Case Study: Bad-debt recovery

Reporting rental payment data helps improve bad-debt recovery

Reporting rental payment data to Experian RentBureau makes outstanding balances, write-offs and rental collections information available to the entire multifamily industry. When this information is incorporated in the resident screening process, on-site teams can identify prospects who are attempting to skip or who have left another community with money owed, enabling them to  prevent those applicants from getting a new lease until they satisfy their outstanding-debt obligation. This broad visibility and transparency to bad-debt balances benefits everyone, providing improved bad-debt recovery for communities and enabling more accurate, comprehensive applicant screening.

Challenge/Objective

Savvy serial skippers know it may take months for bad-debt balances to be reported to collections companies and even longer before that information possibly appears on a credit report used in tenant screening. Recovering moneys owed from serial skippers, or even from residents who aren’t necessarily trying to outsmart the system but still owe past-due rent, can be challenging. Additionally, when a rental collection is reported to credit reporting agencies, it typically is not identified specifically as a collection that originated from a rental agreement. This makes rent-related bad debt less apparent when only a credit report is reviewed at the point of application.

Resolution

An effective tool in the battle to recover bad debt is to share outstanding balances, write-off amounts and rental collections with the industry broadly, making it possible to prevent residents from getting a new lease at another property without first satisfying their outstanding-debt obligation. Every 24 hours, Experian® RentBureau® receives updated rental payment history data from property owners/managers and makes that information available to the entire multifamily industry through our resident screening partners. This quick turnaround helps prevent skips, allows for faster debt recovery and streamlines the collections process.

The collections data reported to Experian RentBureau also is identified specifically as a rental collection in resident screening results. This added transparency provides critical insight into the origin of this specific type of collections debt. Identifying this data as rent-specific debt facilitates the collection of outstanding debt at tenant screening, thereby increasing bad-debt recovery for the collections firms (and their property owner/manager clients) reporting data to Experian RentBureau.

Results

Property owners/managers reporting to Experian RentBureau have experienced these benefits firsthand. According to Chris Jenkins, Vice President of Financial Planning at Equity Residential, “On the collections side, we have a lot of examples where we don’t have to contact former residents. They contact us to clear up an outstanding balance when their rental payment history appears in connection with trying to rent another apartment. So, it absolutely does work.”

Additionally, in a recent study, rental collections information from the Experian RentBureau database that was used during the screening process resulted in nearly $1.5 million of recovered debt for one national collection agency over a seven-month period. Prior to screening, the recovered debt had been outstanding for nearly 800 days. Once the rental-specific collections information was used in the screening process, however, those amounts were paid off completely within 25 days.