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Credit Glossary
Glossary of first party collector and creditor terms commonly used in the industry.
The following glossary contains definitions for common credit and collection related terms and laws.
A
Accounts receivable - Amounts of money owed to a company by its customers.
Account takeover - A type of fraud in which a fraudster takes over an account by assuming the accountholder’s identity and using it to acquire credit on the account.
Adjustment - This is the percentage of the debt that is to be repaid to the credit grantors in a Chapter 13 bankruptcy.
Affinity card - A credit card sponsored by an organization or an institution with which the cardholder has an affinity or established relationship.
Aged trial balance (ATB) - All open accounts for a particular time period. An ATB for 0 to 90 days would be a listing of accounts that are open and have existed for up to 90 days after a patient’s discharge.
Amortization - The process of fully paying off indebtedness by installments of principal and earned interest over a definite time.
Annual fee - A yearly fee charged to the card for keeping the account open. Some cards have this fee and some do not.
Annual percentage rate (APR) - The cost of carrying a balance on a loan expressed as an annual percentage. To calculate the amount owed in interest each month, divide the APR by 12. For example, if the APR is 18 percent, the monthly rate is 1.5 percent.
Annual percentage yield (APY) - The amount earned on an interest–bearing investment in a year, expressed in a percentage. For example, if in 1999 you earned $60 on a $1,000 certificate of deposit (CD), your APY is 6 percent.
Annuity - The annual payment of an allowance or income.
Appraisal fee - The charge for estimating the value of property offered as security.
Asset - Anything owned by an individual that has a cash value. This includes property, goods, savings or investments.
Asset rollover - The commonly used term to describe a situation in which the principals of a bankrupt company purchase assets from the bankrupt corpora¬tion to restart the same type of business. The concern is that the principals in effect continue the same business under a new name, while creditors of the bankrupt company suffer a loss. These are occasionally referred to as "flips."
Assignment of benefits - Form that indicates to whom the benefits should be paid. Signing would indicate the patient would like payment to go to the provider.
Attachment of earnings order - If a debtor fails to pay money as ordered in a County Court Judgement, the creditor can apply to the court to have money deducted from wages. Deductions are made at the rate of payment decided by the court as reasonable.
Attributes - Relative weights automatically assigned by a scoring model to characteristics.
Authorized user - Person permitted by a credit cardholder to charge goods and services on the cardholder’s account. Authorized users are not legally responsible for payment of the charges incurred.
Automated collection system - Computerized system for recording collection activities, i.e., person called, where contacted, reason for delinquency, agreements reached.
Automated underwriting - A service that enables lenders to obtain a risk classification without using traditional manual underwriting.
Automatic stay - An injunction or court order that takes effect when a Chapter 11 petition is filed. The automatic stay prohibits, among other things, all collection actions against a debtor, such as Hayes Lemmerz, and all actions to exercise control over property of a debtor.
Available credit - The amount of the credit line plus the amount of the credit balance.
Average daily balance - The average daily balance is a method used to calculate finance charges. It is calculated by adding the outstanding balance on each day in the billing period and dividing that total by the number of days in the billing period. The calculation includes new purchases and payments.
B
Bad credit - A term used to describe a poor credit rating. Common practices that can damage a credit rating include making late payments, skipping payments, exceeding card limits or declaring bankruptcy. "Bad credit" can result in being denied credit.
Balance - The total amount of money owed. It includes any unpaid balance from the previous month, new purchases, cash advances, and any charges such as an annual fee, late fee or interest. The balance should not be confused with the monthly payment (the minimum payment allowed each month), which is generally 2 percent to 5 percent for revolving credit cards.
Balance transfer - Moving a balance (debt) from one credit card to another. This is often done with special checks or forms, or may be offered as an option on some credit card applications. The usual reason is to shift an ongoing debt to an account with a lower interest rate.
Balloon payments - A loan with a balloon payment requires that a single, lump–sum payment be made at the end of the loan.
