• Version 1.0

• Prepared by: @Lorraine Sebata

• Approved by: @Lashanda Mackey

• Reviewed date: 2025-07-25

• Next review date: 2026-07-24

1. Purpose

This SOP details the step-by-step process for identifying delinquent loan accounts, engaging with clients for repayment, managing charge-offs, and initiating legal action when necessary at Easyterms. Its purpose is to ensure consistency, efficiency, and compliance with the Loan Charge-Offs and Debt and Recovery Policy, as well as other relevant regulations.

2. Scope

This SOP applies to all Loan Officers, Collections Department staff, Credit Analysts, and relevant administrative staff involved in the management of delinquent loan accounts and the charge-off process.

3. Related Policies

• Debt and Recovery Policy

• Credit and Loan Policy

• Customer Data Privacy Policy

4. Roles and Responsibilities

• Collections Officer (or designated Loan Officer): Primary responsible for monitoring delinquency, client communication, repayment negotiation, and initial documentation.

• Operations Manager / Head of Collections: Reviews and approves repayment plans, charge-offs within delegated authority, and escalates cases for legal action.

• Legal Counsel: Manages legal proceedings related to debt recovery.

• Finance Department: Processes charge-offs and updates financial records.

5.1. Identification of Delinquent Clients

• 5.1.1 Weekly Monitoring: Monitor all loan accounts in the Loan Management System (LMS) or Xero Collections weekly to identify delinquent clients with outstanding balances over $2,000.00.

• 5.1.2 Prioritization: Prioritize accounts flagged as:

  • Retired clients

  • Deceased clients

  • Terminated clients

  • Resigned clients

5.2. Communication with Delinquent Clients

• 5.2.1 Initial Contact: Within [e.g., 3 days] of identifying delinquency, contact delinquent clients through:

  • Phone calls (document call details in LMS/CRM)

  • Emails (use approved templates)

  • Written notices (send formal demand letters as per schedule)

• 5.2.2 Information to Convey: Clearly outline to the client:

  • The exact overdue balance, including principal, interest, and any penalties.

  • Available repayment options (e.g., full payment, partial payment, installment plans).

  • Applicable discounts or settlements for lump-sum or early repayment, if offered.

• 5.2.3 Special Handling Procedures: Note and apply special handling procedures for:

  • Retired clients: Offer adjusted repayment or write-off terms if verification criteria are met.

  • Estates of deceased clients: Liaise with next of kin/estate executor regarding loan obligations.

  • Rewritten loan holders: Ensure recovery actions are consistent with revised agreements.

5.3. Verification of Retired Client's Status

• 5.3.1 Documentation Request: Request official retirement documentation or pension status letters from the client's HR Department.

• 5.3.2 Status Verification: Verify status via government records or employer confirmation where possible, adhering to data privacy policies.

• 5.3.3 Eligibility Determination: Determine if the client qualifies for adjusted repayment or write-off terms based on verified status and the Loan Charge-Offs and Collections Policy.

5.4. Verification of Deceased Client's Status

• 5.4.1 Documentation Request: Request a copy of the death certificate or other certified documentation from the next of kin, estate executor, or public notices.

• 5.4.2 Estate Contact: Contact the next of kin or estate executor regarding:

  • Loan obligations and outstanding balance.

  • Available repayment arrangements from the estate.

  • Submission of estate documents, if required for claim processing.

5.5. Identification of Rewritten Loans

• 5.5.1 Loan File Review: Review loan files in Xero and internal systems for rewritten loans, specifically those with an original balance under $2,000.00 that have been restructured.

• 5.5.2 Term Confirmation: Confirm:

  • Original and updated loan terms.

  • Any prior settlements or restructures applied.

• 5.5.3 Action Consistency: Ensure recovery actions are consistent with the revised agreements and terms.

5.6. Repayment Negotiation

• 5.6.1 Client Engagement: Engage clients to offer flexible repayment plans based on their verified income and financial status.

• 5.6.2 Incentives: Propose discounts or settlements for lump-sum or early repayment, as per policy guidelines.

• 5.6.3 Documentation: Document all agreed terms in writing (e.g., repayment agreement form) and update Xero Collections notes and the LMS immediately.

5.7. Follow-up Procedures

• 5.7.1 Communication Log: Maintain a detailed communication log for each delinquent account, recording dates, times, contact method, discussion summary, and agreed actions.

• 5.7.2 Status Monitoring: Use a tracker or CRM to monitor the status of:

  • Promised payments.

  • Active repayment plans.

  • Client follow-ups.

• 5.7.3 Compliance Review: Conduct bi-weekly reviews to ensure compliance with repayment terms and to identify accounts requiring escalation.

5.8. Legal Action (Last Resort)

• 5.8.1 Identification for Legal Action: Identify unresponsive clients or those who consistently refuse to pay despite all collection efforts.

• 5.8.2 Evaluation: Evaluate each case for legal action based on:

  • Debt amount and potential recovery.

  • Account history and client engagement.

  • Availability of complete and accurate documentation.

• 5.8.3 Legal Liaison: Liaise with legal counsel to:

  • Send formal legal demand letters.

  • Initiate court action if necessary and approved by management.

5.9. Loan Charge-Off Process

• 5.9.1 Charge-Off Criteria: Loans will be recommended for charge-off when they meet the criteria defined in the Loan Charge-Offs and Collections Policy (e.g., 180 days past due, bankruptcy, confirmed uncollectible).

• 5.9.2 Documentation: Prepare a charge-off recommendation report, including account history, collection efforts, and reasons for charge-off.

• 5.9.3 Approval: Obtain approval for charge-off from the Branch Manager or Head of Collections (or higher authority as per delegated limits).

• 5.9.4 System Update: Process the charge-off in the LMS and Xero Collections, ensuring the Finance Department updates all relevant financial records.

• 5.9.5 Post-Charge-Off Recovery: Even after charge-off, continue passive recovery efforts (e.g., monitoring for client contact, potential future settlements) as per policy.

6. Documentation and Forms

• Delinquency Report (from LMS/Xero)

• Client Communication Log

• Repayment Agreement Form

• Official Retirement/Death Certificates

• Charge-Off Recommendation Report

• Legal Demand Letters

• Court Documents (if applicable)

• Different codes of customer employment status (in LMS)

7. Training

All Collections Officers, Loan Officers, and relevant staff will receive mandatory training on this SOP and related policies annually or upon significant revisions.

8. Review and Revision

This SOP will be reviewed annually by the Operations and Finance Departments to ensure its continued effectiveness, compliance, and alignment with business objectives.