Collections:Collections:“It’s Not Rocket Science”“It’s Not Rocket Science”

Texas Municipal Courts Education Center

Collections Webinar Jim Lehman

Office of Court Administration

2

Texas Office of Court Texas Office of Court AdministrationAdministration

State Agency Created in 1977 Chief Justice - Texas Supreme Court Provides Administrative & Technical

Support Serves approximately 2,600 courts in

the state (512) 463-1625

Five Part PresentationFive Part PresentationThe Concept of ChangeCollections PerspectivesThe Importance of Court CollectionsGeneral Attitudes About Court CollectionsProactive Strategies

Solving the PuzzlesSolving the Puzzles

Think!Think differently.Think like designer of the puzzleThink Outside of the Box

““In Order to Grow We Must Make In Order to Grow We Must Make A Conscious Decision to A Conscious Decision to

CHANGECHANGE!”!”

““Change is often not easily Change is often not easily embraced but is almost always embraced but is almost always

inevitable.”inevitable.” ATTITUDEATTITUDE KNOWLEDGEKNOWLEDGE TIMETIME HAM FACTORHAM FACTOR

The Ham FactorThe Ham Factor

COLLECTIONS PERSPECTIVES

“Public & Private Sector Views”

CASH

ACCTS REC

SALES

INVENTORY

OPERATING CYCLE

Private Sector

Private Sector CharacteristicsPrivate Sector Characteristics

Purpose Well DefinedClear Line of Responsibility/AccountabilitySignificant Investment in Quality StaffingSignificant Investment in Strategy/PlanningCreativity is Encouraged

““Every Day A Debt Remains Every Day A Debt Remains Uncollected the Likelihood It Will Uncollected the Likelihood It Will Remain Uncollected Increases.”Remain Uncollected Increases.”

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10

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30

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60

70

80

90

100

0 29 Days 30 Days 60 Days 90 Days 6 Months 9 Months 12 Months 24 Months

DEPRECIATION – DEPRECIATION – “The Incredible “The Incredible

Shrinking Dollars.”Shrinking Dollars.”

0102030405060708090

100

Current 120 Days 270 Day

Private SectorPrivate SectorCollections TargetsCollections Targets

ACA 90%

D&B 85%

MED 70-80%

Private Sector Account Private Sector Account ManagementManagement

Current - 30 Days 31- 60 Days 61-120 Days 120 Days +

85% Collected 10% Collected 3% Collected 2 % Collected

Charge Off/Write Off

In-House

In-House

In-House

Outside

LAW

ENFORCEMENT

PENALTY

CRIME

JUSTICE CYCLE

Justice System

Public Sector CharacteristicsPublic Sector Characteristics

Purpose Often Generic, General, & BroadLines of Responsibility/Accountability

Often Vague and/or OverlappingStaffing Often Limited By Resources &

PoliticsStrategy/Planning Often Short Range &

Stop GapMaintaining the Status Quo Is The Norm

USUALLY NO CONSIDERATION USUALLY NO CONSIDERATION OF:OF:

RISK DEPRECIATION

Public SectorPublic SectorCollections TargetsCollections Targets

50% - 60%???

Survey Question #1

Court Case ManagementCourt Case Management

Current - 60 Days 61-180 Days

181 Days +

25% Collected 65% Collected Warrant Issued 10% Collected

In-House

In/Out?

Outside

GREATEST SIMILARITY:

“Both provide goods and services.”

GREATEST DIFFERENCE:

“One is driven by profit, one is driven by politics”

How Important Is Court How Important Is Court Collections!!!Collections!!!

On A Scale from One to On A Scale from One to Ten…Ten…

Survey Question #2

General Attitudes About Court General Attitudes About Court CollectionsCollections

Court Philosophy

“These people can’t pay and its not my job.”

Community Perception

“They don’t expect us to pay and nobody cares.”

Government

“We don’t have the time or money to invest.”

