Ranking overview
Servicing category	Jurisdiction	Overall ranking	Management and organization subranking	Loan administration subranking	Ranking outlook
Special servicer of consumer finance loans and credits	Germany	Strong	Strong	Strong	Stable
Special servicer of consumer finance insurance and receivables	Germany	Strong	Strong	Strong	Stable
Financial position
Sufficient

Rationale

• Lowell Financial Services GmbH provides collection and credit management services in Germany, Austria, and Switzerland through 10 subsidiaries.
• We have affirmed our STRONG rankings on Lowell as a special servicer of consumer finance loans and credits and as a special servicer of consumer finance insurance and receivables in Germany.
• Our special servicer rankings only apply to two of Lowell's subsidiaries--Proceed Collection Services GmbH and Sirius Inkasso GmbH, which together manage 72% of Lowell's overall portfolio by gross book value as of the end of 2022.
• The ranking outlook for each ranking is stable.

S&P Global Ratings' rankings are STRONG on the Proceed Collection Services GmbH (PCS) and Sirius Inkasso GmbH (SIR) subsidiaries of Lowell Financial Services GmbH (Lowell) as a special servicer of consumer finance loans and credits and as a special servicer of consumer finance insurance and receivables in Germany. The ranking outlook for each ranking is stable.

Lowell supplies collection and loan management services on owned and third-party portfolios and it is part of the broader European Lowell Group (the Group), which provides special servicing of unsecured loans and receivables in the Germany, Austria, and Switzerland (DACH market), the U.K., and in the Nordic countries.

Our rankings reflect:

• Lowell leverages synergies from the Group in supporting areas such as human resources and internal controls.
• New executive management appointments at the DACH and Group levels, primarily through internal promotions since September 2021, reflecting Lowell's ability to retain and train talent.
• Lowell's ability to react to the cyberattack that took place in March 2022 and hit five DACH subsidiaries, excluding PCS and SIR.
• A robust servicing system, which effectively supports Lowell's receivables management workflow.
• The Group's reliable internal controls and governance models, which are tailored to address regional/country requirements, including Lowell in Germany.
• Sound internal and external reporting, supported by a proprietary online portal where clients have real-time access to their portfolio information, which allows good control over the servicer's ongoing activity.
• The solid servicing model, including a long and positive track record of servicing various types of diverse portfolios.

Since our prior review (see "Servicer Evaluation: Lowell Financial Services GmbH," published May 21, 2021), the following key changes and/or developments have occurred:

• In March 2022, Lowell was hit by a cyberattack from a cybercrime group and worked promptly to isolate the affected operations and fully restored them in June 2022, while continuing to provide its typical standard of service.
• Lowell appointed a new chief information officer in April 2022, a new chief executive officer in September 2022, and a new director of financial performance in November 2022.
• Over the course of the past two years, Lowell strengthened its regional internal controls framework by adding new features aimed at enhancing the level of control over its subsidiaries.
• At the beginning of 2022, Lowell introduced an online borrower portal, which provides loan information to borrowers and self-service functionalities for certain borrower requests.

The outlook on each ranking is stable. Lowell has the systems, policies and procedures, and well-trained staff in place to service its portfolio according to the industry's best servicing practices.

Moreover, Lowell was able to react quickly to the cyber incident, while continuing to provide a sufficient standard of service to avoid any disruption to borrowers and clients, and to prevent losing any key account clients following the attack.

The financial position is SUFFICIENT.

Servicer profile
Servicer name	Lowell Financial Services GmbH
Primary servicing location	13 servicing centers, of which the largest ones are located in Essen and Dusseldorf
Parent holding company	Permira Holdings Ltd.
Loan servicing system	phinAMV

Profile

Lowell supplies collection and credit management services on owned and TP portfolios in Germany, Austria, and Switzerland (the DACH market) through its 10 operative subsidiaries. Lowell operates through different locations while its headquarters is in Essen, Germany.

Our rankings assess Lowell's ability to manage consumer finance loans and credits along with insurance and receivables as a special servicer in Germany, and they are limited to the analysis of two of its subsidiaries: Sirius Inkasso GmbH (SIR) and Proceed Collection Services GmbH (PCS), which together manage 72% of Lowell's portfolio, in terms of gross book value (GBV):

• SIR primarily services small credits for insurance companies, utility companies, and telecommunications providers, among others, managed with a more industrialized approach; and
• PCS primarily services loans that require tailored collection activities for financial institutions and banks.
• The DACH operations are divided into three different business units, leveraging economies of scale and scope as follows:
• The first one ("Industry BU"), includes the subsidiaries such as SIR that manage highly automated credits, which require a standardized workflow.
• The second one ("Manufacturing BU"), comprises the subsidiaries such as PCS that manage less automated credits, which require a more tailor-made approach to each credit under assessment.
• The third one includes one of the subsidiaries working on the Swiss and Austrian market and is therefore outside of the scope of our assessment.

