A Texas servicer of subprime mortgage loans says it is getting a double benefit from a service designed to help collect payments.
The phone- and Internet-based Speedpay Inc. service collects substantial fee income along with those payments, says Meritech Mortgage Services Inc.
Debtors use the service, at $6.95 per transaction, mostly to avoid being delinquent.
"This year I should make about half a million dollars in income from using it," said Craig Bashinski, vice president of call center operations at Fort Worth-based Meritech, a Dominion Capital subsidiary that services more than $4 billion of subprime loans.
Meritech's phone service representatives ask borrowers nearing delinquency whether they want to authorize check payments over the phone. If borrowers agree, the representatives enter their checking account information into software provided by Speedpay. The software creates versions of paper checks that can be printed and deposited immediately.
Speedpay, a unit of New York-based E-Commerce Group, also hosts a Web site and an automated phone center for Meritech. Borrowers can visit the site or call the center to authorize payments.
Though Western Union and other companies provide similar phone authorization services, Speedpay's combination of services is unique, Mr. Bashinski said.
Meritech began using Speedpay's service two years ago to get emergency payments from tardy borrowers and those nearing delinquency. The servicer pays Speedpay only when a transaction is made.
Speedpay said its fees are based on payment volume and average less than $1 per transaction. There is no charge to creditor companies for setting up the service.
Marc Mehl, vice president at Speedpay, said it adopted its free installation and transaction-based pricing to appeal to cost-conscious decision-makers at financial institutions.
"We found it palatable for customers not to have to justify that up-front capital expenditure," he said.
Mr. Bashinski said Speedpay has saved him money by setting up and hosting the service for free. "Other companies didn't have a voice-recognition unit that they let me use for free," he said. "That saves me a fortune."
Meritech customers took to Speedpay fast, Mr. Bashinski said. Last month Meritech took in more than 7,000 payments this way, compared with 1,485 in December 1997, when it began using the service.
In recent months 14% of borrowers, whose loans Meritech services, have been paying through Speedpay. And a surprising quarter of them are using it for payments that are not even nearly late, or even to schedule payments in advance, despite the $6.95 transaction fee.
Mr. Bashinski said he was initially surprised to find borrowers going that route instead of scheduling regular periodic payments through automated clearing house debits -- a service that Meritech offers for free.
"My guess is that most of our customers may not want to pay on the same day every month," he said.