Debt Collections Legal Solutions
5383 South 900 East | Suite 103 | Salt Lake City, UT 84117 (801) 361-0502 | www.juristec.com
Table of Contents •
Juristec Overview – Comparison to Traditional Solutions – Value Proposition – Proven Results – Why Juristec?
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Appendix A: Market Direction – Increase in Debt to Household Income – Increase in Delinquency Rates – Increase in Debt Write-offs – Debt Collection Industry
•
Appendix B: Juristec Details – Juristec Technology – Juristec Features – Security & Confidentiality – Juristec Tenets of Excellence – Management Team – Frequently Asked Questions
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Executive Summary •
Juristec automates the process of collection litigation to efficiently and cost effectively manage high volumes of bad debt.
•
Our goal is to provide solutions for debt that is currently not being effectively collected including late-stage and small-balance bad debt.
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Our focus is on the needs of our clients and how we can enable them to capture value lost through bad debt.
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Our team has tremendous experience in collection litigation, strategy planning and consulting, and technology implementation for ASP services.
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Our mission is to provide best-in-class technology and services that will enable clients to better manage and collect their bad debt.
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Advantage in Debt Collection Over Traditional Law Firms Clients using Juristec are fundamentally better at collecting on bad debt because clients can collect on “affordable” debt.
High-balance debtors have a greater likelihood of filing for bankruptcy and defaulting on their debt. Law firms typically settle for what they can get.
Bad Debt Balance
High $50,000
Written Off (“The Can’ts”) $5,000
Traditional Law Firms
Juristec pushes the cost of each case down making it possible to pursue low-balance debtors that traditional law firms can not pursue
Clients Using Juristec “The Won’ts”
$500
Low-balance debtors have a greater capacity to pay off their debt and can make manageable installment payment rather than defaulting.
Low Low
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Ability To Pay
High
Advantage in Debt Collection Over Traditional Collection Firms Current solutions for collecting late-stage debt are inadequate. Juristec significantly improves the effectiveness of collecting older debts. 35%** C
20%
A)
Industry average for collections is 14% (ACA international).
B)
The probability of collecting late stage debt is 72-87% less than collecting at an earlier stage.
C)
With Juristec Clients/Attorneys utilize the effectiveness of litigation with the high volumes of collection agencies.
A
10%
B
25%
15% 4% Collection Industry Total Early Stage/Primary
Collection Late-Stage/Secondary Placement Industry Collection Through Late-Stage/ Juristec* Secondary Placement
*Based on five-year average of Peterson & Simpson’s debt collection law practice. Cases received by Peterson & Simpson are latestage (8-14 months) and low-balance ($1,000-$1,250 average) and are focused mainly in Health Care. **Average reaches 35% when excluding skips.
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Complaints to the FTC The FTC continues to receive more complaints about third-party debt collectors than about any other single industry. The number of these complaints has been increasing steadily for a number of years, reaching nearly 70,000 in 2006. - Deborah Platt Majoras, Chairman, Federal Trade Commission
80 70
Complaints to the FTC, In Thousands
60
3rd-Party
50
In-House
40 30 20 10
Nilson Report (835, 857, 880)
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20 06
20 05
20 04
20 03
20 02
20 01
20 00
19 99
0
Comparisons Collection Agency
Traditional Law Firm
Client Using Juristec
Collection Capabilities
Calls, Demand Letters (non legal), Credit Checks
Demand Letters, Litigation, Garnishment, Bench Warrants
Demand Letters, Litigation, Garnishment, Bench Warrants
Regulations
Tightly regulated by FDCPA
Partially regulated by FDCPA but has many more options through litigation
Partially regulated by FDCPA but has many more options through litigation
Under FDCPA, collectors can no longer contact if debtor requests no contact. Does not take legal action.
Bankruptcy
Bankruptcy
50%
33-50%
25-40%*
Early: 60-180 days
Any
Any (Typically late-stage: 180+ days)
10,000-25,000 per year
200-500 per year
10,000-25,000 per year
1,000
5,000
1,000
10-15%
20-30%
20-30%
Obstacles
Contingency Fees
Collection Stage
Case Load Average Case Size % Collected
7
*By increasing volume of cases to a law practice and providing the means to process them, client can better negotiate legal fees with attorney.
Value Proposition Juristec adds value to clients, attorneys and debtors. Enables clients to maintain a professional relationship with debtors through litigation.
Client •Allows client to capture 20-30% more of their bad debt.
