IMGCAP(1)]
Collecting from estates, in some ways, is akin to collecting in bankruptcy court. You file a claim. You wait. But that's where the similarities end. Bankruptcy cases are handled in 94 federal judicial districts. Probate cases are all handled locally in 3,000 counties across America.
That's arguably a major barrier to embarking on estate collections work. It takes some time to assemble the expertise needed to meet the legal requirements for each of those courts.
Then there's the compassion and listening skills needed to discuss a debt with survivors, and the knowledge that the client seeking payment is equally adamant about defending their brand image. It can be a tough assignment, but the experts are quietly dedicated to it.
At Estate Information Services Inc. (EIS), Columbus, Ohio, probate work is the entire business. "We devote all of our resources to this field," President and CEO J.C. Gunnell says.
Nearly all its claim filings are done through automation. "Once an account is imported [from the client], it is driven by city, state and ZIP code," and EIS's system automatically prints out the claim form from the correct court, says Gunnell. "If we find 500 applicable claims, we file them all in one day."
EIS's proprietary software program, the Probate Data Entry System – Gunnell calls it "ProbE" – contains all data on each probate court jurisdiction, including court phone numbers. The software is evolving, she says. "We are working on a second version that will incorporate more flexibility and do some further scoring of accounts."
Gunnell started EIS in 1998 and spent more than a year researching each probate court system. The company landed its first client in 2000 with four employees. Today, the company employs about 100 people.
Gunnell believes deceased collections attracts so few competitors because it is a highly administrative task. "If it's not your core business and you don't have the technology to handle the volume, it's very burdensome," she says.
ProbE includes EIS's own scoring model. "We took all the legal, statutory requirements and all the historical collection data to create a scoring model so the best accounts are being worked at all times," she says.
"If, for example, California does not allow an executor to pay for five months until the claim filing period is over, our collectors don't work those accounts for five months," she says. "Instead, they work fresh accounts where executors are allowed to pay sooner."
If a claim is rejected, EIS has three in-house attorneys who support the collector in legal aspects of the case, she says. Rejections may happen because the claim was filed too late, in which case "you're out of luck," Gunnell says, adding, "We work with our clients to make sure claims are filed on time."
Although founded a mere seven months ago, DCM Services LLC in Minneapolis assumed the collections work for Balogh Becker, a former legal collection firm whose partners, Jim Balogh and Gary Becker, are now DCM's chairman and CEO, respectively.
"All we do is deceased collections," says Ron J. Michalak, vice president of marketing. The firm works with five of the 10 largest credit grantors in the U.S., three of the largest auto finance companies, utility companies and a considerable number of debt buyers, he says.
Why does a creditor need outside help to collect from deceased customers? "[Creditors have a] limited knowledge of the probate process," says Michalak. "Unlike bankruptcy, there is no uniform system. [It's] kind of chaotic. Each county can determine how it administers estates in probate."
The advantage of working through this system, Michalak says, is "you can generate significantly higher recoveries than if you go through a voluntary account process, where I send you a letter and call you to ask to repay the debt."
Gunnell, Michalak and their peers all say that in most cases, survivors contacted after a death are not directly responsible for the debt and therefore are not required to make good. "Going through probate converts a moral obligation to a legal obligation and secures the rights of the creditor," says Michalak. However, if a collector finds the decedent's family will not be opening an estate in probate court, he is bound to work directly with the family. Here is where sensitivity training – common at agencies in this line of work – comes in handy.
Emotional Calls
The first call to survivors is "a difficult conversation," Gunnell says. "We train our employees on handling grief. "Our collectors need to understand how to deal with irrational emotions. We train them with bad calls, hysterical calls, and how to control the conversation. You have sympathy for what they're going through but you must also resolve the outstanding debt," she says. DCM collectors do whatever they can to avoid bothering the survivors. In most cases, says Michalak, "The deceased accountholder is delinquent only because they died."
First, DCM finds the estate; then sends a condolence letter. "When we approach family, the result can be very unpredictable. When our account representatives contact the personal representative [of the estate], they must be delicate. Dignity and respect are required," Michalak says. "We help our account reps deal with these situations by participating in ongoing compassion and sensitivity training," he says. "We give them a set of tools to help them deal effectively with survivors, and the stress and anxiety that they themselves will feel," he adds.
Apart from the typical training, including Fair Debt Collection Practices Act (FDCPA) compliance, collectors working deceased debt at Array Services Group Inc., St. Cloud, Minn., take an empathy class. "We strive for compassion and let our collectors know that listening skills are going to be as important as talk-off skills," says Mark Kottke, vice president of business development for Array, which also handles live debtor accounts for its clients.