Bankruptcy - Bankruptcy is a legal declaration of the inability to repay debts. Bankruptcy should be viewed as a last resort. It will have a severe impact on a credit rating and will remain on a credit report for 10 years. Furthermore, bankruptcy is not a solution in all cases. Federal student loans, federal tax debt and child support are all exempt from bankruptcy protection. Bankruptcy agreements vary, but there are two types of agreements that most people choose: Chapter 7 and Chapter 13.
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Chapter 7 - In a Chapter 7 agreement, the court resolves most debts by selling assets and property so that the filer is given a fresh financial start. The court takes all assets including cars, homes, furnishings, jewelry or anything else of value. The assets are sold to pay off the debt. There are some debts that a person may wish to repay on their own instead of having the court resolve it. This is called reaffirmation. Reaffirmation is a special payment plan with the court. For example, if a car loan is reaffirmed, the person keeps the car and makes payments under new terms. Chapter 7 bankruptcy will not eliminate debts due to taxes, child support, alimony, student loans, court fines or personal injury caused by driving drunk or under the influence of drugs. A Chapter 7 filing will remain on a credit report for 10 years.
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Chapter 13 - In a Chapter 13 agreement, the court creates a debt repayment plan that allows the filer to keep their property. In order to file Chapter 13, a person must have a source of income and promise to pay part of their income to creditors. The court allows the filer to keep any assets that have debts against them if they pay them off under terms determined by the court. A Chapter 13 filing will remain on a credit report for 10 years. With Chapter 13, there is a better chance of obtaining future loans and credit.
Bankruptcy court - A federal court responsible for handling Chapter 11 cases.
Bankruptcy judge - The bankruptcy judge presides over the administration of a Chapter 11 case and decides contested aspects of that case related to the reorganization of a debtor.
Bankruptcy petition - The legal instrument filed with the Bankruptcy Court that initiates a Chapter 11 case.
Batch - Grouping of documents by characteristics.
Behavior scoring - System used primarily by credit issuers to predict the probability of account delinquency on an ongoing basis. Accounts are scored every billing cycle. The score becomes a reliable predictor for payment or nonpayment as accounts mature and information about purchases and payments accumulate on the master file.
Billing cycle - The number of days between statement dates. This is generally about 25 days.
Buydown - A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer's periodic payments to repay the indebtedness.
C
Capacity - Factor in determining creditworthiness. Capacity is assessed by weighing a borrower’s earning ability and the likelihood of continuing income against the amount of debt the borrower carries at the time the application for credit is made.
Capacity planning - Use of historical data such as productivity rates and resource availability to predict product output during a specific period of time. Such planning enables companies to match human resources and equipment to volume.
Capital - Factor in determining creditworthiness consisting of a borrower’s tangible assets and resources. The presence of sufficient capital in a borrower’s profile in an assurance that a debt could be paid from the borrower’s assets if the need arose.
Charge–off - Action of transferring accounts deemed uncollectable to a category such as bad debt or loss. Such accounts will usually continue to be worked by collectors, but are no longer considered part of a company’s receivable or profit picture.
Closed–end credit - Generally, any loan or credit sale agreement in which the amounts advanced, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate and automobile loans are closed–end agreements.
Cluster analysis - A statistical technique or mathematical formula used to create a scoring model. This technique creates profiles of customers or prospects with similar attributes, lifestyles or behavior patterns, and groups these individuals into homogenous sub–groups according to those similarities.
Collateral - Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. (Also called security.)
Collateral assessment - As estimate of a property’s value, used to evaluate its adequacy to serve as security for a loan, such as a mortgage.
Community reinvestment act (CRA) - Encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations.
Conditions - A factor often considered with the factors of capacity, capital and character when creditors are analyzing an applicant’s creditworthiness. This factor consists of economic conditions that could affect a borrower’s ability to repay, such as unemployment, seasonal work, etc.
Confirmation - The Bankruptcy Court's approval of the debtor's plan of reorganization.
