CCP Collection Strategy & Escalation 3 — Questions and Answers
Question 1: The 'waterfall' approach in settlement negotiations means:
- Offering progressively larger discounts as accounts age deeper into delinquency (Correct answer)
- Collecting accounts in order from smallest balance to largest
- Applying payments to interest before principal
- Escalating to legal immediately after first missed payment
Correct answer: Offering progressively larger discounts as accounts age deeper into delinquency
A waterfall settlement strategy authorizes collectors to offer higher discount levels as accounts become more delinquent, reflecting reduced expected recovery over time.
Question 2: Which of the following is a key indicator that an account should be placed in a 'do not call' status within the collections system?
- The debtor has submitted a written cease-communication request under the FDCPA (Correct answer)
- The account balance is under $100
- The debtor's phone number is a mobile number
- The account has been disputed once
Correct answer: The debtor has submitted a written cease-communication request under the FDCPA
A written cease-communication request legally obligates the collector to halt calls and other direct contact, requiring immediate system flagging.
Question 3: A 'promise-to-pay' (PTP) broken rate above 40% in a collections queue most likely indicates:
- Collectors are accepting unrealistic payment commitments without ability-to-pay assessment (Correct answer)
- The collection strategy is working effectively
- The debtor pool has high creditworthiness
- Settlement discounts are too generous
Correct answer: Collectors are accepting unrealistic payment commitments without ability-to-pay assessment
A high broken PTP rate signals that collectors are securing promises without validating debtor capacity, leading to commitments the debtor cannot keep.
Question 4: Under Regulation F (CFPB's FDCPA implementation), the default call frequency limit for debt collectors contacting a consumer about a single debt is:
- No more than 7 calls within 7 consecutive days (Correct answer)
- No more than 3 calls per day
- No more than 10 calls per month
- No more than 1 call per week
Correct answer: No more than 7 calls within 7 consecutive days
Regulation F establishes a presumption of harassment if a collector places more than 7 telephone calls within any 7-day period to a consumer about a specific debt.
Question 5: In collections portfolio segmentation, a 'probability of default' (PD) score is most useful for:
- Prioritizing collector effort toward accounts most likely to respond to outreach (Correct answer)
- Setting the initial credit limit for new accounts
- Determining whether to approve a balance transfer request
- Calculating the charge-off reserve on the balance sheet
Correct answer: Prioritizing collector effort toward accounts most likely to respond to outreach
PD scores help allocate collector resources by identifying which delinquent accounts have the best likelihood of curing, maximizing return on collection effort.
Question 6: Which legal remedy allows a creditor to obtain payment directly from a debtor's employer after a court judgment?
- Wage garnishment (Correct answer)
- Bank levy
- Lien attachment
- Receivership
Correct answer: Wage garnishment
Wage garnishment is a post-judgment remedy that requires an employer to withhold a portion of an employee's paycheck and remit it to the creditor.
Question 7: A collector who threatens legal action they have no intention of taking violates which federal regulation?
- The Fair Debt Collection Practices Act (FDCPA) (Correct answer)
- The Equal Credit Opportunity Act (ECOA)
- The Truth in Lending Act (TILA)
- The Fair Credit Billing Act (FCBA)
Correct answer: The Fair Debt Collection Practices Act (FDCPA)
The FDCPA explicitly prohibits false, deceptive, or misleading representations, including threats of legal action that the collector does not intend to pursue.
CCP Collection Strategy & Escalation 3
The 'waterfall' approach in settlement negotiations means: