Very Competitive Field in ED Collection Performance Rankings

The Department of Education’s criteria for competitive distribution of accounts to private debt collection contractors is producing some interesting results in the monthly performance rankings.

The contractors occupying the top three performance spots have changed as often as a game of musical chairs. But contractors will quickly tell you that one good month won’t win the high stakes game of retaining or winning future ED contracts.

Pioneer Credit Recovery, Inc. of Arcade, N.Y. has been the only consistently top-ranked performer in the unrestricted contractor category since the new contract began in October.  Pioneer’s overall performance score of 98.32 points for May was well ahead of second place CBE Group, who broke into the top three monthly rankings for the first time in May with a score of 80.36.  NCO Group, meanwhile, recovered from its fifth place ranking the previous month to take third place with 79.16 points.

Chad Benson, senior vice president of operations for The CBE Group said the company is reaping the benefits of investments in technology and staff, as well as experience gained from working on the 2004 ED contract.  He said a big factor in continued success for CBE Group, or any agency on the ED contract, will be an experienced staff.

“Tenure is obviously critical to be successful over the long term,” Benson said.

Among small business contractors, Collection Technology Inc. (CTI) of Monterey Park, Calif. took the top spot for the second consecutive month with 96.95 points.  Former leader Coast Professional was close behind with 91.60 points, followed by Immediate Credit Recovery who held onto third place with 79.83 points.

Coast Professional CEO Brian Davis said the ED’s rewards system raises the competitive bar for agencies and it is showing in the results.

“We take this (performance rankings) very seriously,” Davis said.  “Hat’s off to CTI for a great job.”

Davis added that with two first place monthly performance rankings behind it, CTI could be the top ranked performer among small contractors for the April through June period, grabbing the largest distribution of inventory when placements are divvied up next month. But CTI president Chris Van Dellen isn’t overly confident.

“All the companies are pretty close in terms of numbers and I have a healthy respect for all my competitors,” he said.

Van Dellen noted that ED’s reward-based system, where overall scores are based on a weighted average of performance metrics — including total dollars collected, total accounts serviced and administrative resolutions — requires more strategic planning to consistently do well. Account placement volumes are determined each quarter; the highest-scoring collection agencies in the previous period get the most accounts in the next quarter.

Although a greater number of inventory placements each quarter will go to the contractor in each group with the highest overall performance score during the previous period, Van Dellen said ED will look at long-term performance when considering contract extensions and renewals.

“You can’t focus on one aspect of the business and think you will do well,” Van Dellen said. “You need to manage a lot of variables and move two or three steps ahead in every variable.”

Benson said a still very high national unemployment rate has consumers focused more on savings versus spending. The average student loan balance is about $10,000, and more often requires years to pay.  Most consumers who are paying down debt are focused on eliminating smaller balances, he said, adding that convincing them to commit to paying student loan balances is more challenging nowadays.

“Consumers are making choices, whether they will part with their money and over what time period,” Benson said. 

While ED contractors have collected $86,511,997 through the end of May, Benson said liquidations during the first seven months of the 2009 contract are down compared with the first seven months of the 2004 contract. Placements, meanwhile, are up slightly. ED expanded the debt collection from 17 total agencies (12 unrestricted and five small) in 2004 to 22 for the 2009 contract (17 unrestricted and five small).

Still, performance isn’t measured in numbers alone. Benson said it is equally important to do what is positive and leave a good impression with the consumer.

“Being able to know the job we’ve done helps people accomplish things that are not easy to accomplish now is important,” he said. “A lot people have fallen on tough times and don’t want to be there.  How we address that is important.  We want to be seen as a company that constructive not destructive.”

Here are the complete results for the April-May period: