NCO Edges Out Allied Interstate for Top Spot on ED Collection Contract for Q1

Accounts receivable management giant NCO Group narrowly beat out Allied Interstate for the top spot on the Department of Education’s student loan collection unrestricted contract in the first quarter of 2009 as recovery rates on the contract slipped year over year.

Continental Service Group (ConServe) was the highest-scoring collection agency on the small business set aside contract for the quarter.

On the unrestricted contract, reserved for the largest agencies, NCO scored a 97.66 compared to Allied Interstate’s 96.82. ED’s performance scores are based on a weighted average of performance metrics, including total dollars collected, total accounts serviced and administrative resolutions. Final quarterly rankings determine bonuses and account placement levels.

In the first quarter, NCO collected $48 million for ED trailed by Allied Interstate with $44.5 million collected. Both were significantly behind overall contract leader Pioneer Credit Recovery who brought in $61 million in the quarter.

On the small business set aside, ConServe achieved a perfect score of 100 for the first quarter, with Account Control Technology taking second place with a score of 95.11. ConServe was also the leader in collections with $18.4 million recovered in the quarter.

But recovery rates on both contracts were lower than in the first quarter of 2008, a likely function of the ongoing recession and underscoring the difficulty ARM firms have had recovering money in the downturn.

In the first quarter of 2009, NCO led all collection agencies with a recovery rate of 3.71 percent. In the first quarter of 2008, Pioneer led the way with a 5.67 percent recovery rate; NCO’s rate in that quarter was 4.74 percent. On the unrestricted contract, the average recovery rate in Q1 2009 was 2.89 percent compared to an average recovery rate of 3.50 percent in Q1 2008.

The small business contract also saw significant recovery rate deterioration. The average for the first quarter of 2009 was 2.56 percent compared to a 3.17 percent rate in the year ago period.

The 17 collection agencies currently on the contract – five on the small business set aside and 12 on the unrestricted contract – have collected $5.47 billion for the Department of Education in the 49 months the contract has been in force.