Shawn Smith: I'll kick it off. My name is Shawn Smith, I'm the owner of Dedicated Commercial Recovery. We're based out of Minneapolis, we're primarily a commercial
collection agency that does full nationwide legal, we're "cradle to grave" service provider. I'm going to talk about setting up policies and procedures for
professional level internal department. I think a lot of this room is really good at giving money away. But quite frankly, if you can't get the money back, I don't
think you're going to be here when the dust settles. I think a common issue is that we're, as funders, you are so focused on how can we sell more deals, the problem
you're gonna run into is when the house is on fire, if you don't have the fire extinguisher set up, it's not the right time to go to the store, then and try to
figure out which fire extinguisher you want, which one works best. Right? And that's a big common issue within this industry is it's so focused on writing deals that
are not focused on their back end process. A lot of the things that you're thinking internally, because you don't emanate from our area, actually make our job a
lot harder to get your money back. And it's very counterintuitive sometimes. So one of the first things I'd say is, when you're working with a collection
agency or an outside law firm, you want to be setting up policies that make our job easier to get more money for you. If there's conflict, there are a lot of times
it's your internal department that is really doing that. And you need to be collaborating with your third-party agencies, not just treating them like a
subordinate and do whatever is told because you're hurting yourself mainly because your background isn't in 20-30, Mark, how many years of experience do you
have?
Mark LeFevre: 36 years.
Shawn Smith: Right. So you know, that is a very common problem, you have someone with 36 years of experience being told how to do it, and you're costing yourself
money. So one of the first important rules of setting up shop is don't set up policies and procedures and working with your third-party agencies that are
actually costing you money, because you're telling them how to do the job they specialize in. And that's like us coming in and telling you how to fund when you've
been doing it for 20 years, right? Now, the idea is, you know, you have to set up an internal process, and I like to call it either be a waterfall process or
whatever that is, but it is a these type of accounts, you know, we're talking about first payment defaults. That account is going to be handled differently. There
may be a guy who's communicating with you, and, you know, all of his payments are bouncing, but he's still communicating that those are two very different plans
for how you handle that account. Do you have a process set up? Does your team executing on that process? Because typically, if I asked you as a funder, if you
have any idea? Nothing. Like crickets in that. So you know, let's say I talk about is within that waterfall process? Are you protecting yourself? For your brand
and what you want to see happen? Because every one of the funders has a different idea of how it should be done. What they want to do, when they want to do it.
When is that account go to an attorney? What is it go to an agency? How long does it stay there? Does it get placed with someone else? Does it get purchased?
Everybody has a different idea to do that. And I would say that the majority of the MCAs that we work for, which is over 60 different MCAs don't have those
processes documented set up their internal team, you know only really the the big guys are doing that. And when the market shifts, and your default rates go 5, 8,
12. And that becomes a bigger issue, you want to have things set up in place. So you know, I really wanted to touch on just, you know, setting up that process having
a document and we're going to go a little bit more into depth with Mark and Kimberly. So I'll turn it over to Mark and we're going to just to set the precedent,
we're going to just going to talk about a few topics, then we're both going to jump on or all three of us are going to jump on on a couple topics together and then
we'll do Q&A at the end. And then the big thing is we're going to be at the back of the room and this is done and we'd love to take your specific questions
then. So, Mark, turn it over to you.
Mark LeFevre: Hi, everybody. Before going over this, it's a business policy I've had sound profitable growth. Shawn was speaking being sound developing a
policy, this is what we do having policy in place, flexible, not in stone, okay, this guy did this, I have to do this, this is the first payment default, I have
to do this, it's time to take him to court, it's time to put them to collections. There's a whole slew of things that you have to do. And have experience to do
it and watch what happens, make mistakes with it, tweak it, that becomes a part of your business, that's being sound. Now, once your sound, a direct result has been
profitable. Now, that's not running your business sound, and doing all that, and then just say, yea or nay to profit, it's a direct result. Then when you have
profitability, then you have growth, whether it be company growth, personal growth, you pick it. But if you start with being sound, it'll lead to those two.
