Collections Glossary of Terms

Collections
Glossary
A | B | C | D | E | F| G | H | I | J | K | L | M | N | O | P | R | S | T | U | W

This Glossary is used to establish a vocabulary of common terms used in the collections domain.
Project participants should refer to this glossary for specific interpretation of common industry
terminology in the context of Pega Collections.

A
account integration
Account integration is the communication required between the collection system, the host billing
system and any other supporting (for example: sub) systems.

account status
Account status is an indication of account inactivity or the availability to incur additional charges
(debits).

Adeptra
Adeptra is an outbound telephonic computer voice product from the Adeptra (vendor).

agency management (Collection Agency Management)

Agency management is the process whereby a creditor sends accounts to collection agencies,
monitors those accounts for activity and then recalls them from the collection agencies if no
payments are received or specific service levels (SLA’s) are not met. There are also extensive reporting
and audit functions that fall under the Agency Management process.

agency placements
Agency placements is the process of sending accounts to collection agencies. First, the primary agency
gets the first external assignment from the credit grantor. Then the secondary agency gets the
assignment after the account is recalled from primary agency. Finally, the tertiary agency gets the
assignment after the account is recalled from secondary agency.

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aging
Aging also known as roll date is the delinquency migration of an account as it moves from one billing
cycle to another. For example, an account may be 30 days overdue and may roll into 60 days past due.
The account is now 60 days past due because the new monthly billing cycle ran without a sufficient
payment being made.

Account Master File (AMF)

The Account Master File is an account’s entire master file (for example: demographics, payment and
charge history) on the host billing system or the portion thereof being downloaded to the collections
system.

Annual Percentage Rate (APR)

The Annual Percentage Rate is an expression of the effective interest rate that will be paid on an
account. The APR is the total cost of credit to the consumer expressed as an annual percentage of the
amount of credit granted. APR is intended to make it easier to compare terms from different lenders.

arrears
Arrears, also known as arrearages, occurs when the debt is overdue and unpaid.

Arrangement (see PTP)

A repayment offer that has been agreed to by a customer.

arrearage
Arrearage is the amount on the account that is in arrears (overdue and unpaid).

Attorney-in-Fact
An Attorney-in-Fact is an agent legally empowered via a Power of Attorney to act on someone else's
behalf in a legal or business matter. The term ‘attorney-in-fact’ should not be confused with the term
‘attorney at law’ who is a lawyer that is licensed to practice law in a particular jurisdiction.

authorized user
An authorized user is an individual who is authorized to make charges to an account but is not liable
for repayment of the account balance.

B
bad rate
A bad rate is generated by a behavior scoring model that predicts the likelihood of an account reaching
90-day delinquency

bankruptcy
Bankruptcy is a legal process where individuals restructure their overall debt burden through a
Federal Bankruptcy Court and, based on an agreed repayment plan, makes monthly payments to a
Trustee. The Trustee then distributes the funds to the various creditors. There are three primary type
types of bankruptcy:
• Chapter 13 — a repayment format as described above

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• Chapter 7 — no repayment plan and the debtor surrenders his assets (except for home and
auto).
• Chapter 11 — the business equivalent of a Chapter 13.

bankruptcy score
The bankruptcy score predicts the probability of a customer declaring bankruptcy within a specific
timeframe. This score is based on criteria such as credit line utilization and payment history, and may
also incorporate other external data such as indebtedness data from external credit bureaus.

bar date
A bar date is the last day on which a claim can be filed in a legal matter such as probate or
bankruptcy.

behavior score
The behavior score reflects the behaviors of the customer since they became a customer. The
behavior score is more powerful than the application score which was calculated before the customer
was accepted as a customer as it reflects how they have managed their account or accounts since
they were onboarded. It is usually derived from internal and sometimes externally sourced data and
can include repayment history, delinquency level, use of cash advances, how they have repaid those
cash advances (taking cash can reflect a high risk) over limit, insufficient fund checks, and utilization
rate.

broken promise
A broken promise describes a situation where a customer does not meet the terms of a single
payment obligation in a repayment arrangement (such as a promise to pay) either by not paying any
amount, paying only a partial amount, or paying late. Broken promises are often used as a statistical
measurement of the collector’s performance related to promises to pay and of a customer’s
performance in keeping payment commitments.

bucket
A bucket is an Industry term to indicate the degree to which an account is delinquent based on the
past billing cycles
• 00-29 day range = not yet delinquent
• 30-59 day range = bucket 1
• 60-89 day range = bucket 2
• 90-119 day range = bucket 3
• 120-149 day range = bucket 4
• 150-179 day range = bucket 5
• 180+ (depending on the type of debt) day range = bucket 6

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C
champion and challenger
A ‘champion‘ strategy is the existing strategy currently being applied to accounts in a collections
environment. A ‘challenger’ strategy is a test strategy that may be applied to a small percentage of
accounts to test the success rate as a method of comparison with the ‘champion.’ This methodology is
used to identify better strategies and may be utilized in both contact strategies and offer strategies.

channel
A channel is a delivery method for a payment such as mail, branch, or electronic delivery.

charge-off
A charge-off is an accounting adjustment in which an account (and its corresponding balance) is
changed from being an asset to being a loss. Charge-offs appear as an expense on the company's
income statement, thus reducing the company’s net income. Most financial companies make an
estimate of charge off expenses that might be incurred in the current time period. Then, based on
past records they set up an account known as the Reserve (or Loan Loss Reserve or Reserve for Bad
Debt -) to offset the anticipated losses.

From a collections standpoint, the term ‘charge-off’ is significant because it signifies when an account
moves from the collections process into the recovery area. Note, that this may not always be the case
outside of the North American market.

Customer Information File (CIF)

A customer information file is managed by a lender and identifies and stores account relationships to
create customer profiles. These account relationships are usually linked by a key value (for example:
Tax I.D. Number) or some combination of values. This linking process is critical when a customer-
centric method of collections is preferred over a traditional account-centric method.

collection agencies
A collection agency is an external vendor who is assigned accounts that are in collections to assist
financial institutions with their collection efforts.

collections (in collections)

Collections is the act of trying to secure money from customers who have become delinquent in their
payments or have exceeded their credit limit. The status of individuals and/or accounts that have
reached a state of delinquency or an over-limit (credit) situation in which the institution from which
the credit was issued has initiated collection activity is referred to as ‘in collections.’

collections case
A collections case represents activity to recover money owed arising from a transaction in which
property, services, or money was acquired on credit. There can only be one active collections case at
any given time. Once a collections case is closed, a new collections case is created if the account (or
customer) requires additional activity. While open, a collections case may contain multiple work
objects and support multiple independent or related streams of activity.

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collections score
A collections score is derived from the internal master file data that predicts default risk beyond the
range of a behavior or credit bureau risk score (greater than 90 days delinquent). The results inform
the creditor about either the percentage of the balance that will be collected, or the prediction of
collecting a dollar or more before charge-off. The collections score is only used when an account is in
collections.

collectors (collection agents)

Collectors are individuals who perform the tasks necessary to secure the money owed by customers
in collections.

component
A component is a lender‘s method designed for debit and or concession repayment. One too many
components can make up an offer.

Consumer Credit Counseling Services (CCCS

Consumer Credit Counseling Services (CCCS) is a group of credit counseling agencies that help set up
extended repayment plans for consumers to reorganize their overall debt situation, to avoid filing
bankruptcy. When a Debt Management Program (DMP) or repayment plan exists, the customer pays
a single sum to the agency and the agency manages all future payment made under the terms of the
extended repayment plan or the DMP. These agencies may be non-profit (funded by the credit
grantors) or for-profit (funded by the individual consumers).

contact strategy
A contact strategy describes how the organization intend to communicate with the contact.
Characteristics of a contract strategy include:
• Contains one or more treatments
• Contains one or more decisions/events and actions
• Defines the specific timing of treatments
• Has a beginning and an end
• Can be executed against different accounts, or can be re-run against the same accounts
• Does not include offer(s)
• Target address where to call, mail, email (business vs. home)
• Agent skill requirement (will define site)
• Specific objectives (improve, stabilize, cure)
Customers may interchange the definitions of strategy (see contact strategy and offer strategy) and
treatment; the definitions listed here are those used by the Pega Collections system.

credit limit
The credit limit is the maximum amount of credit that a bank or other lender will extend to a debtor
or the maximum amount that a credit card company will allow a card holder to borrow on a single
card.