Array began its estate collections practice two years ago and today has more than 20 collectors assigned to the task. Educating the Client EIS spends a good deal of time educating its clients. "A lot of times they don't know they have a lot of deceased accounts. We help them along with the notification process" and other account management tasks, says Gunnell. According to DCM's Michalak, clients are often torn between short-term liquidity requirements and maximizing recoveries. "We help the creditor understand the benefits of the estate process and help them manage expectations internally," he says. "The estate – where the money is – will generate much higher recoveries" than voluntary (non-estate) deceased accounts, Michalak says. "So credit grantors have to make the decision: Do they need liquidity or do they want to maximize total recoveries?"
Creditors are influenced by live debtor collection strategies in which the goal is to recover as much as you can immediately. "Creditors have been led to think that short-term return is more valuable," Michalak says. "The easiest way to get short-term return is to settle estate accounts. Our challenge is to get creditors to understand that they should never settle on estate recoveries because they are sacrificing 50 cents on the dollar," he says. "You'll improve your returns with a little patience.
Agencies also teach their clients how to identify deceased accounts and scrub files in a timely fashion so they can meet claim-filing deadlines. Creditors should scrub their portfolios for deceased accounts, verify them and close or transfer them to an appropriate party, Michalak says. This helps prevent fraud. After date-of-death charges, which occur when a family member uses the decedent's credit card to pay funeral expenses, for example, are covered by estate payouts. Closing an account reduces the possibility that someone will use the decedent's card illegally.
"The sooner you start, the better," Michalak adds, "because contact information is perishable." A creditor wants to protect its reputation so sensitivity-trained collectors are an asset in maintaining brand image. AT EIS, because of the special training collectors receive, claims of violations of the FDCPA are rare, says Gunnell. When credit grantors try to work deceased debt, they face increased brand risk, Michalak says. "We are making contact with folks who are in a state of bereavement and are assuming responsibilities they may be unfamiliar with," such as a widow whose husband always took care of the family finances.
Traditional collection methods reduce cooperation and good will, he adds. If an agent has dealt only with live debtors and redeploys the same collection strategies in deceased collections, that may "put brand at risk and detract from cooperation," says Michalak.
A company that spends hundreds of millions promoting its brand should be seeking recoveries through the probate process, Michalak says.
"Clients are concerned about brand image and customer loyalty," says Kottke at Array Services Group. "They want to retain the customer relationship" with survivors. Array has an in-house compliance team that reviews calls daily and monthly. They can send recorded calls to clients and allow clients to listen to live calls to hear how collectors try to ask for the right answers and educate the executor.
As it is for all agencies, "compliance is a major factor," Kottke says. "Clients will not tolerate complaints. This is the main priority to the client and we take every step possible to adhere to their guidelines."
Follow-through is as important as filing a claim. It could take six months to more than three years to get paid, if you get paid, says Kottke. After filing, "you have to stay active with the estate's executor and with the court to follow the status of the case. It's a lot of manual work." For example, an account may have an incorrect address, and the collector is expected to do the fact finding.
Estate collectors "have a niche job," Kottke says, and the agency has capital invested in each of them because of the intense, manual work and because they are knowledgeable about laws in different jurisdictions, such as which states have community property or homestead exemption laws.
Each probate court has its own idiosyncrasies, he says. Large courts often have electronic claim filing systems; some smaller towns and counties might require the petitioner to file using a certain weight linen paper, a relic from a bygone era.
One important aspect of collecting from estates is the ability to educate survivors and gain their trust. If that is achieved, the survivors will feel better about these conversations.
The future of probate collections seems assured. "People die every day so the business will always be solvent," says Tyrone Campbell, collections manager at Wright, Scott & Associates LLC, Owings Mills, Md. "Creditors will always need someone to get their money back."
There are a number of unmistakable trends that point to continued growth in this sector, says Michalak at DCM Services. "As the population continues to age, according to the US Census Bureau, we should see the death rate slowly start to climb, from its current 0.826% to over 1.0% by 2035."
He cites the Social Welfare Institute, which forecasts an unprecedented transfer of wealth in the next 50 years. "They project a $41 trillion intergenerational transfer of wealth by 2052 – the largest in the history of the world," Michalak says. "For an organization that is focused on recoveries through the estate process," he says, "such trends bode well for the continued success of our business."
