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Debt Collections Legal Solutions

5383 South 900 East | Suite 103 | Salt Lake City, UT 84117 (801) 361-0502 | www.juristec.com


Table of Contents •

Juristec Overview – Comparison to Traditional Solutions – Value Proposition – Proven Results – Why Juristec?

Appendix A: Market Direction – Increase in Debt to Household Income – Commercial Bank Charge-Offs – Debt Collection Industry

Appendix B: Juristec Details – Juristec Technology – Juristec Tenets of Excellence – Management Team – Frequently Asked Questions

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Executive Summary •

Juristec automates the process of collection litigation to efficiently and cost effectively manage high volumes of bad debt.

Our goal is to provide solutions for debt that is currently not being effectively collected including late-stage and small-balance bad debt.

Our focus is on the needs of our clients and how we can enable them to capture value lost through bad debt.

Our team has tremendous experience in collection litigation, strategy planning and consulting, and technology implementation for ASP services.

Our mission is to provide best-in-class technology and services that will enable clients to better manage and collect their bad debt.

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Advantage in Debt Collection Over Traditional Law Firms Clients using Juristec are fundamentally better at collecting on bad debt because clients can collect on “affordable� debt.

High-balance debtors have a greater likelihood of filing for bankruptcy and defaulting on their debt. Law firms typically settle for what they can get.

Bad Debt Balance

High $50,000

Written Off

Typical Collections

Juristec pushes the cost of each case down making it possible to pursue low-balance debtors that traditional law firms can not pursue

$5,000 Low-balance debtors have a greater capacity to pay off their debt and can make manageable installment payment rather than defaulting.

$500 Low Low

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Ability To Pay

High


Advantage in Debt Collection Over Traditional Collection Firms Current solutions for collecting late-stage debt are inadequate. Juristec significantly improves the effectiveness of collecting older debts.

With Juristec, Clients / Attorneys utilize the effectiveness of litigation with the high volumes of collection agencies.

20%

25%*

10% 15% 4% Collection Industry Total Early Stage/Primary

Collection Late-Stage/Secondary Placement Industry Collection Through Late-Stage/ Juristec* Secondary Placement

*Based on five-year average of Peterson & Simpson’s debt collection law practice. Cases received by Peterson & Simpson are latestage (8-14 months) and low-balance ($1,000-$1,250 average) and are focused mainly in Health Care.

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Complaints to the FTC The FTC continues to receive more complaints about third-party debt collectors than about any other single industry.

Complaints to the FTC, In Thousands

3rd-Party In-House

Nilson Report (835, 857, 880)

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Comparisons Collection Agency

Traditional Law Firm

Client Using Juristec

Collection Capabilities

Calls, Demand Letters (non legal), Credit Checks

Demand Letters, Litigation, Garnishment, Bench Warrants

Demand Letters, Litigation, Garnishment, Bench Warrants

Regulations

Tightly regulated by FDCPA

Partially regulated by FDCPA but has many more options through litigation

Partially regulated by FDCPA but has many more options through litigation

Under FDCPA, collectors can no longer contact if debtor requests no contact. Does not take legal action.

Bankruptcy

Bankruptcy

50%

33-50%

25-40%*

Early: 60-180 days

Any

Any (Typically late-stage: 180+ days)

10,000-25,000 per year

200-500 per year

10,000-25,000 per year

1,000

5,000

1,000

10-15%

20-30%

20-30%

Obstacles

Contingency Fees

Collection Stage

Case Load Average Case Size % Collected

7

*By increasing volume of cases to a law practice and providing the means to process them, client can better negotiate legal fees with attorney.


Value Proposition Juristec adds value to clients, attorneys and debtors. Enables clients to maintain a professional relationship with debtors through litigation.

Client •Allows client to capture 20-30% more of their bad debt.

•Informs client through real-time reports.

•Lowers costs and minimizes losses.

•Provides full audit trail of case work and payments.

•Retains control over handling of individual cases.

•Enforces client’s procedures and policies.

•Enables the collection of small-balance and late-stage cases.

•Extends the statute of limitations allowing client longer time to collect.

Attorney •Includes checks to prevent legal errors, malpractice, and missed deadlines.

•Permits debtor to pay manageable installments without undue cost.

•Increases professionalism and decreases risk of counter suits.

•Allows debtor’s payments and costs to be accurately posted and tracked.

•Allows attorney to handle greater caseload.

•Reduces Attorney’s fees, for which debtor is liable, through efficiency.

•Tracks all money transactions for auditing.

•Provides due process to debtor through court.

•Collates similar cases for efficient work distribution.

•Allows debtor inquiries to be quickly and accurately handled.

•Automates repetitive procedures to reduce processing costs.

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Debtor


Legal Process is Complicated Client

In-House collections contact debtor

Client can forgive the Debtor’s debt at any time in the process

Debts not paid sent to legal team

Compiles cases and generates batch of demand letters. Demand letters sent

Debtor files answer with firm/court.

Supplemental proceedings: Summary Judgment

Firm files with court.