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cure
A cure occurs when an account in collections is no longer deemed to be delinquent (or over limit. The
primary goal in collections is to cure the account. An account may be cured when the customer pays
the delinquent or over limit amount, or when the account has been re-aged.

current balance
The current balance is the total balance outstanding including all principal balances, interest, fees and
charges, as of the last transaction update from the host.

customer (see Right Party)

cycle date
A cycle date is the revolving credit arrangement organizations have to balance the production load of
statements and call center operations. Organizations have between 20 and 25 cycle dates per month.
It is at cycle date that the billing system creates the statement data. It is only at cycle date that an
account can become delinquent, or progress to the next delinquency cycle if it is already in arrears.
For example: If the cycle date is 11, then on the 11th day of the month a statement is produced with
all transactions on the account that have occurred since the last statement production. All charges
and payments are reflected on the statement. It is on this date that an account is considered
delinquent or progresses to the next delinquency cycle if the account is already in arrears.

cycles past due

The number of months a customer is past due. (see Bucket)

cycle-x (context-sensitive definition):

• cycle-x (billing cycle date, cycle ID, or cycle Day)
o It is the statement, or billing date, which then defines the 30-day cycle to which the
account belongs.
o For example: A cycle-9 account is one that bills on the 9th of the month.
• cycle-x (cycle day, cycle ID, or delinquency cycle)
o The number of periods an account is delinquent.
o For example: A ‘cycle 9’ account is one that is nine billing cycles in delinquency.
o Side note: The longer the delinquency, the greater the likelihood there is for a charge.

D
debt buyers
Debt buyers are individuals or organizations who buy portfolios of delinquent (and mostly charged-
off) accounts from credit grantors with the intent of collecting from these accounts a significant
amount more than they pay for them.

debtor (See Right Party)

dial spin
A dial spin is the number of times a dialer ‘list’ has been run through the dialer within a time period.

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dispute
A dispute occurs between the credit grantor and the customer over fees or charges that the customer
claims were incorrectly added to an account.

deficiency balance
A deficiency balance is the amount left to collect on a secured loan after the collateral has been
liquidated.

delinquency history
A delinquency history represents the last 11 months/periods of rolling history. If the field has 12
numbers in it, then it represents the current period plus the last 11 months of history. For example,
the delinquency history field might be displayed as:

0001100002100

This field would be interpreted as the current period plus the two months prior to being non-
delinquent (000), the two months prior to these having been in bucket 1 (11), the four months prior
to these being non-delinquent (0000), the month prior having been in bucket 2 (2), the month prior
having been in bucket 1 (1), and the prior two months being non-delinquent (00). This information
can be used for decisioning and risk analysis.

debt management program (DMP)

A debt management program is a formal payment arrangement agreed between a CCCS and the
customer. Under the terms of a DMP, the customer will make a single monthly payment to the CCCS
and the CCCS will disburse payments to creditors.

dollars-at-risk
Dollars-at-risk is the account balance multiplied by its bad rate (determined by behavior score).

Decision Strategy Manager (DSM)

The decision engine used within the Pega Collections application. DSM logic files, or strategies, are
created and maintained in Strategy Director and then deployed for use by the Pega Collections
application.

dynamic delinquency movement matrix (DMM)

A dynamic delinquency movement is a method of reporting the change in account delinquency on a
cycle basis. From the matrix, it can be determined whether there has been improvement (fewer cycles
delinquent), stabilization (no change in number of cycles delinquent, for example: billed one, paid
one), cure (brought current), or degradation (increase in the number of cycles delinquent).

dynamic offer (see Offer)

A dynamic offer is a systematically generated presentation of a repayment agreement representing an
optimized solution for the creditor designed to maximize money collected versus cost of collection. The
collector proposes a repayment from the customer based on the terms displayed in the dynamic offer.