Now I've looked at the measure of internal department results. That's another thing being sound if you've got a group of collectors. Do count how many calls they're
making, do you have phone reports? Do you record their phone calls? Do you have results? Okay, they've made 50 phone calls, out of those 50 phone calls they get 4
payments. There's different ways of accounting for what's going on. The way I think to determine is, what results are you getting to start with? I've got five
people on the line, I'm not getting the results that I want. Now, there's phone systems out there that you can monitor phone calls, you can record phone calls, check
with your attorney as far as giving notification or a beep on the line that you're recording the call and monitoring it. But that helps a lot because it keeps
track of your call count. 120 phone calls a day you should get my opinion 15 - 20% commitments. And what you do with those commitments, how you close them will
determine what happens with those each and every time. You can track it. Okay, I've got those 15-20 commitments, and 6, 7 of them are postades. What am I
gonna do in locking down the others? Am I just telling the guy my looking to get them off the phone? Am I listening to what he has to say? How am I locking it
down? You could listen to what the guy says. At that point. You say, Okay, let's make sure we have a complete understanding of what both you and I just
agreed to. Tell me what it was. While I said on Friday, no, no, no, that's not what you said. On Thursday and go over it until it's repeated and he knows and
understands. Okay, chances are that once again that will pay without a problem. Your follow up will be "Hey, look, we had an agreement what happened?". Also,
you look at determining whether you should use a collection agency or law firm. Collection agencies and law firms are both needed. They work hand in hand. Use
a collection agency for first payment default. You guys, Shawn said you've got somebody that says hey, look, I've run into a problem. Some that you can verify
they've had problems with business, you've already looked at three months worth of bank statements, you see the problem, you've lowered payments to see if that
helps. If that turns around, it comes back on track where they're making their payments, and becomes a good customer and even open to a second or redo loan. That's
what you want. But if you see somebody that keeps giving you the runaround, I'll pay you, I'll pay you, I pay you, and don't. Then you need to take a look. Let's
get it with a collection agency. Here comes the credibility of collections. I'm gonna turn you over a collection agency, I would say "I'm gonna turn you over
for collections If it's not taking care of". Tell them on Tuesday, given till Thursday, on Friday, that account goes to collections. He's got eight invoices on
his desk, and he's talked to eight different people. And somebody's gonna send them another letter and send them another letter. You told him on Thursday, it goes
in Friday, he gets a call Friday, right? Then he knows that you're serious about getting your money, you have credibility in your collection efforts. When you turn
it over, there's a dichotomy of characteristics. Again, with the first default, bad checks, disconnected phone numbers, skip ad business, new owners, landlord calls
you and ask you "Do you know where they're at?". Keep an eye on that. And there might be some in house stuff that you can come up with yourself and determine hey,
these are the certain policies. But remember, if you're setting these things up for policies, be flexible. Nothing is put in stone. Kimberly.
Kimberly Raphaeli: All right. Hi, everybody. I'm Kimberly Raphaeli, I'm General Counsel at AMA Recovery Group. We are a collections agency, third party, we
work just on merchant cash advance, we take no other commercial collections matters. We tailor our process just to MCA. So if you're a funder, and you have
questions, I'm happy to talk to you after the talk, I'm going to talk to you a little bit about whether you should, because I'm a lawyer, whether you should use a
collections agency or a law firm. It obviously depends entirely on the circumstances of the individual file that you're working your individual merchant. If you
have a hard default of fraud. And you need to get them on more than just a contractual default, but a civil fraud that says things along those lines, you may be
considering your law firm. If you've got just someone who's been NSF'ing, you've got them back on payment plans, they defaulted, again, like Mark said. That's
when you might need some depth and breadth in your collections. Talented folks with 30-40 years experience who can jump in there and pull it up by the bootstraps
and go out and find your merchant. That's we say, reach out and touch them. You guys are busy, you may have one person dedicated to collections, you may have nobody in
your shop dedicated to collections. So you may be taking valuable resources away from your funding servicing operation, to go out and collect files that
may be quickly on their way to death's door. That's when you want to get it out to your third party collections agency. And maybe not just one agency, you
know, you may not want to put all your eggs in one basket, you may want to have more than one agency, because they may have a different approach. But getting
it out to your agency quickly, while the merchant still viable is really important. I know a lot of funders feel like if they hold on to a file, I will get them