Attorney

Pre-Trial / Trial

Court

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Debtor

Debtor receives demand letter

Payment Received Summons and Complaint are delivered by legal officer to debtor and is filed with the court.

Payments made. Debtor is encouraged to pay off debt or set up payment plan at any time during the process. Attorneys can move case along without undue cost or loss of efficiency if payments are missed

Judgment

Default Judgment (Debtor doesn’t appear)

Judgment extends statute of limitations from 4 to 8 years. Attorney can garnish wages/bank account if debtor is noncompliant.

Judgments place liens on real property and can prevent debtors from obtaining further credit.


Juristec is the Solution Client

Attorney

Client has access to Juristec database with all case information. Database is backed up on a secure network daily.

Juristec tracks time intervals and generates filings for the court. Attorney has several litigation options to obtain judgment.

Juristec tracks payment and creates ability for periodic payment from debtors.

Debtor Juristec creates error-free pleadings completed in one-step process. Cases can be sent electronically to the court.

Courts 10

Juristec updates case proceeding quickly and easily, assigns ticklers for further proceedings.


Proven Results When demand letters are no longer effective, litigation should begin.

Demand Letter Juristec automates all litigation procedures, tracks deadlines and payments. Greater effectiveness when demand comes from an attorney.

Pleadings Most responsive debtors settle or make payment arrangements before going to trial. Legal officer serves pleadings directly to the debtor. FDCPA prohibits other collectors from personal visits.

43% Collected Pre-Judgment*

Trial/Judgment Court orders debtor to pay. Attorney can question debtor about personal finances.

Post-Judgment Attorneys may garnish wages or place liens on property to compel debtor to pay.

Most cases are ruled in favor of the creditor.

Judgments can prevent debtors from obtaining future credit such as home/auto loans.

Judgment allows attorney to take appropriate action against the debtor.

57% Collected Post-Judgment

*Based on five-year average of Peterson & Simpson’s debt collection practice

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Proven Results – Case Study Juristec ASP is a proven technology that has been used to collect over $75 million in late-stage collections. Peterson & Simpson was a small, but very effective legal practice with two attorneys, one paralegal, a few administrative assistants and part-time file clerks.

Total Remittances: $300 Million

The firm received 500 new cases per week with an average case size around $1,000, with $500 as the minimum. Cases were received between 8 and 14 months past due after several collection attempts had been made. Each case was prosecuted to judgment and a debtor's exam unless paid or settled. Cases that warranted it were garnished. The office staff created a series of pleadings and letters with minimal input and without resorting to word processing, which provided a complete audit trail of pleadings and transactions. The firm allowed debtors to make installment payments; the program calculated a per diem interest rate. The firm was able to move forward on those who defaulted in payments without any loss of efficiency. The platform allowed the firm to maintain a high level of professionalism in their practice, enforcing the office standard forms, eliminating human error, and automatically calculating interest, costs, attorney fees and balances. Judges appreciated the firm’s pleadings because of this efficiency. The client received monthly reports including payments, costs, and important status changes. Development of the first electronic filing system with the Sandy Court in Utah increased ease of filing cases. In the firm’s 25 year history, they collected $75 million out of a total $300 million in outstanding debt from over 85,000 cases.

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Collected: Collected: $75 Million $75 Million

Collections for Peterson & Simpson, Attorneys at Law


Why Juristec? Juristec provides both technology and services that allow clients to cost effectively litigate on a high volume of low-balance and late-stage bad debts while maintaining control of the case.

Juristec enables its clients to: – Capture revenue that has been written off to bad debt by the client. – Focus on collecting a higher volume of small-balance and late-stage debt. – Increase the ease and professionalism of their debt collection process. – Maintain oversight of the collection process. Allows client to have adequate communication with customers and prevents over-zealous collection practices. – Track and document each case and efforts for collection. 13


Table of Contents •

Juristec Overview – Comparison to Traditional Solutions – Value Proposition – Proven Results – Why Juristec?

Appendix A: Market Direction – Increase in Debt to Household Income – Commercial Bank Charge-Offs – Debt Collection Industry

Appendix B: Juristec Details – Juristec Technology – Juristec Tenets of Excellence – Management Team – Frequently Asked Questions

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Debt to Household Income “The household sector is much more exposed to consumer credit than it has been for a long time; in fact, than it ever has been. We are at a record level now of the ratio of total debt outstanding to household income.� - Bill Hampel, Senior Vice President, Credit Union National Association

Mortgage

Consumer

Federal Reserve Flow of Funds, Commerce Department

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1985Q1 1985Q3 1986Q1 1986Q3 1987Q1 1987Q3 1988Q1 1988Q3 1989Q1 1989Q3 1990Q1 1990Q3 1991Q1 1991Q3 1992Q1 1992Q3 1993Q1 1993Q3 1994Q1 1994Q3 1995Q1 1995Q3 1996Q1 1996Q3 1997Q1 1997Q3 1998Q1 1998Q3 1999Q1 1999Q3 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3

Commercial Bank Charge-Offs Charge-off Rate

Federal Reserve Board

16 Delinquency Rate Charge-offs

7.0% 30,000

6.0%

$24.2 Billion

3.7%

1.0%

1.5%

0.0% 25,000

5.0% 20,000

4.0% 15,000

3.0% 10,000

2.0%

5,000

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Debt Collection Debt collection plays a vitally important role in this system of consumer credit. Collecting on a debt, of course, benefits individual creditors who are repaid money they're owed, but it also has much broader economic benefits.

