NFCC Credit Solution Plan

NFCC Credit Solution Plan Implementation Training Guide for Credit Counseling Agencies Updated Jan 2017

Guide s Purpose What is CSP? How does CSP work? NFCC Credit Solution Plan (CSP ) Implementation Training Guide Contents Why is CSP important? CSP Development Background CSP General Requirements CSP Benefits CSP and the Counseling Process CSP Protocol CSP DMP Applying CSP and Non-CSP Terms CSP Protocol Data Movement Resources to Support Implementation 2

Guide s Purpose To provide a common framework for each agency s training: Information relevant to all agencies regardless of CMS Consistent message about short and longer term objectives of the initiative How applying the CSP Tiers and resulting DMP is different from current practice, and the projected incremental lift What may be different in the counseling process but is now common to all agencies Important changes to all agencies documentation process and RPPS file preparation Expect that agencies will add additional content to address their specific counseling model and CMS / budget / DMP development process 3

What is the Credit Solution Plan? The Credit Solution Plan (CSP) is an initiative led by the NFCC Advisory Council which began in 2012, with significant ongoing input and participation from major creditors and member agencies. The CSP represents a shift to a uniform counseling protocol with standardized criteria, combined with agency and creditor best practices, and a set of three tiers of concessions applied consistently by participating creditors to a consumer s repayment plan (DMP). CSP s three tiers of concessions enable agencies to build trust and confidence with the client as well as improve consumer options and solutions. This will simplify the process for both agencies and creditors, allowing increased efficiency and enhanced service, and accelerate speed of resolution for the consumer. 4

How does the CSP work? DMPs will be submitted utilizing existing sector platforms CSP creditors will accept a monthly fixed payment of either: Tier 1: 2.25% Minimum Monthly (MMP) (max APR of 12.5%) Tier 2: 2% MMP (max APR of 7.5%) Tier 3 (Hardship): 1.75% MMP (max APR of 2%) All three tiers must amortize within the 60 month timeline required by FFIEC AMG guidelines 5

Why is CSP Important? Both agencies and creditors are working to expand and agree on best practices to enhance the DMP process from counseling through set up. CSP improves the quality and transparency of information and increases operational efficiency for both agency and creditor by mitigating back and forth communication resulting from inconsistent and/or missing client information. 6

Why is CSP Important? Continued CSP provides a foundation for future product development by facilitating segmentation according to consumer need and ability to repay (potential less than full balance product). CSP will generate consumer demand to receive quality, holistic financial counseling and to responsibly pay back outstanding debt by expanding and tailoring solutions to meet their specific needs and circumstances. Conservative projected DMP enrollment lift as a result of CSP shows an incremental 3% of clients would be eligible for a DMP and an additional 7.6% of clients would benefit from the more favorable concessions. 7

CSP Development Background NFCC Advisory Council led initiative which was begun in 2012 Implementation & Technology Working Group: To operationalize the CSP Protocol Bridging the Gap Working Group: To drive more customers to counseling, increase DMP conversion rates, and improve DMP retention Significant input and participation by member agencies Provided client data and feedback to CSP Protocol Validation project Participated in line by line review to finalize Protocol, define income and expense line items, and update associated RPPS definitions Key members of the CSP Implementation Planning Group (IPG) NFCC staff in continued ongoing conversations with Top Ten creditors regarding sustainable funding and CSP participation 8

CSP General Requirements Regardless of CMS, agencies will utilize both a uniform counseling protocol (the CSP Protocol) to assess the client s financial situation and agency best practices to determine a client s ability to support a DMP. DMPs will be submitted utilizing existing sector platforms, but participating creditors will have the option of receiving the full Protocol for individual clients after they are fully decisioned. Participating creditors will accept a monthly fixed payment of either: Tier 1: 2.25% Minimum Monthly (MMP) (max APR of 12.5%) Tier 2: 2% MMP (max APR of 7.5%) Tier 3 / Hardship: 1.75% MMP (max APR of 2%) 9

