[Collections & Credit Risk - Table of Contents] January 2002

Sleuths' Top Tools

Web-based skip-tracing and asset-location solutions may be glitzier than CD-ROMs and paper-based directories, but end-users still place a premium on freshness of data and price when choosing their weapons.

By Peter Lucas

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In the late 1990s, skip tracing and asset location were energized by Web-based applications that provided instant access to vast databases and enabled skip tracers to quickly locate individual debtors and their assets with a few keystrokes.

No more having to sift through phone books or reams of documents detailing consumer address changes or bank accounts. Without a doubt, a great tool for a high tech era.

But while the advent of Web-based applications has made it easier for skip tracers to perform their jobs, it has not completely replaced older technologies, such as CD-ROMs or paper-based documents. That's because, no matter how sophisticated skip-tracing technologies become, end-users continue to place a premium on the quality and freshness of data, user friendliness, the ability to integrate the skip-tracing applications across their existing operating platform, and value for the price paid.

Price for performance remains a key issue for end-users, especially as consumers have become more wary about supplying information about themselves to data warehouses and routinely opt out of consumer mailing lists. At the same time, the Gramm-Leach-Bliley Financial Services Modernization Act has curtailed the ability of skip tracers to quickly and inexpensively obtain core information on debtors contained in the header of a credit report, such as a consumer's Social Security number.

"The technology is certainly better for finding people, but getting good data is getting tougher as people become more cautious about providing personal information, so that puts a premium on the price of the tools you use," declares Denise L. Decker, owner of Debt Recovery Specialists, a Mt. Vernon, Wash.-based skip-tracing firm. "There are lots of tools that will be used."

CD-ROMs remain a popular tool for cost-conscious users, especially if the information on the disk can be shared across an internal network. The ability to do so minimizes the number of CD-ROMs that need to be purchased and speeds distribution of the data contained on the disk. Decker says her firm uses PowerFinder, a CD-ROM containing an electronic directory from Omaha-based InfoUSA.

The disk allows agents to search for the most current address and phone number for debtors nationwide and narrow their searches by country or other geographic region. It can even pull information on the debtor's neighbors. PowerFinder also contains addresses and phone numbers for businesses. Data is updated on a quarterly basis. "The CD is compatible with our operating platform and provides accessibility of data to all employees at once over our network, and the data is current," Decker says.

Accessibility of data across an existing operating platform is critical, especially for small skip-tracing shops that can't afford to replace their existing infrastructure to add a new application.

To that end, Orange, Calif.-based Experian works with leading vendors of collections software such as Vancouver, Wash.-based Columbia Ultimate Business Systems and Muncie, Ind.-based Ontario Systems to make certain their skip-tracing and asset-location tools are compatible with multiple platforms. "Information needs to flow seamlessly across any platform," says Amar Bougarb, market segment manager for Experian. "Compatibility is a need we constantly hear voiced in the marketplace. If there is no compatibility, people are not going to use the product."

Experian currently offers several skip-tracing and asset-location tools, ranging from address and phone directories to modules that locate consumers by their Social Security number. The latter, known as Social Search, lets end-users input up to 20 Social Security numbers at once and match them to names in Experian's consumer credit database.

Creditors that have a permissible purpose according to the Fair Credit Reporting Act can obtain all available identifying information on the debtor, which can include a driver's license number. The tool is frequently used to track down debtors who may have changed their name or for whom there is no other valid identifying information than a Social Security number. Teletype, CPU-CPU, and tape-to-tape processing are available.

While many vendors offer separate skip-tracing modules, some vendors of collections software have opted to integrate their skip-tracing solutions into their platforms. Simi Valley, Calif.-based Collection Data Systems has integrated skip-tracing tools into its Collect One-Tiger software system. "When collectors want to perform skip tracing they want to know the tools are integrated into the collections software," says Steve Cohen, vice president of sales and marketing for Collection Data Systems. "It's as important as having an interface to all three of the major credit bureaus."

Collect One-Tiger also includes an interface to Merlin Information Services, a Kalispell, Mont.-based vendor of online skip-tracing databases. "Skip tracing is critical and what we can't provide in terms of services, we do so through partners, because providing the best possible information is key," adds Cohen.

