ED Debt Collection Contract Yields Ties in Second Quarter

Collection Technology, Inc. edged out Coast Professional Inc. to retain the U.S. Department of Education’s top performance ranking among small business debt collection contractors in the April through June (second quarter) collection period. But the debt collection agencies will get an equal number of placements when the accounts are divvied up next quarter. There was also a tie for third in the unrestricted, or large company, category.

A spokesman for the Department of Education (ED) said Collection Technology, Inc. (CTI) is the official winner for the collection period, but ED contract rules stipulate that agencies that score within 50 basis points of each other are deemed to have tied. CTI’s overall performance score for the quarter was 93.59 while Coast Professional scored 93.37. As a result, when account placements are divvied up for the next quarter, CTI and Coast Professional will receive an equal number of accounts.

“It’s pretty exciting,” said CTI president Chris Van Dellen. ”Our staff worked extremely hard to obtain this goal and come in first place. Hopefully, it will add motivation to try to stay there.”

Performance scores are based on a weighted average of performance metrics, including total dollars collected, total accounts serviced and administrative resolutions. The top performer in each category receives the maximum points awarded for that category. The other agencies are scored against the top performer. Out of 100 total available points, there are 70 points available for dollars collected, 20 for total accounts serviced, and 10 points for administrative resolution.

Among unrestricted contractors, Pioneer Credit Recovery led the group and all contractors with a near perfect performance rating. A division of student loan giant Sallie Mae, Pioneer finished the period with a 98.95 overall performance score, followed by NCO Group with a score of 85.37. Van Ru Credit Corp. and Financial Asset Management tied for third with 82.74 points, meaning that the two companies will also receive the same account distribution for the next quarter.

Performance rankings among the unrestricted contractors have been the most volatile since ED’s newest collection contract began in October 2009. Pioneer has retained its first place ranking since then, but the second and third-ranked slots have hosted several agencies during the quarter, with some climbing as many as five spots to reach the top three. And the latest quarterly scores for five companies were within 1.2 points of each other.

Contractors tell insideARM.com that ED’s rewards-based system for distributing accounts is the reason. ED switched to the rewards-based method of distributing accounts when the new contract began in October. During the eight months  since then, all 22 contractors have collected nearly $109.9 million for the Department of Education.

ED has added another component to the competition with contract-to-date rankings, which will be released for the first time this quarter. The ranking reflect a contractor’s performance since the beginning of the contract. Eighty-five points or higher is considered outstanding; 75-85 points is excellent, 65-75 points is good, 55-65 points is average, 45-55 is below average performance and anything below 45 points is an indicator of poor performance.

The contract-to-date results (CTD) lets contractors know if they are meeting ED’s minimum performance standards and the likelihood of getting an extension or renewal. After 30 months, CTD performance is assessed to determine if an agency is eligible for a one year extension and again in another 12 months to determine eligibility for another one-year extension.

Everett Stagg, president of Coast Professional said the score includes such things as number of customer complaints.

“You’ll know if you are in a good position for renewal or not, based that figure,” said Everett Stagg, president of Coast Professional. “Our goal is 90 points or better. I wouldn’t want to be below 55.”

Performance scores for the reporting period, total money collected, and the number of accounts expected to be transferred to each collection agency can be found below.