CTI Steady as Pioneer Reclaims Top Ranking on ED Debt Collection Contract

Collection Technology Inc. (CTI) continued its reign in November as the top performing small business contractor on the U.S. Department of Education’s private student loan debt collection contract. Pioneer Credit Recovery, meanwhile, edged out Continental Service Group, d.b.a. ConServe to reclaim the top ranking among unrestricted contractors in a competition that saw the first and fifth place performer scoring within five points of each other.

November marked the eighth consecutive month that Monterey Calif.-based CTI finished first among its competition. CTI’s cumulative score for October and November was 97.07, well ahead of Coast Professional, which moved up two spots to finish second among small businesses with 88 points. Delta Management Services again finished third with 86 points.

Pioneer’s cumulative score for October and November was 95.84 points, just ahead of ConServe, which scored 95.67 points. FMS Investment Corp came in third with 94.14 points.

ED performance scores are based on a weighted average of total dollars collected; total accounts serviced and total administrative resolutions. The top performer in each contractor group receives the maximum score for that category, and the other agencies are scored against the top performer. The department awards 70 points for dollars collected to the top performance, 20 points for total accounts serviced, and 10 points in the administrative resolution category.

CTI President Chris Van Dellen told insideARM.com that CTI’s success in holding onto its top ranking continues to be its ability to rehabilitate loans (loans with 10 more eligible consecutive payments), which in turn has helped CTI consistently out collect its small business competitors on a percentage bases, despite having a larger inventory balance. CTI has collected nearly $14.4 million since the contract was awarded in October 2009.

Pioneer, a subsidiary of student loan giant Sallie Mae, leads all contractors with nearly $44.4 million collected.

Van Dellen said more consumers are aware that federal student loan obligations can’t be easily dismissed in court or by state statutes, but collections still are difficult given the near 10 percent unemployment ratel and growth in consumer bankruptcies. The American Bankruptcy Institute (ABI) recently reported that U.S. consumer bankruptcies increased again last year (“Consumer Bankruptcy Filings Increase 9 Percent in 2010,” January 4).

“People are having a tough time keeping jobs and making payments on anything beyond food and shelter,” he said.

As a result, contractors are allowed to let consumers make very low payments, even if the payments aren’t high enough to qualify for rehabilitated loan status. But with the ED contract entering a more mature phase, inventory balances will play a larger role in contractors’ performance because some contractors could have twice the inventory balance of others in their peer groups and that will affect their overall recovery rate.

“You’re not comparing apples to apples anymore,” Van Dellen said.

During the first 13 months of the contract, all 22 collection agencies (17 unrestricted and five small business firms) have collected more than $612 million for the Department of Education.

Performance Report for October-November 2010