ED Collection Contract Closes 2010 with Domination in Both Business Categories

Collection Technology Inc. (CTI) claimed the top ranking among small contractors on the U.S. Department of Education’s debt collection performance results for the third consecutive quarter. CTI scored 96.34 points, well ahead of second place finisher Coast Professional Inc, with 83.41 points. Delta Management Associates rounded out the top three finishers with 81.43 points.

Meanwhile, Pioneer Credit Recovery reclaimed the first-place ranking among unrestricted contractors, scoring 95.32 points, as NCO Group and Van Ru Credit Corp. slid out of the top three. FMS Investment Corp. took second place with 90.15 points during the quarter and Continental Service Group, d.b.a. ConServe finished third with 89.19 points.

Quarterly performance rankings are the only ones that really matter on the collection contract, as account placement volumes are determined by score: the top ranked firms will receive a greater percentage of new accounts when the accounts are distributed later this quarter.

Scott Daniels, CTI’s vice president, told insideARM.com that the company is enjoying the rewards associated with receiving a greater percentage of ED accounts. But the growing inventory puts the Monterey, Calif.-based firm at risk of losing its top ranking at some point, he said.

“The competition is designed to not let someone get too far out ahead,” Daniels said. “The farther ahead you are, the more you carry and it’s difficult to keep up with it…We will be in some neck and neck races and we may lose.  But we think we’ve got a strategy that will allow us to win.”

ED performance scores are based on a weighted average of total dollars collected; total accounts serviced and total administrative resolutions. The top performer in each contractor group receives the maximum score for that category, and the other agencies are scored against the top performer. The department awards 70 points for dollars collected to the top performance, 20 points for total accounts serviced, and 10 points in the administrative resolution category.

As the 2009 contract ages and more facets, such as inventory balance come into play, the performance rankings have become more volatile, particularly among the unrestricted contractors.  None of the top three performers this quarter won two or more categories for the October through December period.

Pioneer, a subsidiary of student loan giant Sallie, won first place because it collected at least $3 million than in December than any contractor in December. It has collected more than $55 million on the contract to date. However, Pioneer finished 8th in the administrative resolutions category and 5th in the accounts serviced category. FMS, meanwhile, finished first in the accounts serviced category and 2nd in the administrative resolutions category.

Because CTI bested its peers in at least two categories, its overall score was higher and therefore its percentage take of the new inventory also will be larger. Daniels said CTI’s employee count hasn’t increased much because of the increased business. CTI is, however, putting more time into matching specialists with the type of accounts it receives, which varies with each distribution, he said.

During the first 14 months of the contract, all 22 collection agencies (17 unrestricted and five small business firms) have collected more than $738 million for the Department of Education.

Performance Report for Fourth Quarter 2010