•Informs client through real-time reports.
•Lowers costs and minimizes losses.
•Provides full audit trail of case work and payments.
•Retains control over handling of individual cases.
•Enforces client’s procedures and policies.
•Enables the collection of small-balance and late-stage cases.
•Extends the statute of limitations allowing client longer time to collect.
Attorney •Includes checks to prevent legal errors, malpractice, and missed deadlines.
•Permits debtor to pay manageable installments without undue cost.
•Increases professionalism and decreases risk of counter suits.
•Allows debtor’s payments and costs to be accurately posted and tracked.
•Allows attorney to handle greater caseload.
•Reduces Attorney’s fees, for which debtor is liable, through efficiency.
•Tracks all money transactions for auditing.
•Provides due process to debtor through court.
•Collates similar cases for efficient work distribution.
•Allows debtor inquiries to be quickly and accurately handled.
•Automates repetitive procedures to reduce processing costs.
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Debtor
Legal Process is Complicated Client
In-House collections contact debtor
Client can forgive the Debtor’s debt at any time in the process
Debts not paid sent to legal team
Compiles cases and generates batch of demand letters. Demand letters sent
Debtor files answer with firm/court.
Supplemental proceedings: Summary Judgment
Firm files with court.
Attorney
Pre-Trial / Trial
Court
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Debtor
Debtor receives demand letter
Payment Received Summons and Complaint are delivered by legal officer to debtor and is filed with the court.
Payments made. Debtor is encouraged to pay off debt or set up payment plan at any time during the process. Attorneys can move case along without undue cost or loss of efficiency if payments are missed
Judgment
Default Judgment (Debtor doesn’t appear)
Judgment extends statute of limitations from 4 to 8 years. Attorney can garnish wages/bank account if debtor is noncompliant.
Judgments place liens on real property and can prevent debtors from obtaining further credit.
Juristec is the Solution Client
Attorney
Client has access to Juristec database with all case information. Database is backed up on a secure network daily.
Juristec tracks time intervals and generates filings for the court. Attorney has several litigation options to obtain judgment.
Juristec tracks payment and creates ability for periodic payment from debtors.
Debtor Juristec creates error-free pleadings completed in one-step process. Cases can be sent electronically to the court.
Courts 10
Juristec updates case proceeding quickly and easily, assigns ticklers for further proceedings.
Proven Results When demand letters are no longer effective, litigation should begin.
Demand Letter Juristec automates all litigation procedures, tracks deadlines and payments. Greater effectiveness when demand comes from an attorney.
Pleadings Most responsive debtors settle or make payment arrangements before going to trial. Legal officer serves pleadings directly to the debtor. FDCPA prohibits other collectors from personal visits.
43% Collected Pre Judgment*
Trial/Judgment Court orders debtor to pay. Attorney can question debtor about personal finances.
Post-Judgment Attorneys may garnish wages or place liens on property to compel debtor to pay.
Most cases are ruled in favor of the creditor.
Judgments can prevent debtors from obtaining future credit such as home/auto loans.
Judgment allows attorney to take appropriate action against the debtor.
57% Collected Post Judgment
*Based on five year average of Peterson & Simpson’s debt collection practice
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Proven Results – Case Study Juristec ASP is a proven technology that has been used to collect over $75 million in late-stage collections. Peterson & Simpson was a small, but very effective legal practice with two attorneys, one paralegal, a few administrative assistants and part-time file clerks.
Total Remittances: $300 Million
The firm received 500 new cases per week with an average case size around $1,000, with $500 as the minimum. Cases were received between 8 and 14 months past due after several collection attempts had been made. Each case was prosecuted to judgment and a debtor's exam unless paid or settled. Cases that warranted it were garnished. The office staff created a series of pleadings and letters with minimal input and without resorting to word processing, which provided a complete audit trail of pleadings and transactions. The firm allowed debtors to make installment payments; the program calculated a per diem interest rate. The firm was able to move forward on those who defaulted in payments without any loss of efficiency. The platform allowed the firm to maintain a high level of professionalism in their practice, enforcing the office standard forms, eliminating human error, and automatically calculating interest, costs, attorney fees and balances. Judges appreciated the firm’s pleadings because of this efficiency. The client received monthly reports including payments, costs, and important status changes. Development of the first electronic filing system with the Sandy Court in Utah increased ease of filing cases. The firm collected 2030% of outstanding debt per year, double the average of traditional agencies.
