Notice That Account Has Been Sent to Collections

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Notice That Account Has Been Sent to Collections Powered By Docstoc
					Collections
              • Ross Martin
                Manager
                MartinR1@michigan.gov
                Ext. 60636
              • 800-642-5626
              • Fax: 517-636-0655
                                    5/2007
Claims
         • Kris Goodman
           Manager
           GoodmanK1@michigan.gov
           Ext. 60660
         • 800-642-5626
         • Fax: 517-636-0655
 Notice of Default
• Notice of Default is filed with the
  Michigan Guaranty Agency (MGA) when
  an account is 300 days delinquent, but no
  later than 360 days delinquent.
• Student Assistance Corporation (SAC),
  as well as the lender, will continue to call
  the borrower until the account is brought
  current or defaulted and purchased by
  MGA.
Notice of Default (continued)
• If the account is not brought under
  210 days delinquent, MGA will purchase
  the account from the lender, and it is
  placed in default.
Default Amount
• The default amount is the principal and
  interest from the delinquent date to the
  default date.
 Default Amount (continued)
• Example: $5,000.00 loan at 8% interest
  Interest paid through 3/1/03
  Due Date 4/1/03
  Purchased 2/1/04
• Interest paid through date + 1 day (3/2/03) to
  purchase date (2/1/04) = 335 days
• $5,000 x 8% = $400.00
• $400 divided by 365 = $1.09589
• $1.09589 x 335 days = $367.12
• Default amount purchased =
  $5,000.00 + $367.12 = $5,367.12
Collection Costs
• Collection costs are added to the account
  if the account is not paid in full within the
  first 60 days of default.
  Based on current federal regulations,
   collection costs are 25 percent of the
   purchased default amount. (This amount is
   subject to change.)
Addition of Collection Costs
• Default amount was $5,367.12
• Did not pay in full within 60 days
  $1.09589 x 60 days = $65.75
• $5,367.12 + $65.75 = $5,432.87
• $5,432.87 x 25% = $1,358.22
• New balance owed to MGA is:
  $5,432.87 + $1,358.22 = $6,791.09
Collection Activities
• Accounts are collected by MGA for the
  first 120 days after default.
• If there is no resolution in that 120-day
  period, the account may be referred to the
  Michigan Department of Treasury’s
  Collection Division or an Outside
  Collection Agency (OCA).
• MGA may initiate Administrative Wage
  Garnishment (AWG) on an account if
  there have been no payments for 60 days.
Outside Collection Agencies
• Superior Credit Services    800-828-9286
• Van Ru Credit Corporation   800-477-0777
• Enterprise Recovery         800-377-1904
• Allied Interstate Inc.      888-316-9530
• General Revenue Corp        800-347-8209
  (Education Debt Services)
• Treasury/MARCS              800-950-6227
• GC Services                 800-753-8354
Credit Bureau Reporting
• Reported to the four national credit
  bureaus if the account is not paid in full
  within 60 days after default.
• Remains on credit report for seven years.
• Reported as I-9 rating.
  Worse than bankruptcy.
Income Tax Offsets
• MGA can intercept both the State and
  Federal Income Tax refunds.
• The State Income Tax refund is taken
  if/when the account is assigned to the
  Michigan Department of Treasury’s
  Collections Division.
Income Tax Offsets (continued)
• The certification process of requesting
  the Federal Income Tax refund begins in
  July of each year.
  A letter is sent to borrowers that are not
   making payments and notifies them to
   contact our office if they wish to avoid offset.
Income Tax Offsets (continued)
• This gives the borrower the chance to:
  Make payments on the account.
     • To avoid offset, a voluntary payment must be
       received within 65 days of the date of the IRS
       notification letter.
  Set up a review of the account/hearing.
  Pay the loan in full.
Income Tax Offsets (continued)
• Once the account is certified to the IRS,
  any U.S. Department of Treasury checks
  (tax refunds, federal employee retirement
  checks, Social Security checks, etc.)
  will be intercepted until the account is
  paid in full.
The Answer is: “YES!”
• The question is: “Is there anything a
  borrower can do to improve their
  situation once they have gone into a
  default status?”
  Rehabilitation
  Consolidation
  Good Standing Letter - two types
Rehabilitation
• An account can be rehabilitated if the
  borrower complies with the following:
  Nine on-time monthly payments of an approved
   payment amount within a ten month time frame.
     • On-time is defined as within 20 days of due date.
     • One monthly payment can be missed and will still be on the
       program.
  Completion of the Rehabilitation Disclosure Form
   with MGA or by signing the Capitalization letter if
   with an outside collection agency (OCA).
  Balance at the end of nine payments must be greater
   than $200.
Benefits of Rehabilitation
• Reporting removed from the
  credit bureau.
• Reduces collection costs to
  18.5 percent.
• Stops possible offset of taxes.
• Stops action associated with
  administrative wage garnishment.
Consolidation
• Payment must be made that at least covers
  interest and collection costs.
• There is no dollar limit for consolidation.
Benefits of Consolidation
• Reporting as paid in full with the credit
  bureau.
  Changes the rating from I-9 to I-5.
• Reduces collection costs to 18.5 percent.
• Stops possible offset of taxes.
• Stops action associated with
  administrative wage garnishment.
Benefits of Consolidation (continued)

• A borrower may be eligible not to make
  any payments (to the consolidator) if they
  are requesting an:
  Income-sensitive repayment plan for FFELP
   loans, or
  Income-contingent repayment plan for direct
   loans.
Subrogation
• A borrower’s account is forwarded to the
  U.S. Department of Education (ED) when
  they have made no voluntary payments
  on the account within one year and meet
  the selection criteria provided by ED.
• ED’s toll-free number is 800-621-3115.
Good Standing Letter for
Financial Aid
• If a borrower makes six consecutive
  monthly on-time payments, they are
  eligible for a good standing letter that
  will allow for additional financial aid.
• The payments must be an amount
  approved by MGA.
• States on the letter, “Our agency does not
  object to the approval of additional
  Title IV financial aid at this time.”
Good Standing Letter for
Financial Aid (continued)
• If, after a borrower receives this letter,
  they miss one payment or are beyond the
  grace period (15 days), they are no longer
  eligible for further financial aid for the
  life of the defaulted loan.
Good Standing Letter
• If a borrower makes six consecutive
  monthly on-time payments, they are
  eligible for a good standing letter.
• The payments must be an amount
  approved by MGA.
• Does not qualify them for further
  Title IV assistance.
   The letter states, “This letter is not to be
    used for reinstatement of eligibility for Title
    IV financial aid.”
So what’s the difference????
• If a borrower has been reinstated for
  further aid in the past and later miss a
  payment, they can still obtain a good
  standing letter for their mortgage
  company or other creditor.
• Make sure the letter you receive states
  they may receive further financial aid
  and is a current letter.
Questions?

				
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