Strategy and Technological Advances are streamlining the collections process.
With so many parties to a student-housing lease and with multiple tenants per unit, assigning and recovering debt has been a longstanding challenge for many operators.
Collections protocol and relationships with debt-recovery companies are nothing new to property managers. Eager to take their services to higher levels, these vendors are exploring and implementing new methods of retrieving debt and even pre-empting collections through better billing processes and stronger connections with renters.
“We believe that focusing on ‘collections’ is too late,” explains Mike Jones, CEO of Waco, Texas-based SimpleBills Corporation. “We need to discuss a paradigm shift in this process and start with a better way to ‘bill’ students.”
For many students, a college apartment is their first step into the real-world responsibility of monitoring and paying monthly bills, especially utility bills. Educating renters and helping students to understand their responsibilities is a beneficial, yet often overlooked, step in the renting process for property managers.
SimpleBills’ proactive approach to billing and receiving payments through friendly reminders and keeping all parties — roommates and parents — in the loop is proving successful as the company experiences a less than 1 percent default, with many markets seeing a 0.1 percent and 0.2 percent default rate.
From its born-from-necessity start at Baylor University, the company offers payment splitting among roommates with transparency of outstanding payments, reminders of upcoming bills and parent involvement, while also taking the burden of billing from the property managers.
“The paradigm shift is now established,” says Jones. “The students believe that they are being treated fairly, but by the same token, they are accountable to everyone for paying their bills.”
While a proactive billing and payment approach may reduce delinquency on debt,many property managers are still seeing defaults on payments in their communities. Ryan Howard, vice president of business development for West Chester, Pa.-based BYL, explains that his company has seen an increase in monthly collection placements this year compared to the same period last year. Additionally, BYL is experiencing an increase in the total amount of accelerated rent being assigned versus normal damages.
However, markets can vary greatly and Atlanta-based JMG Realty Inc. reports that its collections have improved this year versus last year on the student-housing front. Jean Woodworth, divisional vice president for JMG Realty, notes that the decrease is largely due to changes the company has implemented to ensure that guarantor information is conveyed as quickly as possible to the collection agency.
Providing leases with strong language regarding delinquencies and a property managers’ ability to collect is a must, notes Rebekah DeSmet-Fischer, vice president of operations for Denver-based Cardinal Group Management.
“In states and municipalities where it is allowed, leases should allow management companies to collect on utilities, NSF fees, fines, etc. prior to rent, which makes collecting the total balance due a little easier,” she says.
To streamline the flow of renter information, Cardinal Group Management uses the same company that performs its credit and background checks to handle any collections. In addition, the company has added the reporting and recording of previous evictions to residents credit reports, which is often a smoking gun for future issues.
“As an industry, we should be working together to ensure that previously evicted or delinquent residents are required to clear up their previous debts before renting at a new community,” explains DeSmet-Fischer.
Recovery challenges are always an issue within the student housing market, but given the current financial environment and technological advances, it’s becoming increasingly more difficult to stay ahead.
“Ability to pay is showing a different pattern this year based on a few things,” says Marilyn Lohonen, vice president of marketing with Orlando, Fla.-based Southern Management Systems. “Renters not being able to get tax refunds until later this year and the Social Security tax being added back on is leaving people with less available funds.”
Cardinal Group is experiencing a different tightening of funds that is affecting their renters — delays in financial aid payment from universities. Although this delays the company’s ability to collect, it is working with students and waiving late fees and possible eviction notices when the university provides proper documentation.
Beyond payment challenges, the collections industry is in an uphill battle to stay within government regulations but on top of technology advancements. Students renters are more tech savvy than ever and traditional phone-and-letter communication is being replaced with e-mails, texts and website interactions.
“The increase in portable electronic communication devices is moving at a much faster pace than the regulatory restrictions placed on third-party collection companies under FDCPA [Fair Debt Collection Practices Act] and TCPA [Telephone Consumer Protection Act],” says Howard. “Such restrictions limit contact options without prior consent.”