Each subsidiary works independently and applies specific workflows tailored to the assets under management. At the same time, they work under a single-brand strategy set by Lowell and share supporting functions such as the service center and administration. The Group provides further supporting functions such as human resources (HR), information technology (IT), accounting and internal controls.

As of Dec. 31, 2022, Lowell's overall portfolio under management had a GBV of €18.1 billion, including €11.8 billion under PCS management and €1.2 billion under SIR management. Lowell continues to replenish the portfolios under assessment while it has been more difficult to achieve substantial growth as the debt purchasing opportunities remained limited.

Table 1

Portfolio volume
Special Servicing
	PCS consumer finance loans and credits		PCS consumer finance Insurance and receivables		SIR consumer finance loans and credits		SIR consumer finance Insurance and receivables
	Volume (bil. €)	Units (no.)	Volume (bil. €)	Units (no.)	Volume (bil. €)	Units (no.)	Volume (bil. €)	Units (no.)
Dec. 31, 2022	11.59	675,892	0.24	78,930	0.45	485,439	0.76	1,071,921
Dec. 31, 2021	10.94	607,242	0.18	67,131	0.46	448,995	0.73	1,094,976
Dec. 31, 2020	10.98	575,922	0.26	90,894	0.49	468,908	0.72	1,123,274
Dec. 31, 2019	11.11	615,325	0.3	106,910	0.52	480,536	0.74	1,180,966
Dec. 31, 2018	11.26	600,720	0.24	87,279	0.52	465,621	0.71	1,211,591

Table 2

Portfolio volume
Special Servicing
	Group consumer finance loans and credits		Group consumer finance Insurance and receivables
	Volume (bil. €)	Units (no.)	Volume (bil. €)	Units (no.)
Dec. 31, 2022	12.16	1,185,242	5.92	5,501,797
Dec. 31, 2021	11.21	934,099	5.74	5,406,962
Dec. 31, 2020	11.87	1,098,568	7.50	5,719,744
Dec. 31, 2019	11.97	1,186,924	5.76	6,331,238
Dec. 31, 2018	12.16	1,168,129	5.49	5,909,187

In March 2022, a cyber-attack hit five of the 10 Lowell companies and exfiltrated personal information of borrowers. PCS and SIR were not impacted since their data centers were already relocated to Vodafone's data center before the attack occurred. This migration project to the cloud was implemented over time and was successfully finalized for all subsidiaries by the end of 2022. Lowell immediately isolated servers, systems, devices, and networks and physically disconnected all endpoints for all its subsidiaries to contain potential damages. No significant delays were registered in the servicing of the assets in the affected subsidiaries following this breach. At the same time, it immediately involved external IT security and forensic experts in securing the best possible damage assessment, containment, and remedial action plan.

In June 2022, the servicer fully restored its infrastructure and the activities that had been interrupted after the attack. Lowell appointed an external cyber security audit company that regularly audited all restarting activities.

Management And Organization

The management and organization subrankings are STRONG for both rankings.

Organizational structure, staff, and turnover

Aside from some new executive appointments, the Lowell structure remained stable and well-designed with an appropriate governance model structured around several committees at the Group, regional, and subsidiary levels. The Lowell leadership team had the following changes:

• A new chief executive officer (CEO) and a new director of financial performance at DACH level were appointed through internal promotion in September 2022 and November 2022 respectively and sit on the Group's board of directors;

PCS's staff turnover rate remained stable over the last three years at approximately 21%, while SIR registered a slightly higher staff turnover rate of 25% in 2022 (versus 21% in the two previous years). Management explained the increase was due to competition for experienced staff in the marketplace. The company continues to take remedial actions to address this, including improving transparency on career progression and opportunities. At the same time, the Group strengthened the HR team by hiring three new HR experts (two at Group level, and one at DACH level) with specific knowledge on topics such as talent acquisition, talent management, and training.

The average experience rates of PCS and SIR middle and senior management are adequate.

