Tomas Pubrdle

Implementing a
New Collections Strategy
at a Bank
Case Study:
Mortgage Credit Directive 2014/17/EU
Tomas Pubrdle
Collections Europe 2015, SmithNovak, Vienna, June 2015
CONTENT
1. Can you see the wood for trees?
2. What is your mission?
3. Mortgage Credit Directive (MCD): strategy game-changer
4. Reasonable forbearance
5. Seeing the wood in 5 steps
6. Practical approach to MCD
7. From collections to solutions
8. Search-and-rescue of survivors / Recovering the bodies
1. CAN YOU SEE THE WOOD FOR TREES?
Greatest frustration comes from unfulfilled expectations …
2. WHAT IS YOUR MISSION?
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RECOVERY % …
NPL PORTFOLIO …
STAFF MOTIVATION …
PROVISIONS …
NPL RECOVERY …
CASH COLLECTED …
STAND STILL / FAST CASH …
 DOES YOU ORGANISATION UNDERSTAND WHAT IS
COLLECTIONS ACTUALLY ABOUT … ?
 CAN YOU CALCULATE THE ACTUAL VALUE OF THE GIVEN
CLAIM … ?
 HOW DOES YOUR TOOL BOX LOOK LIKE … ?
 DO YOU HAVE A MANDATE TO MAKE A DECISION … ?
3.1. SPIRIT OF THE (MCD) DIRECTIVE
PREVENT HOUSEHOLD OVER-INDEBTNESS AND SECURE HIGH
LEVEL OF CONSUMER PROTECTION (2014/17/EU)
 Consumers in the EU hold significant levels of (mortgage) debt (R3)
 Problems driven by market and regulatory failures (R4)
 Lowering the potential for irresponsible lending and borrowing
(including intermediaries and non-credit-institutions) (R4)
 Responsible and reliable markets = confidence (R3)
 Preventing potentially severe social and economical consequences
(R3)
 Action by Member States = undermining the functioning of the
internal market + inability to ensure high level of consumer
protection = maximum level of EU regulation (R82)
3.2. MCD WILL INFLUENCE …
ALL TYPES OF
MORTGAGE LOANS
 As of 21/3/2016
 Re-financed = new
 Equity release and
reverse mortgages
excluded (R16)
 „Public interest“ and
buy-to-let mortgages
may be excluded by
Member States (R17)
CONSUMER RIGHTS
 Right for conversion into home
currency
 Right for fair pre-payment
(without sanction)
 Right for information about all
relevant changes
THE WHOLE
CREDIT PROCESS
ALL PLAYERS ON
THE MARKET
 Banks, non-credit
institutions and
intermediaries
 Non-banks = oversight
+ must have access to
all public and private
credit info. Databases
 Appropriate
professional skills and
diligence of everyone
involved in the process
(most likely including
also collections EXAs)
 Transparent and understandable communication
 ESIS – binding – must be projected into the Loan
Agreement
 Possible limits on LTV and DTI + reliable valuation
 Underwriting will have to project a „long-term view“
4.1. AND ALSO COLLECTIONS AND RECOVERY
REASONABLE
FORBEARANCE
Article 28 (1) Member States shall adopt measures to encourage
creditors to exercise reasonable forbearance before foreclosure
proceedings are initiated.
4.2. EXCERCISE REASONABLE FORBEARANCE
RESTRAINT …
PATIENCE …
MERCY …
TOLERANCE …
FORBEARANCE …
4.3. IN PRACTICE … (ARTICLE 28, R27)
Given the significant consequences for creditors, consumers and potentially
financial stability of foreclosure, it is appropriate to encourage creditors to:
 deal proactively with emerging credit risk at an early stage
 make reasonable attempts to resolve the situation through other means
before foreclosure proceedings are initiated
 find solutions which take account of the practical circumstances and
reasonable need for living expenses of the consumer.
