Dominant Run Halted in April on ED Collection Contract

Coast Professional unseated Collection Technology, Inc. to take first place in April among small businesses on the U.S. Department of Education’s private student loan debt collection contract.

Collection Technology (CTI), of Monterey, Calif., had been dominating the small business set-aside, winning five consecutive quarterly performance competitions, earning it the greatest number of new accounts to begin the second quarter.

But Coast Professional, based in West Monroe, La., won two of the performance categories to earn 97.60 points in April.  CTI did not win any categories outright, but its 91.56 score earned it a second place finish among small contractors.  National Recoveries, Inc. of Blaine, Minn. finished third in the group with 88.71 points.

Among the large businesses on the contract, Diversified Collection took first place with 97.93 points, followed by Pioneer Credit Recovery with 93.74 points.  FMS Investment Corp. rounded out the top three finishers with 91.80 points.

The Education department’s private collections performance results are determined by a weighted average of contractors’ performance in total dollars collected; total accounts serviced, and total administrative resolutions. The department awards 70 points to the top performer in the dollars collected category. Twenty points is awarded to the top performer in the total accounts serviced category, and the top performer in administrative resolutions receives 10 points.  The other agencies are scored against the top performers in each category

Competition from the unrestricted contractors has been tight almost from the beginning of the current contract, with the top finisher among unrestricted contractors seldom winning two or more categories outright the last three quarters.

Last quarter, Pioneer Credit Recovery — a subsidiary of student loan giant Sallie Mae — came from behind to upset Van Ru Credit Corporation to win the performance competition, even through Van Ru led its peer group two out of three months in the period and had a higher recovery rate during the quarter.  Placement in the quarterly competition is all that matters, as the rankings determine bonuses and subsequent quarters’ account distribution.

April’s results suggest that as the contract ages, competition is growing fiercer among the small business group as well. Although CTI collected the most dollars and serviced the most accounts in April, its recovery rate was hampered by a larger inventory of accounts. Contractors admit that having a larger inventory of accounts is a nice problem to have, but it can weigh on an agency’s performance results.

One month will hardly determine which agency will come out on top when the quarter ends June 30, but it’s no longer a given that the contractors with the best two of three months will win the most new accounts when they are distributed for following quarter.

During the first 18 months through contract, the 22 collection agencies on the Education Department contract have collected more than $1.3 billion, not including other revenue streams such as revenue streams such as approved litigation accounts and pending rehabilitated loans.

Performance Scores and Rankings for April 2011