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E
executor
An executor is a person named by the maker of a will to carry out the directions of the will. The
executor's duties also include the disbursement of property to the beneficiaries as designated in the
will, obtaining information about any other potential heirs, collecting and arranging for payment of
debts of the estate and approving or disapproving creditor's claims.

F
Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act is an American federal law that regulates the collection, dissemination,
and use of consumer credit information. It, along with the Fair Debt Collection Practices Act (FDCPA),
forms the base of consumer credit rights in the United States.

Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act is a United States statute added in 1978 as Title VIII of the
Consumer Credit Protection Act. Its purpose is to eliminate abusive practices in the collection of
consumer debts, to promote fair debt collection, and to provide consumers with an avenue for
disputing and obtaining validation of debt information to ensure accuracy. The FDCPA creates
guidelines under which debt collectors may conduct business, defines rights of consumers involved
with debt collectors, and prescribes penalties and remedies for violations of the Act. It is sometimes
used in conjunction with the Fair Credit Reporting Act (FCRA).

fees and charges

Fees and charges are fixed amounts applied against an account because of a particular action, such as
a late fee, an over limit fee, or an NSF fee.

File date
A file date is the day on which a legal action (such as a bankruptcy petition) is filed with the
appropriate court.

first payment default/first installment default (FID)

A first payment default is a situation where a customer opens a new account with a credit grantor but
never makes the first payment when it comes due. Also referred to as ‘straight rollers’ since they
move directly from one delinquency bucket to another without making any repayment effort. This is
often a good indicator for a potentially fraudulent account.

follow-up date
A follow-up date is a review date set on an account to facilitate collections activity and prioritization.
An account is not queued for activity until this date, which may be set either manually by the collector
or systematically via business rules.

Forbearance
A forbearance is a situation where an account holder does not need to make a normal monthly payment
for a prescribed billing cycle (or multiple cycles), but the account still accumulates interest. This action

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by the credit grantor usually takes place in the event of a natural disaster. May also be referred to as a
‘payment holiday,’ although this is more commonly used as a product feature rather than a collections
tool.

fraud
Fraud is the crime or offense of deliberately deceiving another to obtain property or services unjustly.
Fraud is often accomplished through the aid of forged objects and/or identity theft.

G
general ledger (GL)
A general ledger is the main accounting record of a business which uses double-entry bookkeeping. It
usually includes accounts for such items as current assets, fixed assets, liabilities, revenue and
expense items, gains and losses. The general ledger is a summary of all the transactions that occur in
the company and is built by the posting of these financial transactions.

grace days
Grace days are the number of days after a promise to pay due date that a customer must pay in order
for the PTP to be considered as kept.

guaranty
A guaranty is a promise to be answerable for the debt or obligation of another in the event of
nonpayment or nonperformance. A limited guaranty is restricted to a certain amount or duration.

H
host system
A host system is the primary billing system used by a financial services company where the customer
records are kept, monthly statements are created and payments processed.

I
identify and verify (ID & V)
Identify and verify is the process where an agent confirms whether an individual is a right party or a
non-right party before discussing details of a collections case.

interactive voice response (IVR)

Interactive voice response is an automated telephone system that allows the customer to
autonomously complete simple activities without the need to use a ‘live’ operator. These activities
may be as simple as call routing to taking full payment details.

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IRS Form 1099-C
IRS Form 1099-C is the tax form is a ‘Cancellation of Debt’ from a lender who forgives $600 or more of
debt. The IRS considers $600 or more of forgiven debt as taxable income. The forgiving creditor must
provide the taxpayer with a 1099-C tax form setting out the amount of the forgiveness. Individuals
whose debts are partially canceled outside of bankruptcy need to report the canceled portion of the
debt as taxable income.

J
judgement
A judgement is the formal decision made by a court following a lawsuit. The terms of such a decision
can define the amount of what is owed by the debtor to the creditor as well as the repayment
requirements.