To work around the restrictions, companies, including BYL, are working with clients to update lease language at origination to include authorization of electronic communication by a third-party.
In addition Tampa, Fla.-based Hunter Warfield has noted an interesting trend, which may become an industry challenge. The company has experienced an influx of attorneys soliciting debtors to see if they can get rid of the debt and/or bring suit against the collection company. One of the best ways to overcome this challenge is through education.
“Educated collectors and clients can really help with this issue,” says Tracy Simonton Legg, vice president of business development in Hunter Warfield’s Denver office. “We have a continuing education for our collections staff and also council with our clients on a regular basis about what is needed for a successful collection process.”
Market-to-market variations and challenges are expected in the industry, and collection agencies are working to overcome the obstacles and connect with the new generation of debtor through coupling technological advances and a renewed focus on customer service.
As always the information a collection agency receives from a property manager is vital to the agency’s ability to collect on a debt. Creating strong relationships with clients and making sure all parties understand the needed information makes collecting more successful and easier for both property managers and collection agencies.
“It’s like building a house,” says Lohonen. “A good foundation of information makes for a stable and successful recovery of bad debt.”
With this in mind, collection agencies are developing and implementing new technologies and strategies to streamline the collection process for property managers.
BYL offers complimentary software integrations for property management companies into its web-based collections software, which allows for a secure electronic transfer of delinquent account information, including online application and lease data. BYL’s software, like many other companies, offers an online payment option, which targets the new generation of debtors.
“These integrations, coupled with our online payment portal, haven shortened the gap between account assignment and recovery,” says Howard.
JMG Realty recently moved to an electronic delivery of files to its collection agency, which has made a tremendous impact. With approximately 900 to 1,000 beds becoming vacant at one time, as is the case in student housing, the process for an onsite staff to copy and prepare all the needed files is too cumbersome and often results in delays in the collections process or some files being lost in the process.
“With an electronic delivery system in place, all residents owing a balance, which we set the minimum, are electronically delivered to the agent at once upon move out,” explains Woodworth. “We have seen an improvement of more than 50 percent in collection rates on our traditional student sites after the implement of an integrated collections software.”
In addition to creating an easy connection between property managers and collections agencies, BYL is continuing to increase its online presence to stay on par as students and guarantors continue to increase their screen time. BYL has a 24-hour online virtual debt negotiation platform, which includes electronic communication channels to correspond with the company.
To enhance its services, Hunter Warfield is implementing a voice analytics service that will allow the company to convert voice to text for analysis. This analysis will help ensure the collectors adhere to FDCPA rules 100 percent of the time as well as provide the company with debtor behavior and trends, which will be used to enhance the company’s strategies.
While the company has always provided debtors the ability to pay online, the company is now giving debtors more access to their account through the use of an avatar without having to speak to a collector. Through this technology, debtors will be allowed to negotiate payment plans online based on the client’s guidelines. Hunter Warfield is coupling these advances with its continued support and enhanced integrations with property management software providers, especially with the recent inclusion of status monitoring of residents in default through the company’s OneSite platform. Implementing this service for clients and debtors has helped to ensure that default accounts do not get lost in the shuffle of the busy student housing turnkey season.
“We see big efficiencies in time savings at the site level as well as improved performance for everyone involved,” says Legg.
Customizing collection programs and reporting packages is another way BYL connects with its clients to provide the best possible service. The company has been working to segment clients’ portfolios and develop several distinct segments that perform very differently from one another, explains Howard.
“This has allowed us to work with our clients on unique collection strategies for each segment and generate the best results possible,” says Howard. “This includes peer analysis reports to show our clients how similar portfolios perform and where they may have issues to address at origination.”
This renewed focus on customer service, including internal sales training programs, is critical to ensuring successful collection recovery and maintaining healthy relationships between property managers and collections agencies, as debt collection is an extremely important facet of successful property management.
“I wish collections was a sexier topic that received more attention and focus,” says DeSmet-Fischer. “Bad debt can quickly turn a great community into a mediocre community.”
— Amy Bigley Works