back on payments. You know, I know my merchant best. While that is true, you do know your merchant best, allowing a third party agency to do what they do best
on the servicing side, you know, really reaching out touching the merchants skipping them down, finding their numbers are disconnected the bit they claim
they're not operating, let your agency go out there and do all the hard grunt work. Comb the resources that we have available to us because we pay for special
services that will allow us to go out and find merchants much more easily. So let us do that work for you. A law firm can be great for taking a very
difficult merchant, let's say you have someone who first payment default numbers get disconnected. Businesses just gone. Maybe it was a sham business,
maybe it was just, you know, a show that send it straight to your law firm. That's a great, that's a great resource for them. If you have a COJ, you're
internally debating, okay, what should I do? Do I file this COJ, do I not file a COJ? Obviously, if you go on the side of filing, you're going to be going to your
law firm. But like Shawn said, make sure you have your fire extinguisher ready because if the COJ ends up with zero hits on your bank account, then you need your
third party agency on speed dial to pick up that file on the back end. And then do the really hard grunt work of collections. That's where you have your back end
collections expertise. Other things to consider on your COJ there was a talk earlier on it today. So I'm not going to duplicate a lot of what you heard. But there's
a lot of risk associated with filing COJ's right now. There's reputational risk. It's kind of a one hit wonder in some ways. You do have all of your post
judgment remedies, not just garnishing a bank account. But for the most part, that's what you've got your COJ for. Is to go out, hit that bank account and then move
on. Oftentimes your law firm isn't communicating with the merchants, you know, if you get it over to your collections agency, communication starts day one,
they're calling that file multiple times a day, the law firm may never actually talk to your merchant until their bank accounts are frozen. So those are just some
things to consider. You know. Let's see what else do I have here. As COJ's become, I think more written with controversy. There's obviously all the state and
federal like legislation that's in play right now that we may see some major changes. COJ's, I don't think they're ever going to completely go away. But they're
going to be such significant guardrails that if that is your only collections technique, I think it's a little short sighted. You need to be prepared, like Shawn
said, for this changing environment that's ahead of us. The way we play now is probably not how we're going to be doing business on the collection side in five years.
So having your back end collections agency ready to go maybe more than one of us retained, to hit your collections effort, I think is going to be really
critical.
Shawn Smith: I would definitely agree with your choice of two agencies competing, and I have clients for the only use us. And if I'm giving them optimal advice, you
have to make sure that the two are competing against each other, that they're getting the top rates. And I'd further advocate that you should be tracking them per
batch, which is per month, and how they're liquidating. And then sharing that information, not this specifically company name. But like, you know, agency,
one, two, and law firms can be in that as well. And then sharing that data with the people you're working with, because then they know where they're performing.
And if they want more account, so when we compete, and we know what each other's numbers are at, we can specifically try to dial in and tailor to your accounts
to increase our liquidation rates. And that is something where this industry with it being so emerging, I think, is, is not working hard enough on
their sophistication on the back end to be able to do that so that they can have a lot higher liquidation rates. We're going to touch on a couple other topics
here. One is just vetting a third party agency or attorney, and some of the things you should be looking for. You know, I'll start, you know, we're really
passionate about brand protection, and how we do business. You know, what are you okay with? How much are you willing to extend your reputational risk? You
know, are you looking at their Google reviews? or looking at their Glassdoor? Looking at their Better Business Bureau, it's important to look at who you're
doing business with, and that you feel comfortable with that? Do you see him at these events? Do they know what's going on on the hill and in the States, you
know, how involved are they? Because they're going to know where there might be a landmine in one state or something, you know, something going on. And I think,
when you see companies here investing in this association of people, they're going to be a lot more in the know with what's going on. They're meeting with
industry professionals on a regular basis. Is there anything else you would touch base on.
Mark LeFevre: Yeah, I believe that this country is built on competition. Two agencies, yes, I can have seen that. If my clients are using me as one agency, I
refer them to us three, every 90 days, drop the lowest performer and replace him with another. That keeps all three in a competitive way, and producing the best
return on the dollar. I've never been dropped,
Shawn Smith: You might run out of people every 90 days on that third one, though, I'm just saying.
