5 - Collections and recoveries

Question 1

What is the aim of collections process in regards to irregular accounts?

Answer 1

To bring the account back onto a regular footing, while trying to preserve customer relationship.

Question 2

When does recoveries happen?

Answer 2

Recoveries begins when collections has failed and the account is still irregular.

Question 3

What is the difference between recoveries and collections?

Answer 3

Collections - tries to get customer back on track and keep relationship. In house operation
Recoveries - last resort - tries to reclaim money and end customer relationship. Will involve 3rd party such as debt collectors.

Question 4

What is a default notice?

Answer 4

Statutory requirement demanding full outstanding amount. This is at the end of collections stage and start of recoveries stage. Explains to the customer that they have breached their agreement.

Question 5

What is a call up notice?

Answer 5

It is issued after the default notice and only when the bank holds security.

Question 6

If no security is held can a bank issue a call up notice?

Answer 6

No - Call up notice is for security only and not debt.

Question 7

What is a pre-delinquent case?

Answer 7

these are accounts that have a high probability of becoming
delinquent

Question 8

What is a new account defaulters?

Answer 8

these are accounts where the first repayment has been
missed

Question 9

A collector in negotiation with the customer may apply?

Answer 9

-Late fee charges
-Increase interest rate
-reduce credit limit
-Suppress interest
-Suggest a product switch
-Reschedule loan repayments
-Offer a consolidation loan
-Agree a short settlement

Question 10

What is interest suspense?

Answer 10

This is used when the bank feels that they will get repayment and the interest charge debits the customers account but the amount of the interest is not taken into the banks profit figure.

Question 11

When is unapplied interest an option?

Answer 11

When the bank feels there is little to no chance of repayment.

Question 12

What is re-aging of debt?

Answer 12

A term used to describe the rescheduling of debt. It occurs if a customer has gone into arrears. Normally an account will only be re-aged once in its life time.

Question 13

What courses of actions are there when an account is in recoveries?

Answer 13

-Debt collection agency
-Keep pursuing customer in house
-Sell the debt to an agency
-Set up a repayment programme with customer.
-Take legal action
-Write off the debt.

Question 14

What is the objective of the intensive care unit?

Answer 14

To help the account back into a regular position.

Question 15

What types of accounts does the intensive care unit deal with?

Answer 15

• Current accounts
  -Term Loans
  -Bridging loans
• Self build

Question 16

The aim of a recoveries department is to?

Answer 16

collect the debt and sever the relationship with the customer
2

Question 17

A notice which informs the customer that they have breached the terms of their agreement is
called?

Answer 17

A default notice

Question 18

“Interest suspense” is the term used to describe?

Answer 18

where interest is debited to the customer’s account but not taken into the bank’s profits

Question 19

The term used to describe an irregular account is:
a) deviant
b) delinquent
c) troublesome
d) irrecoverable

Answer 19

b) delinquent

Question 20

When a bank makes allowance for the possibility of bad debt this is called:
a) write off
b) prudence
c) allowance
d) provisioning

Answer 20

d) provisioning