BANKING CASE STUDY #1

Union Federal Bank, a $4 Billion bank with its home office located in downtown Indianapolis and with over 40 branches located state-wide improves collections and customer retention with American Agencies.

The Bank began an overdraft privilege program in early 2003. As was promised, customer satisfaction accelerated under the new program as well as the number of checking customers coming to the bank.

The downside experienced by the bank was also the expected increase in charge-off's. The bank had always handled collections through their internal departments, but this issue seemed a little different, so help was requested from their overdraft consultant.

The consultant saw that an unwanted option would be to hire additional full-time employees to man a phone bank to address this issue and bolster the efforts of ChexSystems. The consultant, however, recommended the bank meet with their partner, American Agencies to address this issue.

The recovery rate since starting the American Agencies program of early intervention with customers has given the bank a steady 62% recovery of potential charge-off's, most of which also include customer retention. This has doubled the results of the previous in-house efforts of the bank and at a substantial savings in internal costs as well as avoiding the hiring of any more full-time employees.

The bank was pleased with the overdraft privilege program and the effect on customer satisfaction. The diplomatic approach of America Agencies complements this program and has proven to be effective in collection of outstanding balances. This has been successfully performed in such a way as to not alienate customers, but to the contrary, customer retention is at an all-time high.

Union Federal Bank and American Agencies are a perfect example of how outsourced collections can be highly effective.

BANKING CASE STUDY #2

City and Suburban Federal Savings Bank is located in Yonkers, New York, and has 750 million dollars in assets. They offer overdraft checking program privileges to qualified depositors that covers them for bounced checks up to a certain amount. Once the depositor bounces a check the bank covers the bounce amount for a period of 30 days during which they send the depositor letters informing them about the bounce and gives them an opportunity to bring the account up to a positive balance, all the while charging fees for this service. The bank hopes the account is brought current and looks to enjoy the non-interest fee income their program allows for. If the depositor doesn't bring the account current by the 30th day, the bank suspends the privileges and traditionally follows up suspension with internal collection efforts that continue for another 30 days.

For City and Suburban, these collection efforts were netting very little recovery as those efforts were limited to bank letters and some random phone calls. If the account remained negative for 60 days past bounce, the bank "charges off" the account which is to say they cancelled it and lists the account holders name with ChexSystems (a national derogatory listing service that keeps records of closed account holders that would cause the account holder to have trouble opening a checking account at any other bank in the country). But by that point, the fee paying customer is gone and the bank has suffered a loss. American Agencies explained to City and Suburban that we could begin helping with the collection process at 30 days and would not only increase fee revenue by collecting the overdraft balances and the fees associated with those accounts but more importantly we would retain more fee paying customers in the process by keeping those customers from becoming charged off.

We created a diplomatic letter series or "prompt" series that brought the issue to another level for the depositor because we are a 3rd party and we did so at 30 days past bounce and continued if necessary, so that the account holder would receive 4 letters within the next 30 days. They were informed that the matter could be resolved by either mailing a payment or calling the bank. Not only did this greatly increase fee income and balance recovery and retain customers but because American Agencies charges a low fixed fee of less than $10 per account with no additional fees, so the bank actually reduced its collection costs from their formal practices of making internal employees set aside time for making phone calls.

After two years, we have collected 68% of the accounts turned over to us at 30 days and did so before they reached 60 days past due which means that nearly 7 out of 10 accounts submitted to American Agencies were never charged off and were kept in the overdraft privilege program. The total amount of accounts collected amounts to $1,211,582.75 in actual recovery dollars of the principal balances and the fee income and the cost to the bank to collect this amount was only 2.5% of the collected amount. Over 2,000 account holders were kept from being listed with ChexSystems and remained with the bank which means those accounts stayed in the banks fee income program for pennies on the dollar.

I have worked with American Agencies for the past 15 years. They have provided our organization with great collection services. One area in which American Agencies performs above average is in their customer service. I rate their skills as 'Excellent'.