The Challenge
A leading credit union came to Corios because they were struggling with an inefficient collections strategy on auto loan bad debt.
Our client’s auto loan portfolio included over 200,000 accounts, with a delinquency rate on outstanding loans above 20%. Their existing strategy for delinquency and collections involved basic collections activity (scheduled notices, dialer campaigns, collateral recovery), but failed to take into account additional related data points, including:
- Outstanding balance
- New vs used vehicle
- Vehicle make & model
- Insured status
- Roll rate
- Cure rate
- Recovery likelihood
- Repayment likelihood
- Loan to book
- Phone contact success rate
- Stage of delinquency
The Solution
Corios worked with the credit union to outline a spectrum of strategies for collections pursuit that included the traditional strategies the client had been using for years, and added some innovative ones to the mix, including: a self-cure strategy, light call strategy, heavy call strategy, and early repossession.
Corios then helped our client to build several predictive scoring and treatment assignment models based on these alternative strategies, which gave our client the opportunity to proactively test these strategies before bringing them to market and also gave the credit union flexibility to change their treatment strategy over time.
- Scoring models predict a variety of member characteristics and outcomes including an individual’s probability of falling into delinquency, the likelihood that they can self-cure, if they default what the likelihood of recovery would be, and what collateral value would be assigned.
- Treatment assignment models assign the best set of members to treat with a given treatment strategy at that time based on capacity and budget for each.
The Results
Our proof of concept results showed that Corios’ predictive models could help our credit union client increase monthly incremental net receivables by over $2 million. Our credit union client adopted the approach, and began putting it into production in 2010.
Contact us to learn more about Corios’ collections strategy and targeting solutions.