Equipment Leasing Firm Cuts Costs and Streamlines International Collection Process Utilizing ABC-Amega Recovery Solutions
The Equipment Leasing Industry
Equipment leasing in the United States is a multi-billion dollar industry accounting for more than $200 billion spent by U.S. businesses on productive assets per year, or approximately one-third of all capital investments. According to the Equipment Leasing Association (ELA), about 80% of businesses lease some or all of their equipment. Several thousand organizations provide leases to American business including industrial finance companies, banks, and independent companies.
One of the fastest growing areas of equipment leasing with high future potential is the international market. The ELA estimates one-half of the world’s leasing is done by companies in Europe and Japan.
Industry Collection Challenges
Despite the contractual formalities involved with a lease, a good number do result in either late payment of installments or total default. The ensuing process to collect past due installments, accelerate the contract, repossess the equipment and collect deficiency balances is a complicated and generally long process that often requires attorney intervention.
In foreign markets, the difficulties collecting on defaulted leases are multiplied for the U.S. lessor. Differences in contract and commercial law and business practice, as well as foreign languages and customs, necessitate local attorney intervention. And, the process of finding the right foreign attorneys is time consuming; managing them effectively can be quite complicated; and the hourly rates they require make the process very costly.
Case Study
The equipment financing arm of a Fortune 100 manufacturer of heavy construction and industrial equipment with a dealership network covering more than 200 countries worldwide, found itself facing a growing problem with defaults on lease contracts with foreign companies.
In its U.S. domestic business, the company was able to develop an efficient and effective process to manage late payment issues, defaults, repossessions, and collection of deficiency balances through an in-house staff of collectors and attorneys, and an outside partner – ABC-Amega Inc. – for third party collections.
However, on the international side, they faced challenges that became insurmountable for their in-house international staff, and their outside attorney costs were skyrocketing. They began looking outside for a solution that could simplify the management of these accounts and decrease costs.
The specific challenges they faced in their international markets:
- Foreign language requirements
- Expense of finding, hiring, training and keeping multilingual collection personnel
- Training customers to pay on time
- Finding experienced and reputable foreign attorneys specializing in collections and contract law
- Managing their foreign attorney network
- High costs of foreign attorneys (hourly rates)
- Multiple reporting systems
To meet these challenges, the company decided to try outsourcing two pieces of the process to ABC-Amega Inc. The results were phenomenal, as you’ll see from the following case study.
Challenge #1
Portfolio of late pays by Latin American lessees. Dealers are sales people; do not want to deal with collections. In-house domestic customer service staff does not know the language and are not experienced debt recoverers.
This is a typical problem for U.S. companies with foreign dealers. The dealers speak the local language but are sales people and do not want to have to collect late payments from their customers. As it was difficult to find and keep qualified, experienced, bilingual collections staff, the late pays didn’t get contacted until they had reached a stage where a local attorney had to be brought into the situation.
Solution: ABC-Amega’s SoftCall 1st party collections service with bilingual, Spanish-speaking customer service representatives.
The financing firm outsourced the accounts receivable customer service function for its Mexican and Latin American customers. ABC-Amega’s bilingual Customer Service Representatives (CSRs) called the Spanish-speaking lessees who were late making their lease payments. CSRs continued regular contact to answer questions, resolve disputes and gently remind the lessees that their installments were due.
Result: Within just a few months, 99.88% of past due funds were collected. Quick follow-up on late payments, in the lessee’s own language, helped to instill in these customers that the equipment manufacturer was serious about the terms of their lease agreements and expected all payments to be “on time”.
Challenge #2
Ongoing issue of finding and managing competent foreign attorneys to deal with defaulted lease contracts, repossessions and deficiency balances. Reputable, experienced attorneys are hard to find. Fees are hourly, so costs are high and actual cash recoveries low.
The lessor faced two issues typical for exporting companies:
- They had a large dealer network in more than 200 countries, but hadn’t been able to find the “right” attorneys – English-speaking with expertise in collections, contracts, leasing, etc. – to represent them everywhere.
- All of their attorneys were paid on an hourly basis. Thus, the attorney’s main focus was suing and getting a judgment, not getting the lessee to make payments.
Solution: Outsourcing all international legal collections to ABC-Amega Inc.
Developing and managing an extensive foreign attorney network had become overwhelming and costly for the lessor. They decided to outsource this piece of the collection process by utilizing ABC-Amega and its extensive network of commercial law specialists.
For more than four decades, ABC-Amega has been developing its resource of affiliate attorneys specializing in commercial law and collection. ABC-Amega currently has more than 340 correspondent attorneys in a network covering practically every major metropolitan area. All foreign correspondents are carefully screened based on referrals received from U.S. embassies and other reputable sources in the legal community. They are required to conform to strict reporting standards and are continually monitored to ensure they provide the best representation possible.
To streamline things for the lessor, ABC-Amega assigned a senior international collection manager to act as liaison between the lessor and the foreign attorneys. ABC-Amega supervises all attorney efforts and manages the legal collection process. The lessor has one contact person to deal with, rather than dozens of individual attorneys.
As ABC-Amega utilizes its affiliate attorneys for hundreds of clients, we are able to negotiate very favorable rates, better than any individual company could obtain. In fact, in many countries, our attorneys work on a contingent fee basis – potentially saving thousands of dollars for our clients.
Result: The success of outsourcing attorney management to ABC-Amega is best illustrated by an example involving one Middle Eastern lessee.
In the first quarter of 2003, a civil engineering and building contractor based in Abu Dhabi, United Arab Emirates, entered into three contracts for heavy equipment with our lessor. The total value of the three contracts was $1.3 million dollars over 4 years.
The lessee faithfully paid its monthly installments through December 2004, then stopped making any payments. After three months of in-house efforts to collect, the account was placed with ABC-Amega.
The day the claim arrived, before the file was even physically created, ABC-Amega’s V.P. International Collections called our attorney in the lessee’s area. That same day, the attorney personally visited the debtor’s place of business, and received a commitment to pay all past due installments. Within just nine days of placement with ABC-Amega, the lessor received $149,000 in back payments. Within 13 days of placement, the lessor received a signed agreement from the lessee restating their commitment to the original contact. All collection fees were paid by the lessee as part of their contract.
The Bottom Line
ABC-Amega can provide equipment leasing, or any exporting companies their own virtual Global A/R Customer Service and Collection Department staffed with multilingual, highly trained and professional experts in commercial accounts receivable management and collections.
Our international capabilities save our clients:
- Time. We manage the process for you. Whether you use our 1st party SoftCall service or 3rd party Debt Collect pre- and post-legal collection solutions, we select, train and manage the professional staff. You deal with a single point of contact, and access reporting through easy-to-use web applications right from your desktop.
- Money. SoftCall trains your clients to pay according to your terms. Disputes are handled quickly and effectively. Your DSO decreases. Your cash flow improves. For 3rd party, most fees are strictly contingent. No collection, no fee. When attorney intervention is required, anywhere in the world, we have negotiated the most favorable rates with the most experienced firms.
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