recovered before the more-than-90 day mark. Banks showed a low 31-90 day delinquency rate and no delinquencies beyond 90 days. Independents showed a higher 31-90 day delinquency rate, but again significantly reduced that by the more-than-90 day mark. Among independents, dollars were collected, but the number of accounts remained high. Most of the success in collection was in the larger accounts where debtors will bring themselves current, but the smaller accounts tend to remain in default.
  • 2016 Delinquencies: When asked to predict what would happen with their company’s delinquencies over the next 12 months, 53% of respondents expected them to get worse, 38% forecast they would stay the same and 9% thought they would get better.
  • Charge-Offs: When asked to forecast what would happen with their company’s charge-offs over the next 12 months, 53% predicted they would get worse, 34% predicted they would stay the same and 13% predicted they would get better.
  • Staffing: When asked about staffing in their collections department, most companies reported adding 1-10 core collectors in 2015 and the average tenure of the collectors was close to 12 years. Hiring has become more difficult as fewer employees aspire to the collections role and it isn’t used as a stepping stone to other positions like it used to be. However, the really good collectors do get snapped up by other departments.
  • Agencies: Only 41% of the survey respondents felt that third-party collection agencies are effective. The survey asked those respondents how many times a placement with a collection agency would be beneficial, and they said that they didn’t believe it would be beneficial to place accounts more than twice.
  • Texting: When asked if they use texting in their collections efforts, 22% of respondents said yes, while 78% said they did not. Among those who reported using texting, most felt that it is effective.  Some debtors don’t want to take a call from a collector, but they will text. The ELFA expects that texting will be utilized more going forward. This will lead to new rules needing to be put in place.

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Terry Mulreany
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