Consumer confidence index - Released each month by The Conference Board, an independent not–for–profit business research organization, the Consumer Confidence Index measures how a representative sample of 5,000 U.S. households feel about the current state of the economy, and what they expect the future to bring.
Consumer price index - The consumer price index is a monthly gauge of inflation that measures changes in the prices of basic goods and services, such as housing, food, clothing, transportation, medical care and education.
Consumer credit counseling service - A non–profit organization that assists consumers in dealing with their credit problems.
Consumer leins - A priority right held by a consumer against assets of a busi¬ness with whom the consumer has made a deposit or down payment for goods or services that the business has not delivered.
Contractuals - An allowance for the difference between charges and the amount of money actually paid by a third party. Contractual allowances include any agreements made regarding discounts for third–party payers.
Conventional Loan - A private sector loan, one that is not guaranteed or insured by the U.S. government.
Correspondent bank - Intermediary bank, usually located near a business, which has a working relationship with the bank serving that business. The proximity of a company to its correspondent bank improves the timeliness in which funds are collected.
Cosigner - Another person who signs for a loan and assumes equal liability for it.
Counterfeit card - Expired, lost of stolen card with valid account data that is re–embossed or the magnetic strip is re–encoded. Or, a fraudulent card that is manufactured to look like a valid credit card.
County court claim (Previously called a County court summons.) - This is a formal document sent to the debtor by the court when a creditor has begun legal proceeding. It must be dealt with within 14 days. Ignoring the claim will result in a Judgement being registered by default and an order for the debtor to pay the whole amount immediately.
County court judgment - Following a County Court Claim, if the figure is not disputed, or the case is unsuccessfully defended, the court will enter a judgment. This is usually for payment by installment or the entire sum to be paid immediately. A judgment may be set aside, varied and suspended on application to the court. Judgments are registered publicly with Registry Trust and held for six years.
Credit - The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.
Credit Bureau Score - A number representing the probability a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.
Credit card - Any card, plate or coupon book that may be used repeatedly to borrow money or buy goods and services on credit.
Credit enhancements/peripherals - Products offered as adjuncts to the credit business, such as insurance products, special merchandise, card protection services, financial products, etc.
Credit history - A record of how a person has borrowed and repaid debts.
Credit limit/line - In open–end credit, the maximum amount a borrower can draw upon or the maximum which an account can show as outstanding.
Credit scoring - Tool used by credit grantors to provide an objective means of determining risks in granting credit. Credit scoring increases efficiency and timely response in the credit granting process. Credit scoring criteria is set by the credit grantor.
Credit report - A report containing a consumer’s financial history, used by credit grantors to determine the financial risk involved in extending credit.
Creditors' committee - The Creditors' Committee is comprised of representatives of the unsecured creditors, i.e., those who do not have existing liens against the company. This committee consults with the debtor–in–possession, reviews and gathers information about the debtor–in–possession's activities and financial condition, and participates in the formulation and negotiation of a Chapter 11 plan of reorganization.
Creditworthiness - The ability of a consumer to receive favorable consideration and approval for the use of credit from establishment to whom they applied.
D
Database marketing - The sorting of data from a database by demographics, psychographics and other categories into special reports, which are then used to target consumers with customized direct mail promotions.
Debt management plan (DMP) - Allows debtors to make reduced repayments to lenders (creditors) over a number of years. Payments are made until the debt is cleared in full or until debtor is able to make the full repayments again. The repayments are based on what you can afford after a realistic income and expenditure has been drawn up.
Debt-to-income ratios - The ratio of monthly housing debt payments to gross monthly income (front-end ratio) and the ratio of total monthly debt payments to gross monthly income (back-end ratio).
Debtor-In-Possession financing (DPF) - Financing obtained by a reorganizing debtor; the significant feature being that the lender assumes priority over other existing creditors.
Deduction from earnings - An order made by the Child Support Agency to make deductions for maintenance. No court order is necessary.
Deed - The document that transfers ownership of a property.
Deed-in-lieu - To avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.