CSP General Requirements Continued Three significant changes from current concessions (including CTA): Adds CSP Tier 1 as the maximum MMP / APR a creditor would require CSP creditors can counter-offer only to another CSP Tier and no higher than CSP Tier 1 Non-CSP creditors will be included at all existing terms Some creditors will continue to offer CTA terms until they phase in CSP Tiers All plans must amortize in a maximum of 60 months to conform to existing regulations All plans also are subject to general creditor policy (i.e., eligibility, missed payments, re-enrollment, etc.) 10

CSP General Requirements Continued Agencies and creditors will incorporate the following changes to MasterCard RPPS to implement the CSP: Four new Hardship Reason codes to clearly identify unexpected / catastrophic, housing, student debt and military service related situations Three new Client Type Indicator codes for the three CSP Tiers Agencies and solution providers will update their RPPS FBD mapping to align with the Protocol line items and definitions Participating CSP creditors may decide to support receipt of the RPPS CDN Note (if they don t already), although when agencies prepare a CDN Note, one common CDN for each submitted client should be sufficient The common CDN will be based on the Client Summary completed as part of the budget review 11

CSP General Requirements Continued Agencies and creditors will report selected CSP-related data similar to what has been required for the Call to Action (CTA) 12

CSP Benefits Projected enrollment lift: In late 2013, a sample of ~400 financial counseling sessions from 14 agencies was analyzed to determine the potential impact of the CSP Tiers versus current concessions on DMP eligibility and likely retention Based on that review, an incremental 3% would now be eligible for a CSP DMP Under Current DMP terms, had outcomes of Insufficient Funds; Eligible but Declined; or Unknown and were not enrolled in a plan Would translate to 11.3K additional NFCC clients, based on FY 2012 NFCC Financial Counseling activity An additional 7.6% could benefit from CSP terms more favorable than current DMP Would represent 28.2 K clients better able to manage repayment Confidential - Not For External Distribution 13

CSP Benefits Continued Improved creditor and agency operating efficiency resulting from: A common counseling Protocol applied consistently across agencies and clients within agencies CSP Tier concessions applied consistently across all participating creditors in a client s DMP Agency and creditor best practices which will improve the quality and transparency of client information and will mitigate back and forth communication prior to decisioning the DMP Creditor best practices include: Creditors will accept proposals at the CSP Tier indicated at submission; will accept allocation of any Tier Surplus Funds as best addressing the client s financial situation Agency best practices include: Counselors will verify client income to the extent possible; every CSP budget should include a minimum $25 monthly savings amount 14

CSP and the Counseling Process The objective of the CSP Protocol is to bring consistency, as much as is practical, to the collection and presentation of a client s financial data To help achieve that objective, a set of CSP Standards has been developed as counseling best practices to contribute to a complete and accurate picture of a client s financial circumstances These may result in a more detailed discussion of some budget items than has been current practice Income Verification: To the extent possible, income should be verified by paystubs or other independent means, as well as the counselor s general knowledge of regional pay ranges Notification: When the appointment is scheduled, clients should be notified that they should be prepared, if possible, to provide income verification 15

CSP and the Counseling Process Continued Monthly Food Expense: To benchmark monthly food expense per household member, this site is recommended and will ensure consistency across clients / geographies: http://www.cnpp.usda.gov/usdafoodcost-home.htm. Counselors should use the low cost plan for males 19 50 (which for Jan 2017 is $237.20 / month) as the monthly maximum for EACH individual in the plan household Can be less or more, as actual circumstances require Amounts above the benchmark should be documented in the line item Note Savings Requirement: Every CSP budget should include at least $25 per month for household savings and the Protocol assumes that minimum as part of the Plan budget Seasonal workers should be encouraged to save more, if practical, to smooth their income stream 16

CSP and the Counseling Process Continued Miscellaneous: Account for any other household expenses not already included Should be itemized in the line item Note AND captured in the Client Summary if they exceed the lesser of 10% of monthly net income or $250 Cash / Near Cash Assets: Counselors should inquire about cash / near cash assets and include if likely to be of material assistance Document in the Client Summary if or how those assets will be used to improve the client s financial situation Electronic Balance Verification ( EBV ): Counselors are strongly encouraged to utilize EBV for all accounts included in the CSP unless a balance is known to be 10 or less calendar days old and / or known not to have any additional transactions provided that the creditor supports and makes an EBV available An EBV should be considered even if a credit bureau report has been pulled to ensure that the most current balance and payment information is reflected in the client s budget / proposal 17

