MANAGEMENT OF HARDCORE DELINQUENT ACCOUNTS Debt Recovery Program

1. MANAGEMENT OF HARDCORE DELINQUENT ACCOUNTS Debt Recovery Program

2. Learn the basics of debt recovery and its importance Session Objectives

3. 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

4. Develop criteria to classify, or qualify accounts for the Debt Recovery Program. Identify potential hardcore delinquent accounts that would qualify for DRP based on set criteria and guidelines. Provide debt-counseling services in determining the type of repayment scheme/s where a potential account will be enrolled Provide an alternative recovery effort for problem and written off accounts minus the legal options Processing Accounts for DRP

5. The Debt Recovery Program is a strategy that can be employed before endorsing a loan to collection agencies or resorting to legal options. An Alternative to Collection Agencies or Legal Options

6. Guidelines & Criteria 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). The bank should focus on determining the client’s capability to pay the loan. Guidelines and CriteriaDebt Recovery Program

7. 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

8. 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

9. 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 Debt Recovery Program

10. 8. Subsidiary ledgers or, an MIS generated reports (recommended) should be prepared that provide listings of the accounts in the Debt Recovery Program. Guidelines and Criteria

11. 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 Alternative Debt Recovery Options