Start Up: Protocol Financial Service

photo by Eric Tadsen

The term “collection agency” might conjure up Hollywood images of hulk-sized men in dark suits shaking down quivering individuals who owe a debt.

Not so, claims Protocol Financial Service CEO Tina Hanson, who insists her company’s role is to help people in debt find ways to make good on their delinquent loan commitments. “No one is yelling on the phone. There is no brow-beating. This is not a repo-business,” she said — an important distinction.

Hanson and Protocol President Tracey Dudek were employed in the collections business for years, working in Madison for State Collection Service, Inc. (SCSI). Last January, they formed their own collection agency, Protocol, a separate legal entity that now contracts with SCSI for infrastructure and general office support.

The two companies are connected through regulation as well. In order to capture a piece of the government pie, SCSI, considered a primary contractor, is required to outsource a portion of its Department of Education (DOE) student loan work to small or minority-owned businesses. Hanson and Dudek, with nearly 20 years of experience between them, recognized the opportunity before them, and jumped on it.

Their minority-owned small business is now a subcontractor for SCSI, and gets DOE work as well as other business it acquires on its own. It’s a good position to be in, Hanson admitted. “There aren’t any primary agencies that are minority owned,” she said, looking to the future. “We hope to be a primary bidder one day.”

Protocol is a third-party debt collector. It finds and collects money owed to businesses that incur debt or make loans. Clients can include hospitals, clinics, or student loan providers, and the company uses high-end databases, technology, and manual searches to locate consumers who have, for whatever reason, chosen not to make payments. Because consumers might be found anywhere, Protocol will spend a total of $87,000 to be licensed in all 50 states. It is compliant in 31 states thus far.

Hanson and Dudek funded the start-up business with a combination of their own money (Hanson also sold her car) and a line of credit from Oak Bank that will help support the company in its inaugural year. The pair also visited UW’s Small Business Development Center, SCORE, and arranged to rent back a portion of their office space from SCSI temporarily.

The Protocol call center is actually located in Beloit, Wis., an area of high unemployement — also called a “development zone.” There, four counselors and a manager work the phones in search of owed money. Hanson said the company’s student loan debt cases are averaging between $1,500 and $2,000 each, and health care debt runs a bit lower, between $600 and $700 per case. About 85% of cases are getting resolved, while the others often get written off. Just a relative few end up in court — always a last resort — and if a person is bankrupt, the pursuit ends. “You can’t get blood out of a turnip,” she admitted.

While Protocol earns a percentage of the money it recovers, payment can be slow. “When you collect student loans, you don’t get any significant revenue for about 10 months,” Hanson said. “You have to get the consumer to make at least six months of regular payments first, to show they can take on the responsibility. After six months, you can consolidate or rewrite the loan. That’s usually when we get paid [by the DOE].” Not surprisingly, the company projects a loss its first year.

Hanson said Protocol is always hiring. Counselors don’t need to have a degree, but they must be goal-driven, people-focused, and empathetic. “Nobody goes to college believing they want to be a debt collector,” she said, “but once you’re in it, it’s very addictive.”

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