The Debt Servicing Costs are costs that are deducted from the gross cash flow recovered in connection with the servicing of the delinquent portfolio. These costs cover the costs related to the collection of the delinquent portfolio, in particular the following fees are included: success fees paid to debt collection agencies, state fees, court fees, fees for the lawyers and any other costs related to the collection. These costs are shown as partial write-offs in your account reports and in the repayment schedule.
Write-offs are done on the gross funds recovered from the delinquent loan (either overdue or defaulted) – no matter of the stage of the specific loan. For example if the loan recovers after court or with the help of the bailiff the Debt Servicing Costs are deducted. If the overdue loan recovered fully with the help of the third parties and continues to pay in accordance with the original schedule then the deduction is made only from the repayment that was recovered. If there is no recovery then the deductions are not made.
The Debt Servicing Costs are calculated on the delinquent portfolio level, regardless of the specific conditions of the specific loan, enabling us to keep the deductions as low as possible for the recovered loans. Calculations for the rate of the deductions are done regularly and adjusted from time to time based on the actual market costs. As of the end of August 2016 the deductions from the repayments on portfolio level has been on average 13,1%. In August at the request of the investors we filed high amount of court cases that resulted in increase of the Debt Servicing Costs. In August the costs were up to 35% of the repayment. In general we expect the Debt Servicing Costs to stay on average between 15-35% but it may fluctuate based on the market costs and efficiency of the collection process and recovery. These costs are mainly written-off from the extra interest and interest but there might be cases where the deduction is made from the principal also.