If consumers don't repay their debts, then sellers will seek to increase the prices of the goods and services to those of us who are paying to cover the cost, and if consumers don't repay their debts, creditors will be less willing in the end to lend money to consumers, and that will decrease our future purchases.

High

Price

Price w/o Debt Collection

Normal Price

Debt collection plays a key role in keeping prices low and ensuring that consumer credit remains widely available across sectors of our economy. - Deborah Platt Majoras, Chairman, Federal Trade Commission

Low Low

Quantity w/o Debt Collection

Normal Quantity

Quantity 17

High


Table of Contents •

Juristec Overview – Comparison to Traditional Solutions – Value Proposition – Proven Results – Why Juristec?

Appendix A: Market Direction – Increase in Debt to Household Income – Commercial Bank Charge-Offs – Debt Collection Industry

Appendix B: Juristec Details – Juristec Technology – Juristec Tenets of Excellence – Management Team – Frequently Asked Questions

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Juristec Technology Juristec Utilizes Cutting-Edge Technology to Provide Greater Security and Flexibility

•Oracle has proven to be the most reliable and most secure database in the industry. Used by more than 50% of the top Fortune 100 companies and the American Hospital Association. •Combining Sun's Enterprise Servers with the latest Solaris Operating Environment delivers enhanced security, manageability and performance. Sun™ Open Net Environment (Sun ONE) is based on Health Insurance Portability and Accountability Act (HIPAA) regulations regarding encryption for privacy of patient records. •The Java™ platform is the foundation for networked and Web services. Java's "run anywhere" technology provides a highly flexible and highly scalable solution. •SingleEdge: Through our security solutions colocation provider, Juristec provides a veritable fortress for our clients protected data.

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Juristec Tenets of Excellence Juristec is an Application Service Provider (ASP) that provides technology to both Clients and Attorneys for the purpose of collecting bad debt through litigation.

BEST-IN-CLASS TECHNOLOGY •Juristec provides a full technology solution for collection litigation. •Manages all technical aspects including data and database management, firewall protection and encryption. •Provides flexibility to handle high volume of cases with smaller debts. •Proven technology currently in operation for 15 years managing 20-30,000 cases per year.

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SIMPLIFIES COLLECTIONS •Provides document automation and one-step pleadings, which speeds the litigation process, eliminates errors and reduces costs.

INCREASES PROFESSIONALISM

GREATER SECURITY & SUPPORT

•Enforces Client’s procedures and policies.

•High-level encryption standards

•Increases communication between Client and Attorney.

•Secure and automated data backup.

•XML/EDI standards to import/export cases through a secure Web site.

•Provides full audit trail of Debtor payments

•Attorneys work cases to collection and Clients monitor the progression.

•Includes checks to prevent legal errors, malpractice, and missed deadlines

•Payment and interest tracking system allows Debtors to make installment payments.

•Greater Client control of individual cases.

•Easy and rapid implementation with low maintenance. •Real-time operating statistics and customizable reporting. •24X7X365 monitoring and comprehensive contingency infrastructure.


Management Team Lawrence R. Peterson – Founder, President • Founding Partner of Peterson & Simpson, Attorneys at Law • 30-year member of Utah State Bar Association • Member of the Utah Collections Bar Association • Certified Solaris/Sun Systems Administrator • Juris Doctorate from University of Utah Brent Peterson – Director of Business Development • Manager for the Cicero Group, LLC • Manager at Bond Street Limited, LLC • Chief Analyst for Blackford Capital, LLC • B.A. from Brigham Young University, degree in Economics

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Frequently Asked Questions Will we be subject to counter-lawsuits if we litigate on our bad debt? Juristec provides greater professionalism and eliminates errors from prosecuting each case. Client also has the ability to filter out any cases they feel may be in question. What about those individuals that don’t have the ability to pay for economic reasons? Those individuals who do not have the ability to pay are virtually unaffected by the process because they typically do not have assets that can be placed under lien. Often times they can qualify for charitable contributions by the creditor. Why aren’t collection agencies able to collect as much as we can with Juristec? Consumers know that collection agencies tend to make idle threats in suing the consumer but never do, and therefore, collection letters are typically ignored. With Juristec, consumers will receive a demand letter from an attorney and will be summoned to court if payment arrangements are not met. Consumers are much more compelled to pay when faced with a lawsuit and can be forced to pay when judgment is rendered If we use Juristec, will we stop using our collection agency? Juristec is typically utilized for late-stage (greater that 180 days) consumer debt. Most collection agencies see their results fall the longer the debt is outstanding.

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Juristec Presentation Jan 12