Columbia Ultimate Business Systems partners with Phoenix-based Acollaid, a provider of skip-tracing and asset-location applications for electronic directory assistance and Minneapolis-based Banko, a provider of credit information services - both divisions of Dolan Information. The tools are offered as separate modules. CUBS is also developing an online skip-tracing application.

Like many providers of skip-tracing services, CUBS enables end-users to run searches in batch mode. "You've got to be able to batch track and integrate that into the system," insists Julie Hanestad, operations manager for Eskanos & Adler PC, an Oakland, Calif.-based collections law firm. Eskanos & Adler uses a variety of skip-tracing tools, from CD-ROMs to the Internet. The key is the dollar value of each tool, especially when it comes to asset location.

Hard to Find
Indeed, end-users say it is difficult to find providers of asset-location tools that are accurate and reliable. Part of the reason is that privacy laws are making it increasingly difficult to secure information about a debtor's bank account or other assets against which a judgment can be attached.

For example, skip tracers can no longer call a creditor to perform an asset location nor are they allowed to contact utilities to gain financial data about a debtor, such as an account they may set up with a direct debit to pay their monthly bills. Hence, when they do find a reliable source for asset location, they prefer to keep the information close to the vest for competitive reasons.

"We've only found one good source for bank accounts," says Hanestad, who declines to be more specific. "Asset location is a tough nut to crack and having an address on a debtor is not going to solve the problem. We can do a bank levy or a job search on our own, but those are expensive and about 40% of job searches are either not valid nor are they particularly effective in finding self-employed people."

Given the limited number of reliable asset-location services, end-users say they typically give their asset-location business to a single vendor. "It is a drawback to put all your eggs in one basket because you don't have any alternatives when prices rise," adds Hanestad.

Not surprisingly, price plays an important role in what skip-tracing and asset-location tools end-users will select. "I'm a one-man shop, so my budget is limited as to what I can spend," says Chris Blank, owner of Asbury Park, N.J.-based Nationwide Tracers. "If it is not cost effective, I'm not buying it."

End-user emphasis on price, quality of data, and compatibility does not mean there is little or no room for online tools in a skip tracer's arsenal. St. Cloud, Minn.-based RiskWise LLC, a wholly owned subsidiary of Lexis-Nexis, offers several online databases to track debtors. In addition to the standard address and phone number verification, RiskWise can identify debtors that may be deceased, as well as locate property, such as a home or automobile owned by the debtor, and any liens that may be outstanding against those assets.

Batch mode searches can be customized, such as providing collectors with the three most current addresses and phone numbers for a debtor. "Our aim is to automate the skip-tracing process and help streamline labor costs," explains R. Dane Mauldin, manager of the batch solutions group for Lexis-Nexis. "That becomes more important to users in a recession, because they are looking to achieve the same level of performance at less cost."

Dollar-driven Decision
Indeed, the softening economy is prompting many creditors to purchase skip-tracing and asset-location tools rather than farm those functions out to third parties, according to Mauldin. "It's all being driven by dollars," he says. "Creditors and lenders see they can avoid a lot contingency fees by doing a lot of the legwork up front."

How much legwork creditors want to perform depends on the human resources they have to dedicate to skip tracing. Some creditors prefer to run more basic skip-tracing functions, such as address and phone number searches. "We have banks and lenders using our product as a first step in the collections process," says Lawrence R. Etienne, vice president of consumer products and subscription sales for InfoUSA. "How far they are willing to go depends on how skilled they are in skip tracing."

Most of that effectiveness comes down to the quality and freshness of data. While many vendors have improved the quality of the databases, some end-users remain skeptical that they are working with the most current data available. They point out that while many suppliers of CD-ROMs update their directories quarterly, the information is still several months old by the time the new copy reaches them.

Questions also persist about the freshness of online databases, since it may take weeks or months for notification of a change of address to be supplied by the post office. The same is true for a death notice from the Social Security office.

"Quality of data is not always as great as it is marketed to be, especially with privacy becoming a bigger issue with the public," says Eskanos & Adler's Hanestad. "The battle for the skip tracer is to get more data than what is contained in the credit report, and that's why accuracy and dollar value are key."

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