COMMON COMMON SIDE-EFFECTSSIDE-EFFECTS

Presumption- “Can’t Pay” Randomly Set Terms Weak Follow Up Warrant As Solution Credit/Recycle

Low Priority – Expectations Perception - Inconsistent High Default Rate Expensive Often Ineffective Expensive & Ineffective

Survey Question #3

COMMON COMMON SIDE-EFFECTSSIDE-EFFECTS

Presumption- “Can’t Pay” Randomly Set Terms Weak Follow Up Warrant As Solution Credit/Recycle

Low Priority – Expectations Perception - Inconsistent High Default Rate Expensive Often Ineffective Expensive & Ineffective

1 2 3

Whatcha See

Case Study No.#1

State of Texas vs Joe Truitt

Joe Truitt and his wife Jodie shared a textbook history of domestic violence: black eyes, broken bones, and broken promises. Joe already had served three years probation for pulling a gun on his older sister. He had spent time in jail for two misdemeanor assaults against his wife, and another two cases were pending. Once, in a fit of rage, Jodie says, he pushed her from a speeding car.

Joe has pled guilty to a third assault charge. He broke Jodie’s jaw. The maximum fine is $10,000.00.

1. As the Judge, would you impose the maximum fine?

2. If the maximum fine is imposed, can Joe pay it?

3. If less than the maximum is imposed, why?

QUESTIONS:QUESTIONS:

•Out of California

•3rd Grade Ed

•Age: 65-70

•Unemployed

•Lives w/relatives

•Owes $5K

Case Study No. 2

COMMON COMMON SIDE-EFFECTSSIDE-EFFECTS

Presumption- “Can’t Pay” Randomly Set Terms Weak Follow Up Warrant As Solution Credit/Recycle

Low Priority – Expectations Perception - Inconsistent High Default Rate Expensive Often Ineffective Expensive & Ineffective

Criminals & CrimeCriminals & Crime

CRIMINAL 1 : one who has committed a crime

CRIME 1 : an act or the commission of an act that is forbidden or the omission of a duty that is commanded by a public law and that makes the offender liable to punishment by that law;

CriminalsCriminals

CriminalsCriminals

There were 10.6 million new criminal cases filed in the state of Texas in 2003.

Of these new cases, only 11.9% were at the county and district court level.

As of 2002 (the latest figures available), there were 438,202 (2% of the state’s population) offenders on supervised probation in Texas.

CriminalsCriminals There are approximately 150,000 (or less than 1

tenth of 1% of the state’s population) adult prison inmates in the state of Texas.

59% of all prison inmates have a high school diploma or equivalent.

Two-thirds of all prison inmates were employed the month before they were arrested for their current offense.

CriminalsCriminals

COMMON COMMON SIDE-EFFECTSSIDE-EFFECTS

Presumption- “Can’t Pay” Randomly Set Terms Weak Follow Up Warrant As Solution Credit/Recycle

Low Priority – Expectations Perception - Inconsistent High Default Rate Expensive Often Ineffective Expensive & Ineffective

Show Me The Money!Show Me The Money!

American Collectors Association

Housing………………….28%Housing………………….28%

Transportation…………...24%Transportation…………...24%

Food……………………..19%Food……………………..19%

Clothing…………………..5%Clothing…………………..5%

Medical…………………...5%Medical…………………...5%

Insurance………………….5%Insurance………………….5%

Other/discretionary………14%Other/discretionary………14%

Discretionary DollarsDiscretionary Dollars

It is estimated Texas Courts Assessed Approximately $1.1B in Fines and Fees in FY 03 or about $52 for every person in the State.

In FY 03 the State of Texas reported approximately $2.96B in gross lottery ticket sales or about $142 for every person in the State.

Discretionary DollarsDiscretionary Dollars It is estimated that in FY 2003, the average per

case assessment for Texas courts was approximately $104.

A recent study of state lotteries found that lottery players with incomes below $10,000 spend an estimated $597 per year playing the lottery.

The same study found that lottery players with incomes between $50,000 and $100,000 spend an estimated $225 per year playing the lottery.

