Submitter
Trevor Giampietro, Vice President of Velocity and Inventory Management
Company
SquareTwo Financial
Industry
Financial Services
Business Challenge
SquareTwo Financial is a leader in the highly regulated, $100 billion asset management and recovery industry. Until recently, SquareTwo Financial relied on its network of partner law firms to help work with consumers to find payment solutions to their outstanding debt obligations. However, recent regulatory changes mandate that companies in the asset management and recovery industry can no longer allocate accounts to law firms for collection efforts if there are not also plans to pursue litigation on those accounts.
Analytics Solution
Anticipating upcoming regulatory changes, Trevor Giampietro and the analytics team began reviewing various types of data about SquareTwo Financial’s accounts in the fourth quarter of 2015. Using the traditional test-and-control methodology, Giampietro gathered a pool of accounts with similar characteristics, split them in half, and tested the results of pursuing litigation as part of the collection process versus not pursuing litigation. Although the goal is to always resolve an account amicably and without litigation, Giampietro hoped this information would provide some insight into when the company might be more successful by pursuing litigation at the end of the negotiations and whether this might help the company recoup some of the lost monthly cash flow due to regulatory changes.
Impact
The changes SquareTwo Financial made have resulted in a four-times increase in liquidations in comparison to how similar accounts have historically performed. As a result of this analysis, 90% of the accounts that the company used to liquidate through the law firm channel will now be processed in the new channel, which will enable the company to triple the revenue that it previously received from that 20% of its business. SquareTwo Financial’s goal is always to resolve an account without having to pursue litigation, but the company now operates with a much better understanding about how to proceed if litigation is, indeed, required.