CSP Protocol Feedback from both agencies and solution providers was that current client management systems (CMS) already incorporate the Protocol s detailed line items While this is generally true, adopting the Protocol will improve consistency and transparency across both clients and agencies In addition to the CSP Standards, several notable changes have been made to the client budget (the Protocol) to better represent the current and Plan financial position Total Number in Household: Change from Number of Dependents ; more accurately defines who (and how many) the budget represents Client and Spouse / Partner / Other (s/p/o): Separate sources for income but not expenses as feedback indicated that those are generally considered as household Current and Plan budgets: Plan budget should reflect any adjustments that would balance income and expenses to enable DMP enrollment 18

CSP Protocol Continued Line item Notes and Client Summary: The Protocol requires documentation of out of pattern income or expenses Line item Notes will be available to creditors via the CSP Protocol Data Movement Detail relevant to the proposal s acceptance should also be included in the Client Summary which may be made available to participating creditors through the RPPS CDN Note as support for the proposed CSP Tier New line item for Student Loans and clearer directions about Other debt Student Loans will now be broken out under Monthly Household expenses, and no longer be considered a Miscellaneous expense Other debt (such as Payday / Title loans or Secured debt) will be listed in Monthly Creditor payments (although not necessarily in the DMP) and not in Miscellaneous expense 19

Applying CSP and Non-CSP Terms in a DMP Participating creditors will accept a monthly fixed payment of one of the three Tiers NOTE: The Tier payment will be the same percentage for all CSP creditors in the DMP, which is a change from current practice. Each Tier has a maximum APR, so be aware, creditors may choose to implement an APR lower than the maximum. Please be cognizant of these nuances as you update your CMS platforms. The only exception to all creditors accepting the same tier occurs when a creditor counter-offers. If the creditor counter-offers, it must be for another CSP Tier and no higher than Tier 1 (2.25% MMP) / (12.5% APR). Creditors are committed to minimizing counter-offers. We do expect a higher number of counter-offers at the start of the creditor s implementation of CSP. Then as creditors gain experience and confidence with the process, we expect counteroffers to diminish greatly. Non-CSP creditors will be included at existing terms 20

NFCC CSP Implementation Training Guide Applying CSP and Non-CSP Terms in a DMP Continued If there are Tier Surplus Funds: Any client disposable income in excess of what is required to meet a CSP Tier MMP, but not sufficient to support the next higher Tier May be allocated to non-csp or CSP creditors at the discretion of the counselor / client to maximize client benefit Where client disposable income is allocated to CSP creditors, that allocation should be on a pro rata basis When implemented, DMPs may include both CSP and non-csp creditors Creditors will phase in CSP participation so some may offer existing CTA terms (and, possibly, others) until operationally ready Non-CSP creditors with both single and multiple plan options will be included at the most appropriate option 21

NFCC CSP Implementation Training Guide Applying CSP and Non-CSP Terms in a DMP Continued The following slides provide three examples of how a client s disposable income should be allocated to accommodate both CSP and other terms. Additional examples are included in the Appendix. NOTE: Each creditor renders an independent decision in response to a client s application for CSP participation and concessions, and the NFCC has no responsibility for or influence on that decision. Each counseling agency also makes an independent decision whether to incorporate the CSP Standards into its counseling. By incorporating any element of the CSP Protocol or CSP Standards into its operations, an agency agrees to waive any right to pursue claims against the NFCC related to the CSP Protocol or CSP Standards, including but not limited to claims concerning counseling or the outcomes of applications for creditor concessions. Additionally, by accepting from the NFCC a copy of the CSP Protocol or CSP Standards, you agree on your own behalf and on behalf of your employer to not disparage the CSP to a third party. 22