Mark LeFevre: But the thing that Shawn said about vetting, in the very beginning, I just have a way to get in this competitive business. And what people are
looking for is be accredited. IACC, we're a member of. To become a member, they go through you check out your paying your trust account, and so forth. It's kind
of a rigorous process, but it's a good Association to belong to. So you keep up with the business and what's going on in the industry. Now getting certified
is a different story. We're one of the 29 in the world that are. It took six or eight months for an independent accounting firm, to go through our books, go through me
to make sure we remittent payroll, no lawsuits, no regulatory complaints, I should be clean as a whistle. That to me, that's good to go to our client and
ay, I don't know, I don't know who you're doing business with. Are they licensed, bonded insured, boned and insured in North Carolina, which is a trap, Arizona,
I think it's a felony to collect in Arizona without a license. But you've got to know who you're dealing with.
Shawn Smith: I think it's very common that agencies not involved in this association, let's just say as much are playing licensing roulette.
Kimberly Raphaeli: For sure.
Shawn Smith: And they're trying to fly under the radar on those states and collect. And we're investing 10s of thousands of dollars in licensing and accreditation,
and things like that and making sure that we're handling the trust funds correctly. Those type of things that some of our competition is not. Do you know
that? Do you know what to look for? Do you know what states they should be licensed in? Because commercial and consumer are different things? What level of
bonding? What level of insurance? Do you know those things? And we're the people to talk to about that can help make that clear for you.
Kimberly Raphaeli: I think part of vetting your agency to obviously MCA is a small, small area of FinTech. I mean, it's not small, it's big. We're big, right? We're
a big group, but word of mouth is important. I think MCA is pretty collaborative with syndicating, and what have you. You know, ISOs and brokers that are working
with funders, so find out who your friends are collecting with. Making sure they're getting remittances. It's as crazy as it sounds, some agencies
who shall remain nameless, may not actually send you a remit. I mean, it's possible they take that money and run. There are bad actors in every industry. So making
sure that your collection agency is actually going to send you the remit of what they collect is really, really important.
Shawn Smith: That happens more frequently then people would believe.
Mark LeFevre: I'm adamant about remits. I am, when I first, 15 years ago, became a member of the IACC. They had the room were in DC, where the owners and managers
and so forth, and they introduced the new members. And you tell a little bit about yourself and that and they pointed me This is Mark LeFevre with
Kearns Brinen & Monaghan. And I stood up and I said, thanks for having me. Thanks for bringing me the IACC remit to your clients are all running out of business.
That's all I said.
Kimberly Raphaeli: Yeah. Should we moved on to working with your agency?
Shawn Smith: Yeah. And so the last thing we'll touch on is just, you know, once you've transmitted the account to your agency, just some things to help work with them
more efficiently and effectively. You know, being clear up front with the results you're looking for. Expectation is unbelievably all over the table in this
environment. And it's something where we want to make sure you have proper expectations. We've done, do a lot of upfront communication with expectations. Getting the
accounts over issues, things like that. You know,
Kimberly Raphaeli: Like, for example, you know, are you looking for just lump sum settlements? Let's say 50, 60%, 70%. Be honest with your agency, that that's what
you're after? Because if not, you know, they may be setting you up on a payment plan. And, you know, I mean, some payment plans can be a slow death. So making
sure you're really clear with your agency, how long you're willing to do payment plans for, is if there's dollar amount associated with it. Can you give your
agency some bearer level settlement authority, so they can just take care of files for you in exactly the manner that you would want within a certain parameters
so that they can be churn and burn. When you've got a merchant on the phone, you have a very small window of time to make a deal. And you could lose a lot of
valuable, you could literally leave money on the table by having to go back to the funder, say, Hey, we got this deal, but you know, he's talking to two other
MCAs, because you've been stacked 10 ways to Sunday. So we've only got a small amount of time to accept this deal client finally says yes. Funder says yes, you go
back. Merchants no longer talking to you, they've gone dark. So giving your agency some authority to make some quick decisions on your behalf with parameters you're
comfortable with is hugely important. And I would say the more aggressive, the better. Our interests are aligned with yours. We're never going to take a cut
rate deal if there was more money to be made. You know, we only make money if we get the highest dollar. So just remember that giving your agency a lower
settlement parameter does not necessarily mean less money for you. It gives your agency a lot of power to make deals on the fly when you've got merchants on the
line. And that cannot be overstated, I think.