 obtain the best efforts price for the foreclosed immovable property in the
context of market conditions (Art. 28 (5))
 Where after foreclosure proceedings outstanding debt remains - ensure
the protection of minimum living conditions and put in place measures to
facilitate repayment while avoiding long-term over-indebtedness (Art. 28 (5))
 charges no greater than is necessary to compensate the creditor for costs it
has incurred as a result of the default (Art. 28 (2))
5. SEEING THE WOOD IN 5 STEPS
1. Personal responsibility must be assigned at any
given stage of the collections process
2. Acting in a timely manner and being consistent
3. Personal contact with the client (field visit) is
above all
4. Delinquent client cannot get “time and money” at
the same time
5. Always strengthening creditor’s position
6.1. PRACTICAL APPROACH TO MCD
 Each case must have a person assigned to its management / solution
 Collection Toolbox – ability to apply all available solutions for
problematic claim (from VAS and restructuring to debt consolidation)
 “Desk” analysis should result in preparation of Field Visit (FV) Memo (the
better the prep., the better the result)
 Cut bureaucracy BUT REMEMBER – detailed analysis of the case is not
bureaucracy
 99 % of people can be located and found – Field Visitors’ flexibility is
crucial
 All concerned persons must be considered and contacted (co-debtor,
pledger, etc.)
6.2. PRACTICAL APPROACH TO MCD
 Calls, text messages and notices are NOT the corner stone of Field
Visitor’s work
 Seeing clients in their “home setting” is crucial (nothing tells you more
about a person than a conversation in his / her living room)
 Getting politely inside the property + quality photos (important
psychological element) + good analysis of the local property market
 Client’s financial literacy must be beard in mind – avoid banking and
technical jargon
 Client must understand what next steps will be taken, why and what will
be the outcome
 Habit of regular commitment must be kept at all times
6.3. PRACTICAL APPROACH TO MCD
 Postponing payment and “buying time” is NOT ACCEPTABLE (people tend
to forget their commitment under the pressure from other creditors)
 Every visit should result in meeting minutes signed by Field Visitor and
the client (minutes to include next steps agreed + deadlines + recognition
of debt)
 Any agreement reached must be followed up (on time)
 If agreement not kept – immediate application of another tool
 Written strategy is a must = detailed analysis of the case (post FV) and
steps taken to date, proposing optimal solution, deadlines and possible
further scenarios. Assigns clear responsibility and “TBD by …” (complying
with the spirit of MCD)
6.4. PRACTICAL APPROACH TO MCD
 Ability to assign status to every case (at any stage) based on pre-defined
rules
 Each and every concession must be “bartered” for strengthening
creditor’s position
 Restructuring = always aim for getting additional co-debtor (family /
pledger), additional security, partial repayment, directly enforceable
Notary deed (CZE)
 It’s not over, till it’s over: residual claim solved, case and accounts closed,
provisioning settled, case archived … the end
 Creditor must understand that there will always be some level of
“consumption” of provisions (the goal is to minimise it)
7. FROM COLLECTIONS TO SOLUTIONS
ANAMNESIS
INFORMATION
DIAGNOSIS
ANALYSIS
 INCOME (ALWAYS NET)  FAMILY SITUATION
 COURT
AND COSTS
PROCEEDINGS
 OTHER ASSETS
 OTHER COMMITMENTS  SECURITY
INFORMATION AVAILABLE IN THE
CREDIT FILE, CREDIT BUREAUS
AND PROPERTY REGISTRY
“Question the cost of living – good
indication of client’s ability to manage
own finances and economic situation”
Clearly structured re-payment calendars
Managed (supervised) voluntary asset sale (VAS)
Innovative approach to restructuring (one tool – flexible use)
Active debt consolidation and tightening other parties into
the credit relation
 Acting in timely manner + knowing “what’s next”
 Applying pressure gradually
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DECISION
PERSONAL CONTACT IS ABOVE ALL
8. SEARCH-AND-RESCUE / RECOVERING THE BODIES
EARLY
RECOVERY
LATE
60/90 DPD
 Ensuring client is
informed about
his/her debt
 Focus on securing
PTP / re-payment
calendar
 „Helping hand“ – if
client communicates
and is actively trying
to solve the situation
180/210 DPD
 Is return to regular
re-payment
possible?
 Personal contact is
above all
 Using the complete
toolbox (VAS, restr.)
 Analysis of creditor‘s
position and the
value of security
 Minimising loss and
consumption of
provisions
 Still acting in timely
manner – it‘s not a
„trash bin !“
 Effective co-operation
with attorneys, bailiff
officers and
insolvency admin.
THANK YOU
Tomas Pubrdle
Senior Project and Programme Manager
Czech Export Bank
E: [email protected]
E: [email protected]
M: +420 606 787 150