NASPL

COMMON COMMON SIDE-EFFECTSSIDE-EFFECTS

Presumption- “Can’t Pay” Randomly Set Terms Weak Follow Up Warrant As Solution Credit/Recycle

Low Priority – Expectations Perception - Inconsistent High Default Rate Expensive Often Ineffective Expensive & Ineffective

RANDOM TERMSRANDOM TERMS

All Fines & Cost At Pleading/JudgmentAll Court Cost At Pleading/JudgmentPay Over Length of ProbationPay Out Before Expiration Of ProbationMinimum Payouts from $10-$50 per month

Six Common Reasons Six Common Reasons for Non-Paymentfor Non-Payment

NegligentNegligentConfusedConfusedTemporary financial difficultyTemporary financial difficultySeasonalSeasonalUnexpected disasterUnexpected disasterDeliberateDeliberate

70%70%

10%10%

COMMON COMMON SIDE-EFFECTSSIDE-EFFECTS

Presumption- “Can’t Pay” Randomly Set Terms Weak Follow Up Warrant As Solution Credit/Recycle

Low Priority – Expectations Perception - Inconsistent High Default Rate Expensive Often Ineffective Expensive & Ineffective

PLAYERS PLAYERS IN THE PROCESSIN THE PROCESS

CourtJudge(s)

EnforcementCourt Administrators Court ClerksProbationPre-trialMarshalsSheriffsWarrant OfficersBailiffs

OffendersLaw Violators

JUSTICE FOR SALEJUSTICE FOR SALECatch- 22Catch- 22

Texas Government Code 420.14 – “Says a judge may be cited for judicial misconduct if a reasonable effort is not made to collect cost…”

Opinion No. 105 of the Code of Judicial Conduct

“Says a judge should not personally be involved in collecting fees…”

Court’s CollectorsCourt’s Collectors

Court AdministratorsCourt ClerksProbation OfficersPre-trial StaffMarshalsSheriffsWarrant OfficersBailiffsWhoever

The Image of Collectors

True or False- “Collectors continually hassle people who cannot pay.”True or False- “All collectors are the same.”True or False- “Tough, threatening collectors are the most effective.”

Offender ProfilesOffender Profiles The Angry Offender The Jerk Offender The Happy Friendly Offender The Educated/Connected Offender The Crying Offender The Impatient Offender The Sick Offender The Slow Offender The Foreign Offender The Dangerous Offender

Offender CategoriesOffender Categories

35 to 50% - WILLS

30 to 40% - MIGHTS

8 to 10% - NOTS

THE WALLTHE WALL

Insurance Unsecured Debt Luxuries

Rent/Mortgage Auto Utilities Food

PETER PAUL

The Art of Collections

Collector

One who successfully encourages a debtor that it is in their best interest to pay what they owe.

(Not to be confused with a cashier)

Key Elements

1. Ability

2. Motivation

•Self-fulfillment (Don’t Bother Me Now)•Esteem (Do You Know Who I Am)•Social (Will My Neighbors Find Out)•Security (What About My Credit•Physical (Rent Is Due)

Inside the Offender’s Head

COMMON COMMON SIDE-EFFECTSSIDE-EFFECTS

Presumption- “Can’t Pay” Randomly Set Terms Weak Follow Up Warrant As Solution Credit/Recycle

Low Priority – Expectations Perception - Inconsistent High Default Rate Expensive Often Ineffective Expensive & Ineffective

Criminal Court Cost, Fees, & FinesCriminal Court Cost, Fees, & FinesFY 2003 FY 2003

$397 Million

$738 Million

Collected

Uncollected

Based on 65% Collections Rate

How Much Is That?How Much Is That?Enough to write a check to:Enough to write a check to:

Every County..……………$1.5MEvery City..……………….$445KEvery Court……………….$149KEvery Judge……………….$125K

But Is It Just About Money?But Is It Just About Money?

The Impact of Unpaid FinesThe Impact of Unpaid Fines

Loss of Public Revenues Decease In Services Increase in Taxes Weaker Government

How Important Is Court How Important Is Court Collections!!!Collections!!!