Deemed trust - A statutory priority whereby assets of a debtor are deemed to be held in trust for the specified creditors to whom the priority is granted, and hence are not available for distribution to the other creditors of the debtor.
Default - Failure to meet the terms of a credit agreement.
Default notice - Must be issued by a creditor before he can start legal action to recover a debt. It states the amount of money owing and the amount required from the debtor to put things right. It asks for payment in full in seven days. If the seven days pass without payment, the creditor can take court action.
Delinquent - Accounts classified into categories according to the time past due. Common classifications are 30, 30, 90 and 120 days past due. Special classifications also include charge-off, repossession, transferred, etc.
Derogatories or derogatory credit incidents - Negative information in a credit report, i.e., a loan that is in foreclosure or collections in a derogatory.
Diagnostic related group (DRG) rate - A dollar amount used by Medicare to pay hospitals for services rendered. It is based on the average of all patients belonging to a specific DRG adjusted for economic factors, inflation, and bad debts.
Discharge - Discharge is the legal term for the elimination of the company's liabilities or its debts through the Chapter 11 process.
Disclosure statement - A document that is presented to the Court, and ultimately to creditors, that discloses the terms of the company's plan of reorganization, as well as sufficient information so that holders of claims against or interests in the company can make an informed decision as to whether to vote for or against the plan.
Discretionary income - Personal income after taxes and basic living expenses are paid.
Discriminant analysis - A statistical technique or mathematical formula used to create a scoring model. This technique classifies individuals into mutually exclusive groups on the basis of a set of characteristics. It then identifies the groups, meaning it discriminates among these groups on the basis of score as well as characteristics.
Disposable income - Personal income after taxes are paid.
E
Electronic fund transfer - Computerized process whereby funds can, with proper authorization and under strict security controls, be automatically moved from accounts in one financial institution to accounts in another.
Emboss - Imprinting of credit card plastics with specific characters that are raised on the surfaces of the card. The raised characters indicate specific information such as the consumer’s name, account number and expiration date.
Encode - Conversion of specific written or printed information into machine-readable codes.
Encoded transit routing - Use of magnetic ink character recognition (MICR) to direct check to the appropriate bank for collection of funds.
Enhancement - Tangible reward or “hard” benefit that enhances the value of a credit card. Rewards are used to entice cardholders to charge more purchases to the card.
Equal Credit Opportunity Act - Federal law which prohibits creditors from discriminating against credit applicants on the basis of their sex, marital status, race, national origin, age or because they get public assistance income.
F
FICO score - A generic risk score, developed by Fair, Isaac and Company, Inc., that predicts the probability of delinquency. This score is shown on credit reports provided by the national repositories, Experian, Equifax and Trans Union.
Fair Credit and Charge Card Disclosure Act (FCCCDA) - Amendments to Truth In Lending Act that require the disclosure of the costs involved in credit card plans that are offered by mail, telephone or applications distributed to the general public.
Fair Credit Billing Act (FCBA) - Federal legislation that provides a specific error resolution procedure to protect credit card customers from making payments on inaccurate billings.
Fair Credit Reporting Act (FCRA) - Federal Legislation governing the actions of credit reporting agencies.
Fair Debt Collection Practices Act (FDCPA) - Federal legislation prohibiting abusive and unfair debt collection practices.
Finance charge - The total dollar amount paid to get credit.
Fiscal intermediary - An agency, usually an insurance carrier, designated by the Social Security Administration to administer benefits of the Medicare program.
Fixed rate - A traditional approach to determining the finance charge payable on an extension of credit. A predetermined and certain rate of interest is applied to the principal.
Float - Time between a transaction (such as the writing of a check or the purchasing of a product on credit) and the collection of funds to cover the transaction.
Forecast - A statistical projection based on an analysis of historical data about the targeted consumer population as well as the credit issuer’s operation policies.
Forecasting - Use of historical and statistical data and sound business judgment to predict future business events, such as expenses, profitability rations, volume, and in risk scoring, projections such as response, attrition, delinquency or collections.