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Collected: Collected: $75 Million $75 Million
Collections for Peterson & Simpson, Attorneys at Law
Proven Results “There is a unique power in utilizing the court; however, it’s certainly fair and effective to use a court to collect a debt which has not been paid after years of debt collection efforts in many cases.” - Adam Olshan, Past President of the National Association of Retail Collection Attorneys A) Most traditional collection attorneys are not able to handle large volumes nor low-balance debt. Because high-balance debt is often difficult for debtors to manage financially, attorneys face less actual collections and more bankruptcies.
C A B
20%
Collection Volume
25% B) Average collection for industry players is approximately 15% (ACA, 2005). C) Only with Juristec can clients/attorneys utilize the effectiveness of litigation with the high volume practice of collection agencies.
20%
10%
15%
Current Attorneys
*Based on five-year average of Peterson & Simpson’s debt collection practice. Cases received by Peterson & Simpson are late-stage (8-14 month) and low-balance ($1,000 average).
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Collection Industry
With Juristec*
Why Juristec? Juristec provides both technology and services that allow clients to cost effectively litigate on a high volume of low-balance and late-stage bad debts while maintaining control of the case.
Juristec enables its clients to: – Capture revenue that has been written off to bad debt by the client. – Focus on collecting a higher volume of small-balance and late-stage debt. – Collect 20-30% of qualified delinquent debt through litigation. – Increase the ease and professionalism of their debt collection process. – Maintain oversight of the collection process. Allows client to have adequate communication with customers and prevents over-zealous collection practices. – Track and document each case and efforts for collection. 14
Table of Contents •
Juristec Overview – Comparison to Traditional Solutions – Value Proposition – Proven Results – Why Juristec?
•
Appendix A: Market Direction – Increase in Debt to Household Income – Increase in Delinquency Rates – Increase in Debt Write-offs – Debt Collection Industry
•
Appendix B: Juristec Details – Juristec Technology – Juristec Features – Security & Confidentiality – Juristec Tenets of Excellence – Management Team – Frequently Asked Questions
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Outstanding debt to Income “The household sector is much more exposed to consumer credit than it has been for a long time; in fact, than it ever has been. We are at a record level now of the ratio of total debt outstanding to household income. - Bill Hampel, Senior Vice President, Credit Union National Association
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Debt to Household Income Innovation in the financial services marketplace has given consumers many more choices, including an array of options for paying for goods and services, and these innovations, of course, have an impact on the willingness and ability of consumers to borrow money. 20.00
18.00
16.00
14.00
12.00
10.00
Mortgage
8.00
6.00
4.00
Consumer 2.00
19 80 Q 19 1 80 Q 19 4 81 Q 19 3 82 Q 19 2 83 Q 19 1 83 Q 19 4 84 Q 19 3 85 Q 19 2 86 Q 19 1 86 Q 19 4 87 Q 19 3 88 Q 19 2 89 Q 19 1 89 Q 19 4 90 Q 19 3 91 Q 19 2 92 Q 19 1 92 Q 19 4 93 Q 19 3 94 Q 19 2 95 Q 19 1 95 Q 19 4 96 Q 19 3 97 Q 19 2 98 Q 19 1 98 Q 19 4 99 Q 20 3 00 Q 20 2 01 Q 20 1 01 Q 20 4 02 Q 20 3 03 Q 20 2 04 Q 20 1 04 Q 20 4 05 Q 20 3 06 Q 20 2 07 Q 20 1 07 Q 4
-
Federal Reserve Flow of Funds, Commerce Department
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Debt to Household Income “If all of the debt is held by people with really high incomes, it’s much less of a concern than if it tends to be concentrated in lower income groups.” Bill Hampel, Senior Vice President, Credit Union National Association
Income
All Household Debt
45%
42.70%
40% 35%
32.40%
30% 23.90%
25%
19.50%
20% 14.90%
15%
15.10%
12.30%
10% 5%
18.20%
7.40% 7.40% 3.10% 3.30%
0% 1st Quintile 2nd Quintile 3rd Quintile 4th Quintile Federal Reserve, 2004 Survey of Consumer Finances
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Next 10%