K
kept promise
A kept promise is a situation where the customer meets all the terms of a single payment
commitment in a repayment arrangement (for example: a promise to pay) by paying the agreed
amount in the prescribed time. These kept promises are often stored as a statistical measurement of
the collector’s performance related to promises to pay and of a customer’s performance in keeping
payment commitments. A single arrangement may result in multiple kept promises.

L
last payment amount
The last payment amount is the amount of the most recent payment made by the customer related to
repayment of the debt.

last payment date

The date of the most recent payment made by the customer related to repayment of the debt.

lawsuit
A lawsuit is a civil action brought before a court in which the party commencing the action, the
plaintiff (for example: claimant), seeks a legal remedy against one or more defendants. The vast
majority of collections lawsuits are settled early and never even get to trial.

league table
A league table is a management information tool where agency performance is compared on a ‘like
for like’ basis to build a league table of best and worst performing agents. Historically used to drive
account allocation and commission strategies, it is often used in conjunction with agency performance
(in UK).

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Liability
A liability is the amount for which a customer is contractually responsible to repay.

liable party (see Right Party or Responsible Party)

A liable party is an individual who is responsible, via legal contract, for the debt incurred on an
account. For credit card accounts, this individual is identified as the primary card holder. A secondary
card holder can also be a liable party if the primary card holder is unable to pay the debt.

Lien
A lien is a form of security interest granted over an item of property to secure the payment of a debt.
The financial entity that has the benefit of the lien is referred to as the lien holder. The term lien
generally refers to a wide range of encumbrances and characteristically refers to non-possessor type
security interests.

Lift
A lift is the improvement in predictive analytics or the performance related thereto brought about by
a specific action or inaction.

loan (secured and unsecured)

A loan is a type of debt that entails the redistribution of financial assets over time between a lender
and a borrower(s). The borrower initially receives an amount of money from the lender which they
pay back, usually in regular installments, to the lender. This service is generally provided at a cost,
referred to as interest on the debt.
• secured
A mortgage is a very common type of secured debt instrument, used by many individuals to
purchase housing. In this arrangement, the money is used to purchase the property. The
financial institution, however, is given security (a lien on the title to the house) until the
mortgage is paid off in full. If the borrower defaults on the loan the bank would have the legal
right to repossess the house and sell it. In some instances, a loan taken out to purchase a new
or used car may be secured on the car, in much the same way as a mortgage, although the
duration of the loan period is considerably shorter, often corresponding to the useful life of the
car.
• unsecured
These loan instruments may be available from financial institutions under many different
guises or marketing packages such as:
o credit cards
o personal loans
o bank overdrafts
o lines of credit
Each of these unsecured loan instruments have no corresponding collateral or financial guaranty for
the lender to pursue in case of default. The interest rates applicable to these loan instruments will
vary according to the lender. These interest rates may or may not be regulated by law

loan loss reserve (see reserve for bad debt)

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loss mitigation
Loss mitigation is the specialized phase of late stage collection efforts for secured loans. This phase is
performed as an attempt to prevent foreclosure or repossession of the asset involved

M
minimum amount due
Minimum amount due is the smallest payment amount required to make an account current or in
order.

N
next promise to pay date (next PTP date)
The next promise to pay date is the next expected payment on an active promise to pay (PTP).

next promise to pay amount (next PTP amount)

The next promise to pay amount of the next expected payment on an active promise to pay (PTP).

Non-right party
A non-right party is an individual who has no liability related to an account. Certain sensitive account
information cannot be discussed with this individual. A conversation between a collection agent and a
non-right party is often referred to as a non-right party contact.

number of broken promise to pays (PTPs)

The number of broken promises is the amount of unkept commitments to pay. They are usually
captured within a parameter number of months, for example: within the last 12 months.

