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[cubbiesnextyr]

For those who haven't seen it yet:

http://forums.prosper.com/index.php?showtopic=31159

Given all of the threads about Collections on the Forum, I asked Doug Fuller, Prosper’s new Vice President of Operations, to answer some questions so I could post his answers here.

Shira


Doug Fuller, background:
For over two decades Doug Fuller has been a leader in data driven operations management and process optimization with a specialty in collections and risk-management.

Most recently he served as Chief Research Officer at Credigy, a provider of receivables management services focused on the purchase and servicing of distressed receivables. Prior to Credigy, Dr. Fuller served as a principal consultant for Priority Perspective, where his clients included Credigy, GE Card Systems, Ontario Systems, and Thornton Capital Advisors. Prior to his consultancy, he served as Senior Vice President at First Select Corporation/Providian Financial where he led the development and implementation of collection and recovery management systems. In addition, he led Providian’s fraud management activities including detection and prevention of transactional fraud and identity theft.

Dr. Fuller has served as an advisor for the Visa International Fraud Executive Committee, TransUnion Risk Management Panel, Ontario Systems – Artiva Advisory Group, Intelligent Results – Predigy Advisory Group, and Royal Media – Collection Technology Summit. He holds a Ph.D. in Systems Engineering from the University of Virginia and a B.I.E. with highest honors from the Georgia Institute of Technology.

Doug views his role as a steward for Prosper lenders and the integrity of the marketplace. He believes that it is necessary to be as aggressive as regulations permit and to prosecute the most egregious debtors to the full extent of the law.
Doug is methodical in his approach to collections. Drawing on his decades of experience, Doug has already begun an intensive quantitative and qualitative examination of Prosper and its third party collection agencies’ payment recovery techniques and performance. Based on his initial findings, he is confident that there are some short-term solutions that will have a positive near-term impact on Prosper’s recovery rate. In addition, he has developed a laundry list of longer-term strategies aimed at earning Prosper a reputation as one of the leading payment recovery operations in the industry.


Q: Doug, what’s the best way to evaluate your experience in risk management?
A: In my opinion, in order to really evaluate the breadth and depth of somebody’s experience, it is important to look at such things as “span of control”, size of budget and/or P&L and the number of people that a person has hired or fired. In my case, the largest number of people that I’ve had reporting to me was 342 (Providian Fraud). In my most recent job (Chief Research Officer of Credigy); I headed an organization of 72. In terms of P&L experience, my experience was in the small business environment – the maximum P&L that I was responsible for was $22 million. In terms of budget, while head of Fraud at Providian, I controlled an expense line of more than $110 million.

Q: What kind of experience do you have related to unsecured lending risk?
A: My first experience with unsecured lending risk was when I consulted for Capital One while working on my PhD at the University of Virginia. My PhD advisor and I were brought in by Rich Fairbanks, the founding CEO of Cap One, to look at how well, or even if, they were applying their “Information Based Strategy” to the world of Risk Operations. The resulting report served has the blueprint for a complete overhaul of their Risk organization – including the creation of a new SVP position heading Risk Analytics.

Q: What came next?
A: In the course of doing the “Systems Analysis” for Cap One, it became apparent that they had no analytic talent looking at their credit card authorization subsystem. The problem statement that I was given was “Increase our authorization approval rate without increasing our risk.” The resulting “soft credit limit analysis” system was credited with an $8 million impact to Cap One’s bottom line in the first 12 months of operation.

Q: That’s interesting, but is it relevant to Prosper’s business?
A: It depends on how you look at it – I believe that the combination of quantitative and process analytics can improve virtually any business situation – be it optimizing test coverages to maximize the capacity of a semiconductor module line, revising block scheduling procedures to triple patient capacity in an out-patient endoscopy lab or revising the call sequencing strategy to more than double the number of “right party connects” in a collections call shop.

