Method for managing disposition of delinquent accounts

Details Method for managing disposition of delinquent accounts Method for managing disposition of delinquent accounts

1999-12-23

2002-09-24

Rice, Kenneth R. (Department: 3627)

Data processing: financial, business practice, management, or co

Automated electrical financial or business practice or...

Finance

C705S040000

Reexamination Certificate

active

06456983

ABSTRACT:

FIELD OF THE INVENTION
The present invention generally relates to the field of managing the disposition of delinquent accounts (i.e., bad debt) and, more particularly evaluating a collection of delinquent accounts by subdividing this collection into a plurality of groups and making the disposition decision on a group-by-group basis.
BACKGROUND OF THE INVENTION
Significant amounts of credit are being extended to consumers each year in the form of the issuance of credit or other types of charge cards. One significant problem with the extension of credit is delinquency in the payment on accrued balances. A number of courses of action are typically employed for delinquent credit or other charge card accounts. Delinquent accounts may be sent to a collection agency where the creditor of the delinquent account will typically receive a percentage of the amount ultimately collected by the collection agency. Another avenue which may be pursued by a creditor of a delinquent account is to sell the delinquent account to a third party for a stated price who will then attempt to collect on the delinquent account. Typically a creditor will receive a bid for the sale of all delinquent accounts within a certain category or the like. For instance, a creditor may receive a bid for all delinquent charge accounts within a certain industry or group of industries. A creditor may also receive a bid for all delinquent charge accounts which were issued by a common entity or group of entities.
One way in which bids of the above-described type have been previously evaluated is to refer back to a historical database which contains information about payments which were received on accounts after they became delinquent. Information is retained on how each particular delinquent charge account recovered, or stated another way the payment profile of these delinquent accounts (i.e., the amount and timing of payments after the accounts are “declared” delinquent). This historical information is used as follows and may be illustrated by an example where a bid has been made to purchase all current delinquent accounts issued by Company “A”. A single liquidation or payment profile is generated from all of the historical data which has been retained on the delinquent accounts issued by Company “A” in relation to their recovery. From this single liquidation profile and based upon certain other assumptions in relation to the currently delinquent accounts for which a bid has been received, the average net present value of the plurality of currently delinquent accounts for which a bid has been received is calculated. The bid price is compared to this net present value, and the decision is made as to whether the bid should be accepted.
BRIEF SUMMARY OF THE INVENTION
One problem with the above approach is that there may be significant variance of sorts within all of the currently delinquent accounts for which a bid has been received. Some of these currently delinquent accounts may be desirable to sell for the subject bid price, while others may be desirable to retain in some manner (e.g., to continue to hold and receive payments thereon, to send to collections). Thus, there is a need for a system and method which makes disposition decisions based upon splitting a predefined collection of delinquent accounts into a plurality of groups for independent analysis, and thereafter deciding how to deal with these delinquent accounts on a group-by-group basis.
This disclosure generally relates to managing the disposition of delinquent accounts or the like. For instance, this disclosure allows for a determination as to whether certain delinquent credit card accounts should be sold for an offered price, or whether at least some should be retained in some manner for collections by a third-party collection agency or an “internal” collection agency.
One aspect of this disclosure relates to managing a collection of currently delinquent accounts, such as by making a recommendation for disposition of such delinquent accounts. As such, this “collection” will hereafter be referred to as a “current portfolio,” and its respective delinquent accounts will hereafter be referred to as “current delinquent accounts.” Broadly stated, the current portfolio is divided up into a plurality of groups. Each of these groups is then independently analyzed to make a value determination on a group-by-group basis. For instance, the “value determination” may be at least reflective of an average amount which an issuer of the delinquent account may expect to receive in relation to each delinquent account within a particular group. Based on this evaluation, each of the groups may be dispositioned in at least some manner (i.e., all delinquent accounts within a particular group are dispositioned in the same manner). Representative “dispositions” include selling all delinquent accounts within a particular group for an agreed-upon price, as well as retaining all delinquent accounts within a particular group to collect in some manner on future payments made in relation thereto. Payments may be received in a variety of manners. For instance, the issuer could just wait for the holder of the delinquent account to make payments directly to the issuer of the delinquent account. More commonly the issuer of the delinquent account will transfer the particular current delinquent accounts to collections, where the issuer will only receive a percentage of the payments made by each holder of each current delinquent account. “Collections” may be affected externally (i.e., by a party which is not affiliated with the issuer of the delinquent account, or stated another way by a third-party collection agency) or internally (by an entity of sorts which is affiliated with the issuer of the delinquent account, such as a department or division of a company which is responsible for collections).
Various refinements exist of the features noted in relation to this disclosure. Further features may also be incorporated in this disclosure as well. These refinements and additional features may exist individually or in any combination. Each delinquent account may be “scored”, and the “score” of a particular current delinquent account may be reflective of a payment which would be projected to be received in relation to this particular delinquent account, based upon a statistical analysis of sorts. These “scores” may be used to assign each of the current delinquent accounts to one of the plurality of groups, with each group having its own score range.
Historical data may be retained on accounts which were at least at one time “delinquent”, and for which at least certain payments have been made in relation thereto. These previously delinquent charges will hereafter be referred to as “historical delinquent accounts,” and a collection of these historical delinquent accounts will hereafter be referred to as a “historical portfolio.” This historical data may be used in the dispositioning decision in relation to each group of current delinquent accounts. In this regard, the historical portfolio may be divided up into a plurality of groups. One way to define the plurality of groups is to score each of the historical delinquent accounts in the above-described manner, to divide this historical portfolio up into a plurality of groups (e.g., a predetermined number of groups), and to note the high and low score in each group of the historical portfolio to define a plurality of score ranges or clusters. These same score ranges or clusters may then be used to establish the above-noted groupings for the current portfolio.
Further refinements may be used to define the groups based upon the above-noted scoring. Groupings may be established by requesting that there be a certain number of score groups within each of the historical portfolios, and that there be an equal number of delinquent accounts in each of the score groups of the historical portfolio. Once the groupings are established in this manner, the minimum and maximum score in each group of the historical portfolio may be noted to define the score range for e

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