O
offer
An offer is a proposed repayment arrangement presented to the customer by an agent, usually
accompanied by some degree of verbal negotiation. When a customer wishes to amend the terms of
an offer, it is usually done by means of a ‘counter offer’ to the collector. Terms of an offer may include
one or more components that allow a customer to make payments and often bring the account
current or settle (close) the account. An offer may also include concessions from the lender, for
example:
• Waiver of fees or charges
• Interest rate adjustment
• Re-age
• Account status change (re-activate)

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offer strategy
An offer strategy is the predefined offer and conditions under which that offer will be presented to a
customer.
Note: Customers may interchange the definitions of strategy (see contact strategy and offer strategy)
and treatment. The definitions listed here are those used by Pega Collections Manager.

open to buy
Open to buy is an industry term that indicates the account holder can make charges/purchases
against the account unrestricted. If the ‘open to buy’ has been ‘closed,’ then the user can no longer
use the card/account for purchases.

over limit
An over limit is a situation where a customer’s balance exceeds the allowable credit limit for that
account. Such an account may either be over limit and non-delinquent or both over limit and
delinquent.

P
past due amount
The past due amount is the total which is currently past due for payment (which includes any
category of delinquency); also describes the sum of delinquent payments.
payment calculator
A payment calculator is a tool used to assist an agent in creating repetitious or complex payment
plans.

payment due date

The payment due date is the date that the current payment is expected to be paid. In cases where the
account is multiple payments past due, it is the date that the most delinquent amount was due to be
paid.

payment method
A payment method is a type of payment, such as check or credit card that is used to make a payment
on an account. Payment methods are made through a channel, and the same payment method may
be used in multiple channels.

payment plan
A payment plan is a type of arrangement composed of one or more promises to pay (PTP) from the
customer. Key components of a payment plan include promised payment amount(s) and payment due
date(s).

pay now
Pay now is an instant payment made through an electronic channel, such as credit card, electronic
check, Western Union transfer, electronic funds transfer (EFT), or debit card.

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penetration rate
A penetration rate is the number of outbound attempts (all calls) targeted at a given portfolio or
group of accounts. For example, with a group of 1,000 accounts, if 200 are called, the penetration rate
is 25%. Clients look for 150% penetration rate per day. Clients continue to call an account until the
right party is reached.

power of attorney
Power of attorney is an authorization to act on someone else's behalf in a legal or business matter.
The person authorizing the other to act is the ‘principal’ or ‘grantor (of the power),’ and the one
authorized to act is the ‘agent’ or attorney-in-fact’ (AIF), who acts ‘in the principal's name’ (for
example: by signing the principal's name to documents).

portfolio
A portfolio is a grouping of accounts by issuer, type and/or brand (for example: the Home Depot
portfolio or the Chevron portfolio).

prime portfolio (sub-prime or non-prime)

A prime portfolio represents a group of accounts whose risk profile and pricing reflects average
market conditions. A sub-prime or non-prime portfolio represents a group of accounts whose risk
profile is below the average market and whose pricing is higher, reflecting a pricing to risk approach.

promise to pay (PTP)

A promise to pay is a commitment by a customer to pay an amount of money on or before a specific
date. One or more payments may be made to satisfy a promise. For example, a promise to pay $50
may be satisfied by making one payment of $50 or 3 payments of $20, $20 and $10 by a certain
date.). A promise is said to be satisfied (see kept promise) if on or before the agreed date the amount
specified has been paid. A promise is said to be broken (see broken promise) if by the date specified
the full amount promised has not been paid.
In reference to arrangements: From the customer perspective, PTPs are tracked as part of the
arrangements. When an arrangement has multiple PTPs and one is broken (either the amount or date
terms are not satisfied), then the whole arrangement is broken. A single PTP is just a type of
arrangement with one PTP. From the collector perspective, PTPs are tracked individually by the
percentage of those which are kept. Payment method of the PTP may also be tracked per agent.

provisioning
Provisioning is a mandatory setting aside of funds to cover anticipated loan and/or credit losses. The
amount set aside for this purpose is often referred to as the reserve amount (or loan loss reserve or
reserve for bad debt (RBD).