Shawn Smith: Don't incessantly counter your agency on every deal. You're going to lose money, because those people are going to go and settle while they have
money. We see it all the time. We've got a $30,000 settlement up and they're like we want 31-5, you know, I mean, like, what do you do?
Kimberly Raphaeli: In one lump sum not two. like No, just take this.
Mark LeFevre: Yeah. If you haven't talked to the guy for four months? A good thing you could do with your agency as well, to show transparency, my agency has a
portal, 24/7 you can go in and look at your portal, look at your accounts, see what's being done. Look at the notes, pull reports. So you're more of a Hey, look,
I need to know this information, boom, it's on your screen, instead of having to call somebody listen to their opinion and such. I don't think it's you need to
micromanage all of it. It's just good to see. So you can account for what's going on.
Shawn Smith: You have to clearly communicate with your third party agencies. If there's a problem, we're gonna we'll adjust. But we need to know about it. You know, I
mean, if there's whatever the issue. When you're when you're getting your remittance that you don't like your report you want in a different format, whatever the
case is, we're typically going to be able to meet that but every single funder has a different way of doing this. We need to know your expectations needs to be
committed now if we don't make those changes that's on us. But clearly expressing your satisfaction or dissatisfaction just realizing that it's a process when
you start with us to get that dialed in. Because we're doing what we think most people liked the best and that be you may have a different style like Kimberly was
saying as far as now we want more settlements and now we're not concerned with the the payment stream or vice versa or we're concerned with pay rate because we know
liquidation rate is going to follow that or whatever the strategy is.
Kimberly Raphaeli: To circle back to kind of something that Shawn led with when we open the session. If you're going to the trouble to set up your shop, you're doing
your own internal collections, you've got and like I said, you know your merchant best. Convey what you know about your merchant to your agency. You know, it's one
thing to just send a placement over your agency, you've got your contract, most of your underwriting file, bank statements, all those things are really, really
helpful. But if you take the time to put in an email, this merchant says he's going through a divorce, his wife's taking them for all of his money, he has nothing
to pay, tell us that because we can start from there and move the conversation forward and not waste valuable time hearing the same story over and over
again, that's bought the merchant time up until this point. That's why you have us here is to sort you know, circumnavigate some of those issues that have been
plaguing your team internally.
Mark LeFevre: Two things that will collect an account best. One, is your application because it has information. Information collects money,
Shawn Smith: It's power.
Mark LeFevre: You have no, don't know who the landlord is, you don't have any vendors, you don't have any suppliers. You have nobody to talk to to get their side
of the story. That leaves you be able to do half you have to dig up rest, and not even getting the information that you need. Secondly, is how you close a
loan, how you just drop in money on the table and get way. So you can go to the next one. It's how you close it, make sure the terms instead of up front, how much
it is, when it's going to come out what to do if it's going to default. If you got somebody who does three or our defaults, and you don't hear from. It's a problem,
and when you talk to them, you've fixed the problem first. We have defaults never heard from you so far, and so on. This is what we expect when Okay, not a
problem. You can pull the default or you can pull a payment on Friday. That's not what I'm calling about. I'm calling about the default. And using let us know
or did you contact us and say this is what's gonna happen. Okay, well, that I could take care of it on Friday. Now I understand.
Shawn Smith: So we have a we have a small time for questions. We have a mic running the room. Does anybody have any specific questions that they really want to
point out? We have a mic come in right here.
Attendee: What would you say would be the number one tip or tips that you would suggest to people working in the collection agency?
Mark LeFevre: Wow.
Shawn Smith: Internally or with a third party like your internal person collecting?
Attendee: No, I guess we're a third party.
Shawn Smith: Like number one tip and working with a third party?
Attendee: Yeah.
Shawn Smith: The faster you get them the file...
Attendee: Not working with working as
Shawn Smith: Oh, as a collector?
Attendee: Yeah.
Shawn Smith: For me, it's, it's how you treat people. So much of my business is easy to collect, just because quite frankly, someone on the East Coast beat the snot
out of them. And we just treat them like a human being and work with them. And I think a lot of this room could keep more accounts in house and get things
collected if they treat people better.