Q: That last one sounds like its directly relevant, will you tell us more?
A: When I arrived at First Select (charged-off debt buying and collections subsidiary of Providian Financial), the first thing that I looked at was our dialer strategy. It was painfully bad – we had an example of an account where 49 calls had been placed to the same phone number in the course of three weeks – all 49 calls covered a span of less than 90 minutes of the day. We had another case where we made 61 calls to the same disconnected number. The first step was to “stop the bleeding” – quit doing the really, really dumb stuff. The second step was to implement a well designed call coverage and rotation strategy. The first step bought us more than 20% improvement. The second step took about 4 months to accomplish, but doubled our results.

Q: Can you do the same thing with Prosper’s collections calls?
A: Actually, for the month of September, we’ve seen greater than a 40% increase in the contact rates at our primary collection agency.

Q: To what do you attribute the improvement?
A: The squeaky wheel gets the grease. Seriously, the problem that we have is that we have very low volume. At our current primary agency, we represent about 2.5 full time employees of a workforce in a 700+ collector organization. It turns out that on a lot of days, our dialer job was started at about the same time (of day) – not the way to maximize your contacts.

Q: How will you bring about the rest of the improvements you discussed?
A: If the agency is willing to work with me, I’m confident that we can improve. If not, I’m going to find a different agency – or possibly just bring it in-house.

Q: What else are you thinking about for Prosper collections?
A: We have to have a legal strategy. I listened to hours-worth of calls with delinquent Prosper borrowers. One of the things that we emphasize in the call is that the delinquent borrower is not hurting some faceless corporation, they are impacting the 20, 50, 200 “ordinary Joes” that funded their loan. Based on the calls that I’ve listened to, this is a clear advantage in some portion of early delinquency calls – there is a personal connection that motivates the borrower to pay. At some point, this advantage flips – the “debtor” (and I use that term with intent) says to themselves that Citibank and American Express are going to sue me – GMAC going to repossess my car -- what’s Prosper going to do to me? Even though debtors could face lawsuits from the debt buyers of Prosper’s defaulted loans, if debtors don’t think they will be sued, this is a perception we have to change.

Q: Do you have experience with suing people?
A: Oh yes. Between First Select and Credigy, I have been responsible for making the decision to sue more than 150,000 people. There are a lot of lawyers that can’t claim that number of suits in a lifetime.

Q: Well why don’t we just sue everybody?
A: The phrase “blood from a turnip” comes to mind. One of the ways that you can go broke in a big way is by suing people that will never be able to pay you at all. Simple math, it costs a lot of money to sue people.

Q: Okay, so you need to decide who to sue, then what?
A: Put quite simply, my philosophy is this – if you won’t pay, but can (or will in the future) be able to pay, I’m going to sue you. If I sue you I’m going to win.

Q: That sounds kind of arrogant, can you back it up?
A: Courts in seven states have recognized me as an expert at consumer debt litigation. At Credigy, if a case got really nasty, I would go testify live. I refuse to lose.

Q: Really? What’s your win/lose record?
A: In my last 18 months at Credigy, I testified live at 42 trials. My record was 41-1. By the way, I fired the law firm where we lost.

Q: What’s the toughest aspect of this type of lawsuit?
A: By and large, judges are comfortable if you can show them a signature on a piece of paper. The vast majority of judges grew up long before the internet and the passage of the “e-signature” bill during the Clinton administration. Sometimes you’ve got to spend a lot of time educating them.

Q: How do you do this?
A: I have been qualified as an “expert witness” in seven states on the subject of the electronic records of consumer lending transactions. There was a judge in Texas that had me on the stand for more than three hours – the majority of the time, the judge was quizzing me. Other than I missed the last flight home, I thought it was time well spent – he never questioned any of our requests for default judgment after that.


Q: Doug, thank you. With all of your plans, I’m going to stop the questions and let you get to work on improving Collections at Prosper.
A: Thank you.

[bamalucky]

Sounds like a hard ass..I hope it's genuine.

Btw,if he ever visits forums with that attitude you will be doing 1000 years with me.

[Mtnchick]

Hmmm

Sounds pretty sure of himself which can be good, can be bad.

But IMO, he's basically just said everything we've been saying for months. Not sure why they had to hire someone (at a nice salary, I'm sure) to do what he's doing. Though if he's the one who can finally make P----r pay attention to how screwed up things have been from Day 1, then more power to him.

