Credit & Collections Organization Structure
Collections Organizational Structure Outline
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The purpose of Collections is to ensure that delinquent accounts are reconciled and paid in a timely, cost-effective manner. Companies must balance direct credit losses and the costs of debt recovery judiciously. Most companies are willing to allow small debts to lapse if the cost of recovery starts to exceed the amount being collected. Companies can afford to devote considerable time and energy, however, to the collection of larger debts. Typically, collections agencies follow an escalation method based on the number of days the account has been delinquent and the amount owed.
Common Collections job titles: Chief Financial Officer, Director of Credit & Collections
Collections Account Maintenance
The Collections Account Maintenance function is responsible for collecting, verifying and updating customer account information in company systems, as well as performing periodic account information reviews and account balance verifications. They work closely with the Customer Service department to ensure all information is correct. In some cases, Account Maintenance employees may perform skiptracing activities. Skiptracers work to establish the whereabouts and/or the contact information of debtors that have previously been impossible to find or contact.
Common Collections Account Maintenance job titles: Skiptracer, Credit Investigator, Collections Investigator, Collections Analyst, Collections Specialist
The Collections Compliance function is responsible for ensuring that all collections activities comply with government regulations. The Fair Debt Collection Practices Act (FDCPA) of 1978 governs all collections departments and agencies in the United States (Canada and the UK have similar legislation). The Fair Debt Collections Act establishes guidelines and restrictions for such things as acceptable calling times, debtor harassment and credit reporting. The collections compliance group is tasked to mitigate risk (fines, sanctions) related to violations of federal or state collections regulations. The FDCPA does not, however, apply to corporate debt and/or debt related to agricultural or business practices.
Common Collections Compliance job titles: Compliance Analyst, Collections Analyst, Collections Compliance Specialist, Collections Risk Management Specialist
The Collections Operations group makes contact with debtors to collect outstanding balances. They are responsible for identifying and updating debtor contact information in the company's database (or any record-keeping system) when possible. Contact methods and frequency vary based on the number of days the account has been delinquent as well as the amount that is owed. For example, if the account has only been past-due for 10 days or less, the collections group might place a single call per week. In some cases, these calls might be automated, using a pre-recorded message to notify the account holder that their bill is past due. At the 30-day point, however, the group may increase the frequency of calls and begin sending traditional 'snail mail' notifications. When accounts become 60-90 days past due, collections activities intensify until the debt is either written off or sold to a third party collection agency or debt recovery firm.
Common Collections Operations job titles: Collections Analyst, Collections Officer, Collections Specialist, Collector, Collections Agent
The Debt Sales function is responsible for determining when to off-load debt that is unlikely to be collected (or will require more effort than the company would like to spend performing first-party collection activities on the debt) to a third party. By doing so, companies (i.e., first party creditors) are hoping to improve cash flow and reduce balance sheet liabilities. Selling debt that is not likely to be collected in-house (i.e., underperforming debt) also vastly reduces overhead and labor costs related to performing collections activities related to the debt. Third party purchasers of debt typically include collections agencies and debt recovery firms. Companies bundle delinquent accounts into groups and sell them to these third parties for a fraction of the amount owed. The amount that third parties are willing to pay depends upon the likelihood of the debt being collected.
Common Debt Sales job titles: Collections Manager, Collections Consultant, Treasurer
Deferments & Forbearance
The Deferments and Forbearance team is responsible for the review and documentation of deferment or forbearance requests. Deferment and forebearance requests involve the delay of loan payments (either with or without interest accruing). Certain lenders have different criteria for the approval of these requests. Responsibilities for employees working in this function include deferment and forbearance request fielding and review, approval or denial of these requests, mailing of verification letters and updating debtor account information. Many times, a credit "counselor" may work with debtors to determine the best possible route to avoid default. They work closely with loan servicing groups to process information related to the postponement of loan payments.
Common Deferments & Forbearance job titles: Credit Counselor, Credit Consultant, Consumer Credit Specialist, Customer Service Representative, Loan Servicing Specialist