Travel Loan Collections Church World Service IRP Conference 2010 Welcome to this training presented by the Travel Loan Unit of the Episcopal Church in conjunction with Church World Service. We hope that within the next hour we shall be able to impart some useful knowledge about travel loans that you will be able to use in your day-to-day work with refugees.

What is a Travel Loan? Why is it important? Just what is a travel loan? Who issues it? Why is it important? When one looks at the entirety of a refugee’s journey to this country --- the initial interviews, the signing of the travel loan, boarding the plane for the U.S., the lengthy travel, landing, post arrival orientations, then after a few weeks in the country he/she receives a bill to pay a loan --- you could easily see with the immense changes in their lives how refugees could lose sight of the fact that there is a loan to pay back or why it is important to them. That’s why refugees need to be reminded. That’s why we’re going to take time today to go over the basics. Let’s start. Why is it important?

IOM Travel Loans $ $ Refugee Loan Fund (RLF) Funded by PRM Managed by IOM RLF used to fund refugee travel Refugee travel is funded from a pool of money called the Refugee Loan Fund (RLF). The RLF is funded by PRM and managed for PRM by IOM. IOM, as you may know, arranges refugee travel to the USA among other activities related to refugee processing. When IOM arranges refugee travel, they use the funds available in the RLF to pay for the cost of that travel and, in turn, issues refugees travel loans to repay back to the RLF the cost of travel. $ $ RLF

Refugee Loan Fund Revolving Fund Interest-Free Loans RLF The RLF is a revolving fund, that is, loans are made to refugees from the RLF…while payments made by refugees are channeled back into the fund, thus, the name “revolving fund”. PRM tops up the funding to the RLF every year, as not all funds go back into the fund. 25% is set aside from the payments to reimburse the resettlement agencies for the expenses incurred in collecting the loans from the refugees…the remaining 75% of the payments go to the RLF. All loans are initially interest free. 75% VOLAGS 25%

SUMMARY IOM manages Refugee Loan Fund (RLF) for PRM Refugee travel to USA is funded - and loans issued - from the RLF Refugee payments go towards Refugee travel (back to RLF) – 75% Agency collection ops – 25% Let’s summarize. Note should be taken of the important role the loan collection program plays in the financing of the overall US Refugee Program. Every year some 30-40% of the RLF depends upon the continuing collection of payments for refugees. Given the increasingly tight budgets in Washington, refugee payments ensure that other refugees in the pipeline will have access to the RLF.

Travel Loans a.k.a. Promissory Notes a.k.a. Promnotes IOM issues promissory notes with amounts based on average travel costs Loan is issued to the principal applicant for all family members… … except refugees 18 years or older who sign their own loans & unaccompanied minors have loans signed by US anchor Principal applicant signs the loan before departure and keeps a copy Loan is usually translated in the refugees’ language Loan specifies the terms of repayment Travel loans also known as promissory notes or promnotes are issued by IOM. The rates of the loan are established by IOM on a semi-annual basis based on an average fare cost by region. Other general conditions of the loan are stated in this slide.

Terms of Repayment Monthly installment loan Total loan to be paid in 36 months from the start of the first billing Monthly payment is the total loan amount equally divided over 36 months Note that in credit parlance these loans are considered “monthly installment loans” for credit reporting purposes. This has implications for a refugee’s credit history, as we shall see later in this presentation. The loan should be paid in 36 months from the first billing, though the refugee has 42 months from the time arrival to pay off the loan in full. The six month difference is due to the time agencies are given to begin billing refugees after arrivals. The monthly payment is the total amount of the loan divided by 36.

Billing For CWS: one account opened for each loan and account number is assigned. First billing is sent 4 months after arrival - Payment coupon & return envelope The following slide explain how we at CWS bill clients. Note that other agencies have different time frames and procedures for billing, but the general outlines for billing clients would be the same; as we are, as other VOLAGS, all bound by our individual agreements with IOM, which defines the requirements, conditions and parameters for collection. You should impress upon refugees to remember their case number, as it also acts as their loan account number. It is this account number that is registered with the credit bureau to track the loan payments of the refugees. The account number is comprised of two letters followed by 6 digits. Very often refugees remember the number but forget the two letters that precede the number…both are required, as that is how the account is established with the credit bureau.

