Promise to Pay - Parameter Settings

One of the most critical elements of any collections strategy is Promise to Pays. However, many companies often overlook the mechanisms around this process, which can then impact collector productivity, collections results and customer service.

There are four main considerations around PTP’s: system design, parameter settings, follow-up policies and the use of appropriate communication technology. This Tip of the Month covers best practice parameter settings, which can drive significant improvements in collections efficiency and results.

• An effective collections system requires the functionality to be able to not only set an individual ‘Promise to Pay’ on an account, but also a series of recurring PTP’s.
• The PTP indicator should be associated with specific dates, so that the collections department has the opportunity to set a flexible follow-up contact with the customer.
• Follow-up contacts are best set for the day before the PTP date, the day of the PTP date and up to three days after the PTP date.
• It is best practice to contact the customer no more than three days after the PTP date set.
• The collections system needs the ability to automatically convert a PTP into a Broken Promise, after a specified number of days past the promise date have elapsed.
• It is best practice to set the BP indicator 3-5 days after the PTP date and the promised amount has not been received.
• The collections system requires the functionality to automatically convert a PTP into a Broken Promise, if a payment has been received within the PTP date, but it is not as high as the amount originally promised.
• It is best practice to set a PTP payment tolerance amount. Does it make sense to treat a customer as a Broken Promise if they promised USD 155, but only paid USD 150? Typically the PTP tolerance parameter is set to 90-95% of the promised amount, unless the amount paid is less than the minimum payment required.
• The collections system needs the ability to set-up a recurring PTP, so that customers can promise specific amounts on specific dates over a future period. This means that if the customer sticks to their arrangement, then there’s no need to follow-up with them. This has obvious savings in collections calls and letters and also leads to better customer service.
• It is best practice to assign recurring PTP’s to supervisor review queues, in order for the recurring promise details to be verified against company policy, to ensure that the payment amounts meet minimum criteria and the payment dates are realistic.

The next PIC Solutions Tip of the Month covers best practice PTP follow-up policies.

Stephen J. Leonard is Managing Director of PIC Solutions, the largest customer management solutions company based in the Southern Hemisphere. He has over 15 years of risk management experience in the banking and consulting industries at Chase Manhattan Bank and Fair Isaac International. He holds an AS (State University of New York), BA (University of Toronto), MBA (Adelphi University – School of Banking, New York) and is a member of the UK and South African Institutes of Credit Management.