Applying CSP and Non-CSP Terms in a DMP Continued Example Plan Scenario #1: CSP implementation has started, and Chase as well as Discover have converted to CSP Client Financial Summary Client s household income captured per CSP Protocol $ 3,950 Client s household expenses (including Student Loans, captured per CSP Protocol) $ 3,225 Available funds for DMP $ 725 Client s outstanding balances with DMP eligible creditors $27,750 23

NFCC CSP Implementation Training Guide Applying CSP and Non-CSP Terms in a DMP Continued Plan Scenario #1 continued: Evaluate creditors for CTA and / or CSP participation to determine what level of concessions is required Household Income (captured per CSP Protocol) 3950 Household Expenses (including student loans, captured per CSP Protocol) 3225 Available funds for DMP (DMI) 725 Monthly Creditor s CTA (?) CSP (?) Balance Regular DMP Payday Loan 500 50 Medical Debt 1200 36 Collection Agency 4200 126 National Retailer Card 2100 42 Regional Credit Card 5250 118 CSP Tier 1 CSP Tier 2 CSP Tier 3 Chase Visa x 8000 180 160 140 Discover x 6500 146 130 114 Agency Monthly Fee 50 Regular DMP payments are calculated for non-csp creditors Then Tier 1, Tier 2, and Tier 3 payments are calculated for CSP creditors Lastly, payments by Tier are compared to available funds Total 27750 422 326 290 254 Total DMP payment by Tier 748 712 676 Tier 2 is selected 24

Applying CSP and Non-CSP Terms in a DMP Continued Example Plan Scenario #2: CSP implementation has started, and client has a mix of CSP and CTA creditors Client Financial Summary Client s household income captured per CSP Protocol $ 5,300 Client s household expenses (including Student Loans, captured per CSP Protocol) $ 3,600 Available funds for DMP $ 1,700 Client s outstanding balances with DMP eligible creditors $ 61,600 25

Household Income (captured per CSP Protocol) 5300 Household Expenses (including student loans, captured per CSP Protocol) 3600 Available funds for DMP (DMI) 1700 Monthly Creditor s NFCC CSP Implementation Training Guide Applying CSP and Non-CSP Terms in a DMP Continued Plan Scenario #2 continued: Evaluate creditors for CTA and / or CSP participation to determine what level of concessions is required CTA (?) CSP (?) Balance Regular DMP National Retailer Card 5500 110 Collection Agency 6200 186 Regional Credit Card 1200 30 Medical Debt 12000 360 American Express x 5200 117 104 CTA Standard CTA Hardship CSP Tier 1 CSP Tier 2 CSP Tier 3 Chase x 8000 180 160 140 Discover x 10000 225 200 175 Wells Fargo x 7000 158 140 123 Sychrony (GE) x 6500 146 130 114 Agency Monthly Fee 60 Total 61600 863 104 0 709 630 551 Total DMP payment by Tier w/ Regular DMP 1572 1493 1414 Total DMP payment Confidential. by Tier w/ Not CTA Standard for distribution. 1559 1480 1401 Regular DMP payments are calculated for non-csp creditors CTA payments are calculated for CTA creditors Tier 1, Tier 2, & Tier 3 payments are calculated for CSP creditors Lastly, payments by Tier are compared to available funds Tier 1 is selected; note excess funds of $128 26

NFCC CSP Implementation Training Guide Applying CSP and Non-CSP Terms in a DMP Continued Plan Scenario #2 continued: In this example, excess funds of $128 ( Tier Surplus Funds ) are allocated among CSP creditors Creditor Adjusted National Retailer Card 110 110 Collection Agency 186 186 Regional Credit Card 30 30 Medical Debt 360 360 American Express 117 117 Chase 180 213 Discover 225 266 Wells Fargo 158 186 Distributed pro rata among the four CSP creditors (Chase, Discover, Wells Fargo and GE / Synchrony) Based on the balance owed by the client, i.e., the creditor with the largest balance (Discover) received a higher percentage of the excess funds Synchrony (GE) 146 173 Total Creditor s 1512 1640 Agency Fee 60 60 Creditor CSP $ Bal. % CSP Bal Excess Pymt Chase 8000 25.4% 33 Discover 10000 31.7% 41 Wells Fargo 7000 22.2% 29 Synchrony (GE) 6500 20.6% 26 128 Total DMP 1572 1700 27