Foreclosure - A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
G
Gain-on-sale accounting - An accounting method that allows companies to count as current income all projected profits from term loans.
Guarantor - Person responsible for paying a bill.
Graduated payment - Repayment terms calling for gradual increases in the payments on a closed-end obligation. A graduated payment loan usually involves negative amortization.
Gross days revenue outstanding (GDRO) - A calculation used to compare the cash flow and level of receivables between health care organizations. GDRO is calculated by determining gross revenue during a given period divided by the number of days in that period. This figure is then divided into the total accounts receivable. Contractual allowances are not figured into the calculation.
Gross domestic product (GDP) - The total value of all the goods and services produced within a country’s borders.
Gross national product (GNP) - Total value of goods and services produced in a nation during a year.
H
Health maintenance organization (HMO) - There are two fundamental types of HMO plans: 1) the group model, where HMOs contract with several group practices and share the risk of the venture with the physicians; and 2) independent practice associations (IPAs)—loose-knit, prepaid plans that contract with individual physicians to treat patients in their offices, often for a fee-for-service basis.
Home equity line of credit - A form of revolving credit in which the home serves as collateral for the loan.
Home equity loan - An installment loan in which the home serves as collateral for the loan.
I
Image recognition - Optical character reader equipment with the capability to read and capture printed information.
Index - A measurement used by lenders to determine changes to the interest rate charged on an adjustable rate loan.
Individual voluntary arrangement - An alternative to bankruptcy. An IVA is a formal proposal, made on behalf of the debtor by a registered insolvency practitioner, to pay creditors part or all of a debt over a set period of time.
Inflation - The number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.
Inquiry - A request for credit information from a repository. Only inquiries triggered when a consumer applies for a loan are used to compute credit bureau scores.
Installment credit - Credit accounts in which the debt is divided into amounts to be paid successively at specified intervals.
Interest - A fee charged for the use of money.
Interest rate - The amount of interest charged on a monthly loan payment, usually expressed as a percentage.
J
Joint and several liability - If more than one person enters into a credit agreement then both are liable for the full amount. For example, after divorce or separation, both parties can be pursued for the outstanding amount. This also applies to rent arrears on joint tenancies, arrears on joint mortgages, Council Tax payment and water rates on properties that have been jointly occupied.
Judgment - A legal decision. When requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.
L
Liability on an account - Legal responsibility to repay debt.
Lien - Legal document used to create a security interest in another’s property. A lien is often given as a security for the payment of a debt. A lien can be placed against a consumer for failure to pay the city, county, state or federal government money that is owed. It means that the consumer’s property is being used as collateral during repayment of the money that is owed.
Line of credit - In open-end credit, the maximum amount a borrower can draw upon or the maximum which an account can show as outstanding.
Liquidation - Disposing of assets of the debtor, the proceeds to be used toward paying the debts and obligations of the debtor.
Load-leveling - Specific action taken by a business to cause responses to requested items such as payments or credit applications to be received in a steady, daily flow rather than sporadically. Load-leveling is usually achieved through the controlled mailing of information to consumers.
Loan - Money borrowed that is usually repaid with interest.
Loan fraud - Purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.
Loan-to-value fraud - A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased. The higher the LTV, the less cash a borrower is required to pay as down payment.
Lock-in - Since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.
Loss Mitigation - A process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.
M
Magnetic stripe - A magnetized band on the back of a credit card used to record specific information about the credit card account. This recorded information allows use of the credit card in automated teller machines and point-of-sale terminals. Also called optical character read scan line.
Margin - An amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.
Medicare secondary payer - A system that requires hospitals to identify payers who are primary to Medicare as part of the admission.
Mortgage - A lien on the property that secures the promise to repay a loan.
Mortgage Identification Number (MIN) - Indicates that a loan is registered with Mortgage Electronic Registration Systems, Inc., which tracks the ownership of mortgage rights. This number will follow the homeowner throughout the mortgage.
N
National repository - An organization engaged primarily in gathering, recording, updating and storing information about an individual’s use of credit and repayment of debt obligations. The three national repositories are Equifax, Experian and Trans Union.
Negative amortization - Repayment schedule calling for periodic payments that are insufficient to fully amortize the loan. Earned but unpaid interest is added to the principal, increasing the debt. Eventually, payments must be rescheduled to fully pay off the debt.
Negative equity loan - A home equity loan product in which the loan amount is greater than the equity in the home. This product is also known as a 125 percent loan because the loan amount can be up to 125 of the value of the home.
Net days revenue outstanding (NDRO) - A calculation used to compare the cash flow and level of receivables between health care organizations. Contractual allowances are subtracted.
Neutral networks - A statistical technique or mathematical formula used to create a scoring model. This technique looks for interactions between characteristics, applies a set of rules about these characteristics learned through repetition, and makes a prediction based on probability.
Non-priority creditors - Non-payments to these creditors (sometimes known as secondary creditors) would incur less severe consequences than the non-payment of priority creditors.
Non-promotional account - A retail account in which the customer revolves the balance rather than pay the loan in full at the end of the contract term.
Notice of default and right to cure - A notification from a creditor to a debtor that, unless an account is brought current within a specified period of time, further legal action will be taken by the creditor.
Not received as issued - A type of fraud involving credit cards that were mailed but were not received by the accountholder, meaning the cards were probably stolen in the mail stream.
NSF - Standard abbreviation for insufficient funds. Usually used in connection with a bad check.
O
Obsolescence - A term used to describe how long negative information should stay in a credit file before it’s not relevant to the credit granting decision. The FCRA has determined the obsolescence period to be up to ten years in the case of bankruptcy and seven years in all other instances.
Open-end credit - A line of credit that may be used repeatedly up to a certain limit, also called a charge account or revolving credit.
Open-end lease - A lease that may involve a balloon payment based on the value of the property when it is returned. (Also called finance lease.)
Opt in - The ability of a consumer who has opted out to have their name re-added to prescreened credit and insurance offer lists, direct marketing lists and individual reference service lists.
Opt out - The ability of a consumer to notify credit reporting agencies, direct marketers and list compliers to remove their name from all future lists.
Origination - The process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.
Origination fee - The charge for originating a loan; is usually calculated in the form of points and paid at closing.
Overdraft checking account - A checking account associated with a line of credit that allows a person to write checks for more than the actual balance in the account, with a finance charge on the overdraft.
P
Payment in full (PIF) - The entire balance on an account paid in full or a request for immediate payment by a collector working a seriously delinquent account.
Personal disposable income - Income after taxes that is available for use on personal outlays.
PIN - Standard abbreviation for personal identification number.
Points - Finance charges paid by the borrower at the beginning of a loan in addition to monthly interest; each point equals one percent of the loan amount.
Point scoring - Refers to the assignment of values to a number of characteristics identified as indicators of a person’s creditworthiness and is based on the same evaluation process used by a credit grantor in the analysis of an applicant’s creditworthiness.
Point-of-Sale transactions - Charge purchases in which credit is authorized at the point of sale or the time the customer makes the purchase.
Plan of reorganization - The reorganization plan that sets forth how the claims of each class of creditors and equity holders will be treated.
Postdated checks - Check bearing a date making the check cashable in the future. Collectors sometimes ask for a postdated check bearing the date of a delinquent customer’s next payday.
Post mailer - A notification sent to a credit card consumer shortly after the credit card is mailed. The purpose is to ensure that the consumer received the card and that the card was not intercepted in the mail for fraudulent use.
Pre-approve - Lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.
Pre-foreclosure sale - Allows a defaulting borrower to sell a mortgaged property to satisfy the loan and avoid foreclosure.
Pre-qualify - A lender informally determines the maximum amount an individual is eligible to borrow.
Preferences - Payment by an insolvent debtor to one or more creditors while excluding other creditors.
Preferred provider organization (PPO) - A direct contractual arrangement among hospitals, physicians, insurers, employers, or third-party administrators in which providers join together to offer health care for a distinct group of people.
Prepayment - Payment of a loan before the scheduled due date; may be subject to a prepayment penalty.
Primary payer - The insurance carrier or program that takes precedence in the payment of a hospital bill when two or more third-party payers have potential responsibility for the reimbursement.
Priority creditors - Those where non-payment could result in loss of property, essential services or imprisonment, e.g. mortgage, rent, gas, water, electricity, Council Tax, court fines and maintenance.
Provisioning - Reserves set aside as a provision against losses on loans.
Psychographics - Statistical data based on psychological factors that influence behavior, such as personality, self-concept, attitudes and beliefs.
R
Reader/sorter - Equipment that reads coded information on a document and automatically separates the documents into specific groups based on the coded information.
Reaffirmation agreement - An agreement by a consumer debtor to reinstate a debt that was erased by bankruptcy or reorganization, usually for the purpose of obtaining new credit.
Rebate - A deduction from an amount to be paid or the return of part of an amount given in payment.
Receivable - Refers to either the total or a portion of a patient’s account, which represents uncollected revenue for the facility.
Receivables aging - The number of days receivables age from the point of discharge to the time the open account is closed.
Reciever - A person appointed under the terms of a contract with a debtor or by the court, whose powers are specified in the contract or by the court and may include taking possession or control of some or all assets of the debtor, realizing the assets, and paying the proceeds to the creditor under the contract to the extent of the outstanding debt, or to the creditors generally.
Red-lining - Assuming all residents of a particular geographic area are not creditworthy. Red-lining is unlawful.
Refinancing - Paying off one loan by obtaining another. Refinancing is generally done to secure better loan terms (like a lower interest rate).
Regulation B - Regulation implementing the Equal Credit Opportunity Act, which prohibits discrimination in the granting of credit.
Regulation M - Regulation implementing the Consumer Leasing Act, which governs leasing agreements.
Regulation Z - Regulation that implements the Truth In Lending Act and the Fair Credit Bill Act. Truth In Lending requires specific loan disclosures and the Fair Credit Billing Act provides a resolution procedure for errors in billing.
Remittance processing - The center or department within a credit company where payments, known as remittances, are processed.
Renegotiable rate - A type of variable rate involving a renewable short- term "balloon" note. The interest rate on the loan is generally fixed during the term of the note, but when the balloon comes due, the lender may refinance it at a higher rate. In order for the loan to be fully amortized, periodic refinancing may be necessary.
Replevin - An action to recover personal property said or claimed to be unlawfully taken.
Repossession - A creditor’s taking possession of property pledged as collateral on a loan contract on which a borrower has fallen slightly behind in payments.
Revolving account - Credit automatically available up to a predetermined maximum limit so long as a customer makes regular payments.
RFP - Standard abbreviation for request for proposal.
Right to financial privacy act - Federal law that provides protection to customers of financial institutions, ensuring that only persons with legitimate reasons to inspect a customer’s account are allowed such access.
Risk-based pricing - The pricing of an account that reflects the riskiness of the consumer; the greater the risk of default, the higher the interest rate and fees charged on the loan.
Risk classification - The outcome of automated underwriting that indicates the likely performance of the loan.
S
Secondary payer - An insurance carrier or program that is secondary to the primary insurance carrier or program (usually billed after the first carrier).
Secure electronic transmission (SET) - A protocol that enables consumers and merchants to conduct bankcard transactions securely over the Internet.
Secured lending - A loan where security is given by the person borrowing (the security is usually property). If debtor fails to repay a secured loan the property maybe repossessed. These debts take priority over unsecured lending.
Security - The assets of the debtor to which a secured creditor has entitlement if the debtor defaults in payment.
Security interest - The creditor's right to take property or a portion of property offered as security.
Self-pay - Individuals, institutions, or corporations assuming the entire responsibility for payment of hospital and medical bills that otherwise might be covered by an insurance policy.