Top 10%
19 All Business Residential Credit Cards Other Consumer
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1
Commercial Banks Delinquency Rates
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
85 1 9 Q1 85 1 9 Q3 86 1 9 Q1 86 1 9 Q3 87 1 9 Q1 87 1 9 Q3 88 1 9 Q1 88 1 9 Q3 89 1 9 Q1 89 1 9 Q3 90 1 9 Q1 90 1 9 Q3 91 1 9 Q1 91 1 9 Q3 92 1 9 Q1 92 1 9 Q3 93 1 9 Q1 93 1 9 Q3 94 1 9 Q1 94 1 9 Q3 95 1 9 Q1 95 1 9 Q3 96 1 9 Q1 96 1 9 Q3 97 1 9 Q1 97 1 9 Q3 98 1 9 Q1 98 1 9 Q3 99 1 9 Q1 99 2 0 Q3 00 2 0 Q1 00 2 0 Q3 01 2 0 Q1 01 2 0 Q3 02 2 0 Q1 02 2 0 Q3 03 2 0 Q1 03 2 0 Q3 04 2 0 Q1 04 2 0 Q3 05 2 0 Q1 05 2 0 Q3 06 2 0 Q1 06 2 0 Q3 07 2 0 Q1 07 2 0 Q3 08 Q1
19
Commercial Bank Charge-offs Rates
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
All
The Federal Reserve Board
20 Business Residential Credit Cards Other Consumer
Commercial Bank Charge-Offs 25,000
In Millions $$ Q2 ‘08: $20,461,000,000 20,000
15,000
10,000
5,000
19 85 Q 19 1 85 Q 19 4 86 Q 19 3 87 Q 19 2 88 Q 19 1 88 Q 19 4 89 Q 19 3 90 Q 19 2 91 Q 19 1 91 Q 19 4 92 Q 19 3 93 Q 19 2 94 Q 19 1 94 Q 19 4 95 Q 19 3 96 Q 19 2 97 Q 19 1 97 Q 19 4 98 Q 19 3 99 Q 20 2 00 Q 20 1 00 Q 20 4 01 Q 20 3 02 Q 20 2 03 Q 20 1 03 Q 20 4 04 Q 20 3 05 Q 20 2 06 Q 20 1 06 Q 20 4 07 Q 20 3 08 Q 2
-
(5,000) All
Commercial / Industrial
The Federal Reserve Board
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Real Estate
Consumer
Residential
Credit Cards
Other
Commercial Real Estate
Debt Collection “Debt collection plays a vitally important role in this system of consumer credit. Collecting on a debt, of course, benefits individual creditors who are repaid money they're owed, but it also has much broader economic benefits. If consumers don't repay their debts, then sellers will seek to increase the prices of the goods and services to those of us who are paying to cover the cost, and if consumers don't repay their debts, creditors will be less willing in the end to lend money to consumers, and that will decrease our future purchases. So, obviously debt collection plays a key role in keeping prices low and ensuring that consumer credit remains widely available across sectors of our economy.� - Deborah Platt Majoras, Chairman, Federal Trade Commission
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Table of Contents •
Juristec Overview – Comparison to Traditional Solutions – Value Proposition – Proven Results – Why Juristec?
•
Appendix A: Market Direction – Increase in Debt to Household Income – Increase in Delinquency Rates – Increase in Debt Write-offs – Debt Collection Industry
•
Appendix B: Juristec Details – Juristec Technology – Juristec Features – Security & Confidentiality – Juristec Tenets of Excellence – Management Team – Frequently Asked Questions
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Juristec Technology Juristec Utilizes Cutting-Edge Technology to Provide Greater Security and Flexibility
•Oracle has proven to be the most reliable and most secure database in the industry. Used by more than 50% of the top Fortune 100 companies and the American Hospital Association. •Combining Sun's Enterprise Servers with the latest Solaris Operating Environment delivers enhanced security, manageability and performance. Sun™ Open Net Environment (Sun ONE) is based on Health Insurance Portability and Accountability Act (HIPAA) regulations regarding encryption for privacy of patient records. •The Java™ platform is the foundation for networked and Web services. Java's "run anywhere" technology provides a highly flexible and highly scalable solution. •Intellivex: Through our Security Solutions Colocation Provider, Juristec provides a veritable fortress for our clients protected data.
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Juristec Features Juristec is a feature-rich application that allows attorneys and clients to manage the process of bad debt litigation. SYSTEM FEATURES Case Management
BENEFITS Stores case work and allows instantaneous tracking and manipulation of cases on screen.
Debtor Management/Cost and Payment Management
Tracks payment and creates ability for installment payments from debtors.
Easy-to-use, Multi-User Access
Legal/non-legal staff can create error-free pleadings and updates though a secure access.