[DakotahFury]

Arrogant prick...I like him.

[raalcala]

debtors don’t think they will be sued, this is a perception we have to change.

More lawsuits? 

[112233]

so sure of himself that he won't post in the forums and let's shira proofread his posts?

[bamalucky]

so sure of himself that he won't post in the forums and let's shira proofread his posts?

I see no reason for him to come to the forums..Cameron told me he would never come to forums either

[Fred93]

Shira's recent post noted Doug Fuller's PhD from U Virgina, so I looked up his thesis:

An exploration of population classification for managed healthcare within a state-based modeling framework. Fuller, Douglas Neal, PhD. UNIVERSITY OF VIRGINIA, 2000. 217 pp. Advisor: Scherer, William T.

From the title, it doesn't seem related enough to the current issues to get me interested in reading it, so I didn't order the .pdf file.  

[Urbi_et_Orbi]

It's not perfect, but at least he's communicating with us (albeit indirectly) - and saying some of the right things.  I don't know if he can back up the tough talk with action (or if he will last more than 3 months), but I hope some prospective borrowers read the Q&A.

He definitely needs to make sure he advertises some of his initiatives and wins.

[xraider]

We've seen the hat.  Looking forward to the cattle.

[nonattender]

We've seen the hat.  Looking forward to the cattle.

Mu.

-t

[traveler505]

Quick quiz:  Name one thing that Doug Fuller said in that Q&A that 50 lenders haven't telling Prosper for free for the past year. 

Did Prosper really need to hire a vice president to tell Penncro to rotate calling times for borrowers, or to figure out that it might be a good idea to sue borrowers who have the ability to pay but don't? 

(Bonus ponts:  How many times have I used the term "triage" in forums post to refer to precisely this approach to collections?)

Implementing a legal strategy would require a complete change in Prosper's apathy-based business model, and probably a rewrite of the legal agreements.  It ain't gonna happen.  Other than that, Fuller strikes me as a one-trick pony - call center optimization - and he's already done that trick.  The good news is that he sounds arrogant enough that he'll probably quit in 3 months when he figures out that his hands are tied; he doesn't seem like the type who would coast on the laurels of that 20% increase in contacts (not dollars) forever just to keep the paychecks coming.

[lenderguy]

Quick quiz:  Name one thing that Doug Fuller said in that Q&A that 50 lenders haven't telling Prosper for free for the past year. 

Did Prosper really need to hire a vice president to tell Penncro to rotate calling times for borrowers, or to figure out that it might be a good idea to sue borrowers who have the ability to pay but don't? 

(Bonus ponts:  How many times have I used the term "triage" in forums post to refer to precisely this approach to collections?)

Implementing a legal strategy would require a complete change in Prosper's apathy-based business model, and probably a rewrite of the legal agreements.  It ain't gonna happen.  Other than that, Fuller strikes me as a one-trick pony - call center optimization - and he's already done that trick.  The good news is that he sounds arrogant enough that he'll probably quit in 3 months when he figures out that his hands are tied; he doesn't seem like the type who would coast on the laurels of that 20% increase in contacts (not dollars) forever just to keep the paychecks coming.

OTOH, Prosper knows that these things need to get done, so perhaps they hired this guy to do them?  Hiring a guy who sees he knows how to kick ass just to tell him not to kick ass seems counter productive.

[Epictetus]

T was asked: Does Prosper Doug have Buddha nature?

To which he responded (but omitting the traditional exclamation point):

Mu.

-t

Question: When was T's non-existent punctuative?

[Fred93]

Did Prosper really need to hire a vice president to tell Penncro to rotate calling times for borrowers, or to figure out that it might be a good idea to sue borrowers who have the ability to pay but don't? 

Apparently.

Actually, what they needed was to understand that they need a first rate lending operations organization.  Prosper is fundamentally a lender, with an internet approach, not fundamentally a web thingy that happens to have something to do with loans.  His title is "operations", making me think that some part of this idea may have finally arrived. 

Does anyone know when was his 1st day on the job?