Seller's points - A lump sum paid by the seller to the buyer's creditor to reduce the cost of the loan to the buyer. This payment is either required by the creditor or volunteered by the seller, usually in a loan to buy real estate. Generally, one point equals one percent of the loan amount.
Service charge - A component of some finance charges, such as the fee for triggering an overdraft checking account into use.
Settlement - Another name for closing.
Skiptracing - Efforts to locate debtors (“skips”) who have moved from a known address to an unknown location.
Statement - The monthly bill from a credit card issuer that describes and summarizes the activity on an account. A statement includes the outstanding balance, purchases, payments, credits, finance charges and other transactions for the month.
Statement date - The date on which a statement is generated, and the month's finance charges (interest) are added to the balance.
Statutory demand - A formal legal document requiring a debtor to pay off an outstanding debt or secure it against property otherwise the creditor will bankrupt the debtor. Ignoring a Statutory Demand allows the creditor to start bankruptcy proceedings.
Stay - In bankruptcy and insolvency proceedings, the suspension by statute or court order of a creditor's ability to exercise a right it would otherwise have to take legal action, including action to collect a debt.
Subordinate - To place in a rank of lesser importance or to make one claim secondary to another.
Subrogation - The substitution of one person for another, especially the legal doctrine of substituting one creditor for another.
Subvention - A subsidy such as a factory rebate or dealer discount offered by automakers to sell new vehicals.
Subprime loans or mortgages - Loans or mortgages with risk attributes below investment-grade standards. Because of the higher risk, these loans or mortgages usually have higher interest rates and/or higher fees.
Super-priority - A priority granted by statute that ranks a claim ahead of all other claims, including secured creditors' claims.
Surcharge - An extra charge imposed on those who purchase with a credit card instead of cash. (Currently, surcharges for credit card purchases are prohibited.)
Surplus income - This is the amount of money left over after paying essential expenditure (such as mortgage, housekeeping etc) but before making any credit repayments. If this is a negative amount, it is known as a deficit.
T
Telemarketing - Method of communicating an unsolicited advertising or promotional message by telephone to specific customers or specific potential customers.
Third-party collections - Collectors who are under contract to collect debts for a credit department or credit company; collection agency.
Third-party payer - Any agency or organization that pays or insures a specific package of health or medical expenses on behalf of the beneficiaries or recipients.
Time order - Allows a County Court to make changes to the terms of a regulated agreement, if it appears to be just. The court can reduce the repayment rate and the interest rate. Time Orders are normally only made where there is a temporary financial difficulty and if debtor is likely to be able to return to making full contractual payments.
Time-series - Monthly snapshots of account-level performance data, including purchase, payments and delinquencies.
Tradeline - Entry by a credit grantor to a consumer’s file maintained by a credit reporting agency. A trade line describes the consumer’s account status and activity. Trade line information includes names of companies where the applicant has accounts, dates accounts were opened, credit limits, type of accounts, balances owed and payment profiles.
Truth In Lending Act (TILA) - Title I of the Consumer Protection Act. Requires that most categories of lenders disclose the annual interest rate, the total dollar cost, and other terms of loans and credit sales.
U
Underwriter - The employee of a lender or mortgage insurer who determines whether an applicant qualifies for a mortgage.
Unit cost - Average cost of producing or servicing one unit of product. Unit cost is arrived at by totaling the costs of all operations and supplies needed for production or servicing and dividing that number by the total number of units produced or serviced.
Unsecured lending - Is not secured on a property by way of a legal charge and where the rights of the creditor extend only to recovering any money owed.
V
Variable rate - An annual percentage rate that may change over time as the prime lending rate varies.
W
Wage assignment - A signed agreement by a buyer or borrower, permitting a creditor to collect a certain portion of the debtor’s wages from an employer in the event of default.
Writ of replevin - Legal document issued by a court authorizing repossession of security.
Z
Zero balance - An account that is paid out with no balance outstanding.
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