Definition
Recovery rate, also called liquidation rate, is the proportion of delinquent or placed balances collected over a defined period, typically expressed as dollars recovered divided by dollars placed. Gross recovery rate measures all dollars collected; net recovery rate subtracts collection fees or commission to show what the creditor actually keeps. Recovery is usually tracked by vintage (placement month) and over fixed windows such as 90, 180, and 365 days.
Benchmarks vary enormously by debt type and age. Early-stage first-party collection on fresh delinquencies can recover 50% to 80%. Charged-off consumer debt placed with agencies typically liquidates at 8% to 20% in the first year. Purchased debt priced at pennies on the dollar may recover 5% to 12%. Comparisons are meaningful only within similar debt type, age, and balance.
Example
A lender places $1,000,000 of 90-day-delinquent personal loans. After 180 days, $190,000 has been collected (19% gross). The agency kept 32%, so net recovery is $129,200 (12.9% net). The same portfolio on HL Hunt recovers $380,000 gross and $342,000 net after 10% commission.
How HL Hunt handles it
HL Hunt reports gross and net recovery by vintage, debt type, channel, strategy, and plan tier in real time, and typically delivers a median 38% recovery on consumer debt 30 to 180 days past due by working every account rather than the easiest ones.