Here is a copy of the English-only version of the promissory note Here is a copy of the English-only version of the promissory note. There are other versions which have added a translation into the refugees’ language. As previous advised -- one copy is given to the refugee upon departure, one copy stays with IOM and the original copy goes to the voluntary agency. The promnote is a legal document; a written promise to pay money to someone. Its primary function is to serve as written evidence of the amount of a debt and the terms under which it will be repaid. This helps both the lender and borrower know exactly what the expectations and plans for repayment are. If a refugee owes money on the loan and falls behind on repayment, and we haven’t been able to work out a new repayment plan, the promnote gives the agency the legal basis to issue a formal demand letter requesting payment and taking further actions as needed for collection of the loan. 9

This is the PRM brochure sent with the initial billing explaining the travel loan and its importance. 10

This is the inside of that brochure This is the inside of that brochure. You will note that some of the points we are covering in this presentation are also included in this brochure. 11

Payments Monthly computerized statements sent 1st week of each month with envelope for payment Payments to be sent to lock box Payment must be received before the end of the month to avoid late payment Statements generated until loan fully paid Payments clients make to DFMS are sent to a bank lock box. We ask refugees to pay by the 21st of each month, which should give the post office sufficient time to deliver the payment to the lock box before the end of the month. The earlier the payments are sent…the better. Refugees can also pay by credit or debit card. Note that on-time payments are important. We’ll discuss this further in this presentation when we discuss credit bureau reporting. Note again that other agencies may have different procedures and time frames, but the general outline for payments would be the same.

Here is a CWS statement.

Special Circumstances Deferments Hardship Temporary medical conditions Unemployment Humanitarian Write-offs Disability Death Bankruptcy DFMS/EMM will make exceptions to clients with special circumstances. We try to work with clients to assist them when they have life events that derail their resettlement. We do this by deferring loan payments for up to 6 months - though not all at one time - when there are conditions that temporarily make monthly payments difficult. Note that such deferments do not relieve the refugee of his/her obligation to pay back the loan. It is meant to assist them in the short term with their loan obligation. Such instances are unemployment, injury on the job, an unexpected expense causing temporary hardship, and so forth. In certain cases DFMS/EMM has the option to write-off the loan on humanitarian grounds. For these type of cases we shall require documentation from your office. This documentation is used by DFMS as backup for the write-off and is presented to IOM during their audit/monitoring of the loan portfolio (note: this is done twice yearly by IOM of all the VOLAGS). These type of cases include: the death of the head of household, a major medical disability, bankruptcy.

Special Circumstances Splitting loans requires Agreement between the parties to split the loan amount Letter sent to new borrower for new contract It often happens that refugee couples divorce or parents, whose their children turn 18 and become adults, request to split the one original loan issued to the Principle Applicant into 2 or more loans. DFMS is able to meet this request, if and only if, the parties agree to split the loan, as well as, the amounts each will undertake to repay. If there is agreement, DFMS will issue new, separate loans to the refugees, who must then sign, notarize and return the new travel loans to us. Until those new loan documents are received, there will be no change in the status of the initial loan.

Credit Bureau Reporting After 9-12 months, all accounts are reported monthly to the TransUnion Credit Bureau Prompt/on-time monthly payments helps to establish good credit rating Delinquent payments result in poor credit history affecting clients Paid in full clients have loan status communicated to TransUnion Call CWS Travel Loan to avoid credit problems As mentioned earlier, DFMS/EMM reports all loans to a credit bureau. This is why on-time, monthly payments are important. We cannot tell you how often we receive calls from refugees who call to advise us of problems with their credit history. This is usually due to the failure to make prompt payments. Even missing just one month can ruin a good credit score or change the rate of interest on a credit card.

Credit Dispute Process As data furnishers, our goal is to maintain complete and accurate information in every client’s file that we transmit monthly to TransUnion for credit reporting purposes. If clients do not recognize information on their credit report, or believe an item may be inaccurate, they may request an investigation of the data. Only inaccurate information may be removed; negative information that is accurate will stay on their credit report as long as governing laws allow (currently up to 7 years). Refugees should call CWS Travel Loan for more information. When a refugee has a credit history issue, there is a process to correct the error. This slide explains the process.