Court/Judge Database
Tracks information on judges and courts and matches judges to cases
Automated Transaction Archival and Reporting
Full record of all cases, payments and per case costs for auditing and reporting to attorney/client
One-step pleadings
Error-free summons, summary judgments, etc. completed in one step process
XML Court Filing
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Court cases can be directly filed to the courts over the Internet
Juristec’s provides: •Security and reliability •Increased professionalism and decreased errors of legal documents and pleadings •Flexibility to handle high volume of cases with smaller debts •Easy and rapid implementation with low maintenance •Low-scale investment in technology or in-staff training •One-step pleadings processing •Real-time operating statistics and customizable reporting •Auditable payment and transaction tracking •Seamless integration on any operating system •Secure and automated data backup
Security & Confidentiality Juristec facilitates compliance between the Client and Attorneys to protect customer information.
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•
Administrative Procedures to Guard Data Integrity, Confidentiality and Availability. – Virus Checking – Security Testing – Awareness Training – Incident Reporting
•
Technical Security Service to Guard Data Integrity, Confidentiality and Availability – Role/User based access – Data Authentication – Automatic Log Off – Audit Trail
•
Physical Safeguards to Guard Data Integrity, Confidentiality and Availability – Access/Biometric Security Controls – UPS (Uninterruptible Power Supply) – Protected data backup and storage – Data and equipment monitoring
•
Technical Security Mechanisms to guard against Unauthorized Access to Data Transmitted over a network. – Encryption Technology – Virtual Private Networks – Dedicated Firewall – Unique User Names and Passwords
Juristec Tenets of Excellence Juristec is an Application Service Provider (ASP) that provides technology to both Clients and Attorneys for the purpose of collecting bad debt through litigation.
BEST-IN-CLASS TECHNOLOGY •Juristec provides a full technology solution for collection litigation. •Manages all technical aspects including data and database management, firewall protection and encryption. •Provides flexibility to handle high volume of cases with smaller debts. •Proven technology currently in operation for 15 years managing 20-30,000 cases per year.
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SIMPLIFIES COLLECTIONS •Provides document automation and one-step pleadings, which speeds the litigation process, eliminates errors and reduces costs.
INCREASES PROFESSIONALISM
GREATER SECURITY & SUPPORT
•Enforces Client’s procedures and policies.
•High-level encryption standards
•Increases communication between Client and Attorney.
•Secure and automated data backup.
•XML/EDI standards to import/export cases through a secure Web site.
•Provides full audit trail of Debtor payments
•Attorneys work cases to collection and Clients monitor the progression.
•Includes checks to prevent legal errors, malpractice, and missed deadlines
•Payment and interest tracking system allows Debtors to make installment payments.
•Greater Client control of individual cases.
•Easy and rapid implementation with low maintenance. •Real-time operating statistics and customizable reporting. •24X7X365 monitoring and comprehensive contingency infrastructure.
Management Team Lawrence R. Peterson – Founder, President • Founding Partner of Peterson & Simpson Attorneys at Law • 30-year member of Utah State Bar Association • Member of the Utah Collections Bar Association • Certified Solaris/Sun Systems Administrator • Juris Doctorate from University of Utah Brent Peterson – Director of Business Development • Manager for the Cicero Group • Manager at Bond Street Limited, LLC • Chief Analyst for Blackford Capital, LLC • B.A. from Brigham Young University, degree in Economics
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Frequently Asked Questions Will we be subject to counter-lawsuits if we litigate on our bad debt? Juristec provides greater professionalism and eliminates errors from prosecuting each case. Client also has the ability to filter out any cases they feel may be in question. What about those individuals that don’t have the ability to pay for economic reasons? Those individuals who do not have the ability to pay are virtually unaffected by the process because they typically do not have assets that can be placed under lien. Often times they can qualify for charitable contributions by the creditor. Why aren’t collection agencies able to collect as much as we can with Juristec? Consumers know that collection agencies tend to make idle threats in suing the consumer but never do, and therefore, collection letters are typically ignored. With Juristec, consumers will receive a demand letter from an attorney and will be summoned to court if payment arrangements are not met. Consumers are much more compelled to pay when faced with a lawsuit and can be forced to pay when judgment is rendered If we use Juristec, will we stop using our collection agency? Juristec is typically utilized for late-stage (greater that 180 days) consumer debt. Most collection agencies see their results fall the longer the debt is outstanding.
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