Survey Question #4

THE ISSUETHE ISSUE

“Lack of compliance in paying court fines and fees denies a

jurisdiction revenue and, more important, calls into question the authority and effectiveness of the

court and the justice system.”

The ProblemThe Problem

Denial of the IssueDenial of Responsibility/OwnershipBelief that There is No Solution

Embedded Barriers

“Historically there has never been an accounts receivable mechanism in place in the judicial process.”

Practical Diagnosis

Principals of UnderstandingPrincipals of Understanding A fine is punishment and not a “BILL”.

The payment is the defendant’s responsibility.

It is expected that the defendant must sacrifice to pay.

The defendant must give payment the highest priority.

The defendant must expect consequences if payment is not made.

The defendant needs to understand the consequences.

The payment is a Court Order, a sentence which may not be convenient.

A court is not where people prefer to spend money.But, many people come to court with money.

TWO BASIC CONCEPTSTWO BASIC CONCEPTS

Pro-Active Re-Active

Responsive - action occurs after default Recovery - damage control Timely follow-up & enforcement Reduced effectiveness Passive Perception Pros & Cons

ReactiveReactive

Reactive Process Reactive Process Is Response Is Response OrientedOriented

Preventive - definitive action taken to deter default Qualification - standards established for

acceptance (Personal & Financial Info.) Clarification - clear and precise dissemination of

responsibility & consequence Swift follow-up & enforcement (Re-Active) Aggressive Perception Pros & Cons

ProactiveProactive

Preventive - definitive action taken to deter default Qualification - standards established for

acceptance (Personal & Financial Info.) Clarification - clear and precise dissemination of

responsibility & consequence Swift follow-up & enforcement (Re-Active) Aggressive Perception Pros & Cons

ProactiveProactive

How People PayHow People PayA Pay On Time. They Act At Once!

B A little late. They act after a little time passes.

C Whenever we choose.

We never hear from these folks.

“By Contact Not Contract”

Preventive - definitive action taken to deter default Qualification - standards established for

acceptance (Personal & Financial Info.) Clarification - clear and precise dissemination of

responsibility & consequence Swift follow-up & enforcement (Re-Active) Aggressive Perception Pros & Cons

ProactiveProactive

Proactive Proactive Process Is Process Is Results Results OrientedOriented

Collections MatrixCollections Matrix

Agreement or ContractBreach or DefaultConfrontationResolution

The AgreementThe Agreement

Citation Oral Instructions Court Order Payment Agreement

Do We Understand It? Does the Offender

Understand It? Does the Offender

Have the Ability to Comply?

Is It Enforceable?

Enforcing the AgreementEnforcing the Agreement

InformationKnowledge of the Process - CONTROLThe Right to EnforceA Way to Enforce - CONTACTThe Will to Enforce

The BreachThe Breach

What is a breach or a default?When does breach or default occur?When Do We React?How Do We React?

The ConfrontationThe Confrontation

LettersPhoneFace to FaceWarrantArrest

DELINQUENCIESDELINQUENCIES

Prompt Follow Up Make CONTACT Establish CONTROL Get a COMMITTMENT Avenue of Retreat

Letters & NoticesLetters & Notices

Identify (Case Number, Court, Etc.)Convey Official AuthorityBe as Brief as PossibleDesigned to Motivate As Well As Inform

(Responsibility & Consequences)Tell How Much, When, & WhereLeave The Offender & Out

Phone & Face to Face Phone & Face to Face ContactContact

IdentifyImmediately Assume Role & ControlEstablish A Serious ToneBe Organized & ProfessionalListen, but don’t empathize

Symbols of AuthoritySymbols of Authority

Warrant & ArrestWarrant & Arrest

Trump CardThreat Often More UsefulLast Possible OptionExpensiveOften Ineffective

The ResolutionThe Resolution

Determine The Real ProblemListen, but don’t empathizeEvaluate & AnalyzeConsider Options & AlternativesAvoid Temporary Stop GapsLook For The Permanent Solution

ObjectionsObjections Conditions

Objections- are nothing more than excuses in the defendant’s mind that must be overcome.