R
re-age
Re-age is a technique used to clean up the debtor’s credit history. During a re-age, an agent takes a
delinquent account and artificially brings it current so the account is no longer delinquent. This action
is often done as part of a repayment arrangement where the customer can make minimum monthly
payments, but not enough to get out of delinquency on their own. Lenders typically re-age only a
limited number of times per account (a maximum of three times typically). This does not change the

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balance; it simply takes the arrears amount and moves it into the ‘current’ bucket.

reason for delinquency (RFD)

A reason for delinquency is the reason given by a customer for non-payment and is usually discovered
during an interview with a collections agent. The RFD may be a factor for the Decision Strategy
Manager (DSM) when determining offer strategy, especially where special circumstances are
involved.

recovery (bad debt recovery)

Recovery refers to collection efforts on accounts which have been ‘charged-off’ (which in some
instances may also be called ‘written off’), an accounting term denoting an action taken when what
was previously classified as an asset is deemed to be a loss. Those designated accounts which have
been ‘charged-off’ have been passed down from the collection system to the recovery system as part
of the overall debt collection effort.

reserve (loan loss reserve or reserve for bad debt (RBD) (See provisioning)
A reserve is an amount set aside for bad debts. In general, companies make an estimate of bad debt
expenses that might be incurred in the current period based on past records as part of the process of
estimating earnings. Most companies keep a bad debt reserve in the expectation that some small
percentage of their customers will not pay them in full. These losses can then be charged against their
reserve. If the bad debt reserve is accurately estimated, then a company's net income will not be
reduced when the debts are written off as being uncollectible.

return mail
Return mail is correspondence deemed undeliverable due to an insufficient address. In collections,
this usually means that the primary billing address for the customer is no longer valid and may result
in a Skip Trace process being executed.

right party (responsible party)

A right party, also known as a responsible party, is an individual who is contractually responsible for
paying the debt incurred on the account (or accounts if linked) being processed in collections. This
includes the primary account holder as well as any secondary parties who are also financially and/or
contractually liable.
In collections, terms related to primary right/responsible party are interchangeable based on the type
of credits being referenced. Examples include:
• Primary account holder (or card holder, for credit cards)
• Maker
• Customer
• Debtor
• Borrower
• Mortgagor
Likewise, terms used for right/responsible parties other than the primary might include:
• Secondary account holder (or card holder for credit cards)
• Co-maker
• Guarantor

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In some instances, right party may also include legal entities such as attorneys, executors or other
individuals with legal power of attorney that have court granted authority to act on behalf of the right
party owner of the account.

right party contact rate (RPC rate)

The right party contact rate is the percentage of total outbound calls or number of RPCs per paid
resource hour where the call made results in contacting the correct responsible party/account holder

risk
Risk is a measurement for determining exposure to possible future loss. A creditor will assess risk
before granting credit to an individual, and once that individual becomes a customer, another similar
assessment may be made to determine the likelihood of repayment in a timely manner.

roll rate (see aging)

A roll rate is a rate indicating the number of accounts that roll forward into the next delinquency
bucket (see bucket).
A client typically has a strategy around the number of accounts that roll forward into the next bucket.
It is used as an indicator of future losses.

S
scenario ID
A scenario ID is an identifier corresponding to the end-node of a behavior score/adaptive control tree.

secret sauce
Secret sauce is a lender’s proprietary collection strategy that set it apart from its peers.

segment
A segment is group of people or accounts who share one or more common characteristic. A segment
can be described by multiple criteria, and that criteria can be simple or complex. Segments may
include pre-collection accounts (non-delinquent, not over-limit).

settlement
A settlement is an agreement between a debtor and a creditor which considers a debt fully satisfied
for a reduced payoff amount. A debt settlement is usually reached when a debtor is unable to fully
meet his/her debt obligations due to financial hardships and attempts by the creditor to collect on the
debt have failed. The creditor agrees to cancel part of the debt and accept the remaining sum as full
repayment. In the United States, the write-off amount, for example, the difference between what the
debtor pays on the full amount owed, is considered taxable income and reported to the IRS on a
1099-C form.

skip trace
A skip trace is a series of actions taken when attempting to locate a customer whose contact
information is outdated or invalid. Skip trace activity may be performed as an internal collections
function or using external specialty agencies.

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service level agreement (SLA)
A service level agreement is a commitment describing the level of service between a service provider
and customer. An SLA is therefore NOT a type of service contract, but a part of a service contract. A
contract containing SLAs is usually referred to as a performance contract. SLAs are used extensively
for the provision of IT services.