Kimberly Raphaeli: Yeah, I mean, I think that our motto is follows similarly reach out and touch them. It doesn't have to be cutthroat, you can do it in a
responsible, measured way. And remember, you know, we constantly talk to our collectors about this. You're dealing with CEOs of companies, they may be small
companies, three, five people, but you need to talk to them, like their CEO, you know, you don't berate them and treat them like their children, you know, you treat
them like an adult who was capable of making this decision to enter into a merchant cash advance in the first place. What can we do to get you back on track? I
mean, I would say leading there's, Shawn and I think are very similar in that way.
Mark LeFevre: I think it's important, Shawn and Kimberly said, but when you speak with him, of course, treat him as an adult. Make sure there's understanding
expectation up front. But ask for accountability.
Kimberly Raphaeli: Yeah, for sure.
Mark LeFevre: They have accountability of what's been happening, or what what happened, and how we're going to fix it.
Shawn Smith: They have the velvet, but know that it's wrapped in a hammer if we can't work with them.
Attendee: Follow up on top of that, when would you I guess, get tough? And how would you, you know, approach that?
Mark LeFevre: I would, if I'm speaking with somebody, and I've heard more than one time that they we're going to take care of it and so forth. And it's going to be
taken care of by a certain day, and it hasn't been, then I'd send somebody out there the next day. I want pictures of the building, I want to interview
principals, I'm looking at licensing on the wall, I want to talk to vendors, I want the landlord to meet me out there, I'll see whose property out there is his.
Whose property belongs to the debtor. And that's just the start.
Kimberly Raphaeli: And the same somewhere with us. I mean, that will give you a couple broken promises one broken promise really because you've already broken the
promise to our client, the funder in the first place. And after that, it's it's your you've got to be accountable. So now's the time you got to make the
payment today, or we're going to send it to our legal counsel because remember, we can also send it to external legal as well. And you know, a lot of times
that'll do the job. Not always but you do have to be tough. There's a difference between being tough and measured, and I think being overly aggressive and
getting yourself into some trouble, because like one of the earlier panels were saying, you know, this is commercial, you know, FDCPA, the Fair Debt Collection
Practices Act doesn't apply. But as a lawyer, I'll tell you, UDAP is very real. And it's something that the funder should take into consideration. How you treat
people is every bit a part of fairness, and the law.
Shawn Smith: Were situation specific on that. But we really push first called money and getting something up front to show their real as part of that accountability
piece that Mark's talking about is that there's nothing that speaks louder than your actions, like put some money down. I don't care if it's 200 bucks, like show
me that you're real now.
Kimberly Raphaeli: Yeah.
Shawn Smith: And then that, you know, now you have them recommitting to you.
Mark LeFevre: Imagine if you can't, if they can't meet their commitment, if they keep telling you this and telling you that you have to chase them around.
Husbands, wives, Imagine, if Sunday, Monday morning breakfast, PI shows up on your doorstep and knocks on your door. I don't know about you, my wife, I'll be
sleeping in the dog house for a few weeks. But it's just it's you have to know what securing. I want to picture the house. I mean, come on, I've been out and
seeing a house, it's not worth 20,000. You really got to look at where you stand, as far as being able to collect the account, at that point.
Kimberly Raphaeli: And you know, there's some strategy to like, you know, Shawn saying, okay, so you've got a merchant that's in some real dire straits, maybe in the
businesses out of business, and they're paying on their personal guarantee. You're getting 200 bucks in a month? Well, nothing, do it on a temporary basis, do it
for 90 days, get the stream of payments coming in, get their commitment, see where they're banking, they probably change banks, right? And then you can you
know, potentially, that gives you some some leeway when you're talking about COJ's or going with your law firm and getting getting a judgment going after that bank
and garnishing, you'll only find that but putting them back on payments, even if it's small.
Shawn Smith: All right, times up. I want to thank Sean and the whole deBanked crew for allowing us to come up here and speak on a subject that we're obviously very
passionate about. And we think this industry desperately could continue to refine and do a much better job and they're working with third party
vendors, which will result in more success for them. And Mark and Kimberly, thank you for joining me up here and we'll be in the back shortly after we get un-mic'ed
to to answer any more in depth questions and we'd love to discuss more in depth how we can specifically be of help. So thank you for your time.
Mark LeFevre: Thank you guys.
Kimberly Raphaeli: Thanks