Delinquent Loans After 42 months, if 30% is not paid, delinquent accounts are transferred to IOM for collection (write-offs) Transferred loans no longer interest free Letters sent to delinquent clients at various times during the loan period prior to handover to IOM If refugees do not pay off their loans in the time given, then they are written off our books and handed to IOM for collection.

What are possible effects of delinquency? On CLIENTS: Bad credit More difficult to sustain the family needs No possibility to obtain other loans Bad image in the community The agencies in a meeting a several years ago discussed what the implications of delinquencies were for the various stakeholders in the loan collection process. Here a summary of the possible effects of delinquent loans.

Responsibility under Cooperative Agreement During the 90-day initial reception and placement period, the Recipient shall provide or ensure that the refugees assigned to it are provided orientation, with appropriate language interpretation if necessary, concerning: …9. the legal requirement of each adult refugee to fully repay his or her IOM transportation loan in accordance with the established payment schedule. (new) …7. personal and household budgeting and finance. What is your responsibility under the Cooperative Agreement. Here’s what the R&P agreement states… (read slide) Notice that there is a new area of orientation this year regarding personal and household budgeting and finance to be covered with the refugees. When developing a household budget, refugees need to factor their loan payments as an ongoing monthly expense, just as they factor in other monthly costs, such as, utilities, food, rent, transportation, etc. Also, as previously noted, very few refugees understand the importance of good credit. In today's society maintaining an excellent credit profile is very important. Good credit is required to obtain employment; rent an apartment; and to obtain financing for a home or car. Having excellent credit can also save you thousands of dollars in finance charges. Check to see if your city provides credit counseling programs free for the purpose helping refugees in identifying basic credit, debt and budgeting issues so that individuals can improve their personal credit and financial profile, if so, include this in any financial orientation.

Responsibility under Cooperative Agreement Provide travel loan orientation Loan … an Obligation Where and how to send payments Why payment is important Why having good credit is important What happens when clients do not pay Provide updated addresses Maintain loan and files Review requests for deferments, hardship or write-offs Provide SSN When in doubt…call the CWS Travel Loan Here’s a summary of your responsibilities under the Cooperative Agreement. The key is for you to provide a solid orientation to refugees. Let them know that they are responsible for payment of the loan. The main reason refugees have problems and either have poor credit or become delinquent is that they move and forget about the importance of the loan payment. As we at the TLU will be dealing with refugees over the course of 3-4 years, please let them know that when they have any question regarding their loan, they can always call our office. We’ll give you our contact details shortly.

Address Changes ALL Changes of Address should be mailed , emailed or faxed to CWS Travel Loan Impress upon refugees the need to keep the travel loan unit up to date with their new address when they move. We currently have approximately 500 cases with bad addresses. Those are cases who have failed to pay, have bad credit scores and will most probably be written off. These are the clients who will be most affected by their failure to repay their loan. Sooner or later, they will contact us, when they realize their credit is bad and they can’t access another source of lending because of their travel loan delinquency.

Who to Contact at CWS CWS Travel Loan 475 Riverside Drive – Suite 700 New York, NY 10115 Keith Nichols 212-870-3361 Mary Hunt 212-870-2837 Gregoria Malaspina 212-870-2257 CWS Travel Loan Dept 1-866-723-9579 Fax number -212-870-3220 Here’s the information at CWS

Who to contact at CWS knichols@churchworldservice.org gmalaspina@churchworldservice.org mhunt@churchworldservice.org For CWS

CWS Loan Payments to: Church World Service P.O. Box 64706 Baltimore, MD 21264-4706 or Travel Loan Dept. – Suite 700 475 Riverside Drive New York, NY 10115 Here for CWS

Questions Any questions? By the way, if there are none now, but you think of something later, please let us know. It will help us shape future trainings so that they are geared to the concerns and questions you get from refugees in your day-to-day work.

Thank You Remember. If any of your caseworkers has a question, have them call our Travel Loan Specialists and we’ll answer your questions, or deal with any situations any clients may have. Thank you.