Conditions- are real reasons for nonpayment that actually exist.

Collections Scenario 1Collections Scenario 1FTAFTA

Original Amt: $230 Balance: $225 Amt Due: $225 Status: Defendant is

35 days beyond appearance date.

Defendant sends in a money order for $5 along with a note that says this is all she can afford.

Objection Condition

Collections Scenario 2Collections Scenario 2Pay PlanPay Plan

Original Amt: $500 Balance: $500 Amt Due: $125 Status: 10 days late

You reach defendant at work. He tells you he couldn’t pay this month, will catch up next month. Also tells you not to bother him at work “no more.”

Objection Condition

Collections Scenario 3Collections Scenario 3Pay PlanPay Plan

Original Amt: $1000 Balance: $500 Amt Due: $250 Status: It’s Monday,

payment is due on Friday.

Defendant comes into office and says he’s just started new job…can pay half on Friday.

Objection Condition

Collections Scenario 4Collections Scenario 4Pay PlanPay Plan

Original Amt: $500 Balance: $500 Amt Due: $250 Status: Defendant is a

little more than 60 day past due.

You reach defendant at his girlfriend’s house in Little Rock, Arkansas. Says he’s not working and can’t pay anything.

Objection Condition

In Order to Collect You In Order to Collect You Must Connect!Must Connect!

The Art of Skip Tracing

InformationInformationNeeded for searches Needed for searches

Social Security NumberNext of Kin Place of EmploymentList of Friends / Other Family

Local ContactsLocal Contacts

Water / Elec. Company Telephone Company

– Pager / Cell Phone / Internet

Your County Offices– Birth Cert.– Marriage license

Other Law Enforcement Agencies TCIC/NCIC Local Cable Companies Local Video Stores

Internet ProgramsInternet Programs Public Data

http://www.publicdata.com

DCS Information Systems

https://search.dcsinfosys.com

Social Security Death Index Interactive Search

http://ssdi.rootsweb.com/cgi-bin/ssdi.cgi Internet Phone Books

http://www.555-1212.comhttp://www.switchboard.comothers: Yahoo, MSN

Internet ProgramsInternet Programs

Classmates.com

Reverse Phone Books

Find People Search

www.freeality.com/findet.htm

Credit Reports http://www.hartsoftware.com SSN Trace Credit Reports (money)

Internet ProgramsInternet Programs

Texas WorkforceTexas Workforce

Texas Workforce Commission101 E 15th Street

Austin, Texas 78778-001

Contact: Mr. David Summers

(512) 463-2423

david.summers@twc.state.tx.us

FUGINETFUGINET

TDCJTDCJBarbara WeatherfordBarbara Weatherford

Phone: Phone: (936) 437-5164(936) 437-5164Email:Email:barbara.weatherfordbarbara.weatherford@tdcj.state.tx.us@tdcj.state.tx.us

Computer equipment required PC PentiumWindows 95, 98, NT, ME, 2000 or XP32 MB RAM or higher33.6 Modem or higherInternet AccessBrowser: must be Internet Explorer 4.0 or higher or Netscape 4.0 or higher

History InformationHistory Information on on FUGINETFUGINET

OffensesResidenceVehicleEmploymentPre-Parole PlanAliasNext of KinBankingSocial Security NumberSID NumberCollateral VisitInmate Visitor Etc.

TDCJ Intranet

Keys to SuccessKeys to Success Attitude Commitment Patience Resolve Tenacity

Start Something!Start Something!

If you can’t take a big step, take a small step.

If you can’t take a small step, take a tiny step.

Take Action, and you will no longer merely think you can do it. After even the smallest step, you’ll know for sure.

--Ralph Marston

Jim Lehman, Russ Duncan, Don McKinley

Office of Court Administration

205 West 14th Street, Suite 600

Austin, Texas 78701

Telephone: (512) 463-1625

Fax: (512) 463-1648