Sarbanes-Oxley Act (SOX)

The Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor
accounting scandals including those affecting Enron and WorldCom. These scandals resulted in a
decline of public trust in accounting and reporting practices. Named after sponsors Senator Paul
Sarbanes and
Representative Michael G. Oxley, the legislation is wide ranging and establishes new or enhanced
standards for all U.S. public company boards, management, and public accounting firms.

special circumstances
Special circumstances are unique conditions that may require alternative account handling. Some
examples of special circumstances include:
• Active military duty
• Deceased
• Illness
• Incarceration
• Bankruptcy
• Hardship
A collection strategy for an account with special circumstances is usually different than a similar
account without special circumstances.

stabilized account
A stabilized account is one of the components of the dynamic delinquency movement matrix where
the lender bills one payment and receives one payment, but the account is still at the same
delinquency cycle or bucket. As opposed to the lender bills one payment and receives more than they
billed, there is now an improvement on the account.

status
A status is a descriptive label used to categorize either a case or some aspect of the case. For example,
statuses include:
• Case status: A composite status indicating the most important status or status to be used in
determining actions for a case.
• Arrangement status: An indication of the disposition of an arrangement, such as active, kept, or
broken.
• Special circumstances status: An indication of the disposition of an instance of a particular special
circumstance, such as captured, partially captured, waiting documentation, pending, active, or
closed.
• Business step status: An indication of the disposition of a work item in the system, such as
planned, started, complete, cancelled.

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• Financial account status: An indication of the financial condition of the account, such as over limit,
arrears, pre-emptive (action), or charged-off.

strategy (see contact strategy or offer strategy)

statute of limitations
A statute of limitations is a law that sets forth the maximum period of time, after certain events, that
legal proceedings based on those events may be initiated. In civil law systems, similar provisions are
usually part of the civil code or criminal code and are often known collectively as ‘periods of
prescription’ or ‘prescriptive periods.’ In collections terms, this sets forth the length of time which a
debt can legally be pursued.

system of record (accounting system of record)

System of record defines which software system or sub-system a financial services company is using
for maintaining current account balances for reporting purposes and where incoming payments are
processed, including payment application/allocation. In collections, this usually refers to the host
billing system, but in recovery this may be done by the recovery system depending on the rules or
preference of the company involved. The system of record typically transmits financial transactions
directly to the company’s general accounting ledger (GL).

T
third-party
A third-party is an individual or group associated with an account but not legally liable for repayment
of that account. Some third-party examples may be the customer’s parents or relatives, collection or
credit counseling agencies, and legal entities such as judges or courts.

tolerance percentage
The tolerance percentage is the amount expressed as a percentage above which a customer must
pay in total

total
A total is the amount owed by a debtor, including principle, interest, and any charges or fees order to
have a PTP considered as kept.

tranche analysis
A tranche analysis is a management information tool commonly used to track the performance of
external agencies. The goal of such reporting is to track the performance of each ‘tranche’ of debt
sent to each agent over time.

treatment
A treatment is specific content (for example, a letter, text, or call script) that uses a specific channel
that drives strategy. The Pega Collections applications distinguishes between a treatment and a
strategy (see contact strategy and offer strategy). Some organizations may use the terms ‘treatment’
and ‘strategy’ interchangeably.

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trustee (bankruptcy trustee)
A trustee is an officer of the court who oversees the disposition of funds in a bankruptcy. The debtor
pays the trustee who in turn disburses the funds to the individual creditors.

U
utilization rate
A utilization rate is the number of actual hours worked versus the total paid hours of a collections
agent; may also refer to the percentage of the credit limit ‘utilized’ by the customer (for example:
balance/credit limit).

W
write-off
A write-off is a reduction of value of an asset in the general accounting ledger; may also be referred to
as charge-off. In some instances, write-off may refer instead to accounts already charged-off but then
sold to debt buyers, or delinquent accounts past the statute of limitations, thereby becoming
completely ‘written-off’ in the client’s books.

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