Applying CSP and Non-CSP Terms in a DMP Continued Example Plan Scenario #3: CSP implementation has started, and client has a mix of CSP and CTA creditors Wells Fargo and Barclays have converted to CSP; GE / Synchrony and Capital One have not and both offer CTA Standard and Hardship concessions Client Financial Summary Client s household income captured per CSP Protocol $ 2,800 Client s household expenses (including Student Loans, captured per CSP Protocol) $ 2,251 Available funds for DMP $ 549 Client s outstanding balances with DMP eligible creditors $ 22,800 28

Household Income (captured per CSP Protocol) 2800 Household Expenses (including student loans, captured per CSP Protocol) 2271 Available funds for DMP (DMI) 529 Current Monthly Creditor s NFCC CSP Implementation Training Guide Applying CSP and Non-CSP Terms in a DMP Continued Plan Scenario #3 continued: Evaluate creditors for CTA and / or CSP participation to determine what level of concessions is required CTA (?) CSP (?) Balance Regular DMP Comenity 1200 36 Credit Union Loan 2600 65 CTA Standard CTA Hardship GE/Synchrony x 4000 100 80 70 Capital One x 5200 117 104 91 CSP Tier 1 CSP Tier 2 CSP Tier 3 Wells Fargo x 6000 135 120 105 Barclays x 3700 83 74 65 Regular DMP payments are calculated for non-csp creditors CTA payments are calculated for CTA creditors Tier 1, Tier 2, & Tier 3 payments are calculated for CSP creditors Lastly, payments by Tier are compared to available funds Agency Monthly Fee 75 Total 22700 393 184 161 218 194 170 Total Confidential. DMP payment Not by Tier for w/ distribution. CTA Standard 578 554 530 Total DMP payment by Tier w/ CTA Hardship 555 531 507 Tier 3 is selected; note excess 29 funds of $22

NFCC CSP Implementation Training Guide Applying CSP and Non-CSP Terms in a DMP Continued Plan Scenario #3 continued: In this example, excess funds of $22 ( Tier Surplus Funds ) are allocated among CSP creditors Creditor Adjusted Comenity 36 36 Credit Union Loan 65 65 GE/Synchrony 70 70 Capital One 91 91 Wells Fargo 105 119 Barclays 65 73 Total Creditor s 432 454 Distributed pro rata among the two CSP creditors (Wells Fargo and Barclays) Based on the balance owed by the client, i.e., the creditor with the largest balance (Wells Fargo) received a higher percentage of the excess funds Agency Fee 75 75 Total DMP payment 507 529 Creditor CSP $ Bal. % CSP Bal Excess Pymt Wells Fargo 6000 61.86% 14 Barclays 3700 38.14% 8 22 30

CSP Protocol Detailed Data (Phase 1b) Participating creditors will have access to CSP Protocol client detail for fully decisioned CSP proposals. Creditors will have access only to their clients via a secure communication method. No personally identifiable data ( PII ) will be included; a unique client I.D., assigned by the agency, will tie the client CSP Protocol data to the submitted proposal. Data not to be used for decisioning proposals or collections efforts but for analytic purposes such as CSP performance at the agency level and other portfolio management only. Details of the Protocol data movement are still in discussion. A short term solution where a subset of agencies will share data with the creditors will be leveraged initially. Once all creditors are on board, a long term solution will be researched and implemented. 31

CSP Protocol Detailed Data (Phase 1b) Continued The NFCC will have access to CSP Protocol client detail from member agencies. Client detail will be for those CSP proposals that have been fully decisioned. No personally identifiable data ( PII ) will be included; a unique client I.D. will be assigned by the agency and used, if necessary, for reference. Data will be used for analytic purposes only. 32

Resources to Support Implementation For more resources, please reach out to the NFCC at info@nfcc.org. 33