Table 3

PCS
Experience and tenure	Avg. industry experience (years)	Avg. tenure (years)	Six-month turnover rate (%)
Senior management	18	9	0
Middle management	14	10	7
Staff early arrears	N.T.	N.T.	N.T.
Staff late arrears / litigation	N.T.	7	17
N.T.: Not tracked by the servicer.

Table 4

SIR
Experience and tenure	Avg. industry experience (years)	Avg. tenure (years)	Six-month turnover rate (%)
Senior management	20	21	0
Middle management	13	11	0
Staff early arrears	N.T.	N.T.	N.T.
Staff late arrears / litigation	N.T.	8	10
N.T.: Not tracked by the servicer.

Training

The Group, which has 24 dedicated staff allocated across several specialist teams, provides HR support and services to Lowell's subsidiaries including hiring, training and staff appraisal, through Workday.

All new staff attend a compulsory induction training program averaging 43 hours, which varies based on experience and job position. Ongoing training includes external courses, online training, and internal classroom sessions covering IT, receivables management, data protection, and call handling for collection phone calls. The average number of continuing training hours per employee at PCS and SIR has remained stable since our previous review, at levels of similarly ranked peers.

In addition, during 2022 the servicer moved all mandatory training courses, previously hosted on a different external platform, onto Workday to achieve cost savings. This highly automated training system contains recorded training modules, automatic reminders, and tracking of course completion. Furthermore, Lowell introduced LinkedIn Learning modules which provide an expanded catalogue of voluntary training courses.

Lowell continues to hold periodic town halls, face-to-face sessions with the executives, lunch-and-learn sessions, and other internal and external team-building activities. The Group introduced an annual employee survey across Lowell during 2021 to gauge staff sentiment as management believed this would help it address turnover. Following the June 2022 survey, the HR team took the following initiatives:

• Information sessions were implemented for all employees with the HR team regarding career growth opportunities, training, and personal development.
• Communication of the Group's strategy was communicated to all employees beginning in 2023.
• Monthly people manager roundtables were introduced to further improve communication. Several new wellness initiatives were rolled out such as health events and nutrition sessions for employees.

All of Lowell's subsidiaries apply a similar performance appraisal process using Workday, beginning with each employee setting annual goals with their line manager. Managers measure these objectives semiannually, using defined metrics, and assign annual bonuses according to personal, team and company achievements. Additional benefits include pensions, extra holidays, and specific financial contributions in case of marriage or the birth of a child.

Systems and technology

Since our last review, the Group moved to a global IT setting, removing specific regional chief information officers. However, the Group appointed new directors responsible for specific functions while reporting to the Group CIO. Three of these directors will be appointed as host managers for each specific region.

Lowell believes that the new structure will foster efficiency across the whole Group.

Servicing system applications

All of Lowell's subsidiaries use the same version of the highly automated phinAMV receivables management system to facilitate their collection activity. The subsidiaries also interface with the telephony system and the general ledger. phinAMV is a proprietary system tracking collection activity, setting up call reminders, and containing a document management module that efficiently manages customer credit files, scans mail and other important documents, and performs quality checks.

Business continuity and disaster recovery

Lowell maintains a sound disaster recovery (DR) and business continuity (BC) plan, including response procedures to address operational disruption following the pandemic. Lowell updated its DR and BC plans in December 2022 to address certain deficiencies it identified following its assessment of the cyber-attack earlier that year. The Group's BC and DR procedures were also incorporated into Lowell's compliance management system.

Lowell's internal controls area manages the DR and BC plans and tests of these plans, promoting consistent DR and BC practices across the subsidiaries. Furthermore, the Group internal audit function reviews the DR and BC tests and processes annually.

Lowell provides some DR back-up offices to both PCS and SIR at several locations such as Ratingen and Munich. There is also access to Vodafone's emergency data center in Frankfurt.

Cybersecurity

The Group is responsible for establishing cybersecurity protocols including adoption of controls and supervision of activities to address the latest information security standards. Despite these efforts, a cybercrime group cyber-attacked certain Lowell subsidiaries in March 2022. The Group worked promptly to isolate the affected operations and to restore them fully in June 2022 while continuing to provide their typical standard of service.

Following this cyber incident, Lowell implemented several measures to address certain deficiencies it identified including:

• Reinstalled all workstations and introduced new enhanced security software to strengthen the IT infrastructure of the DACH subsidiaries.
• The remaining data centers were transferred to Vodafone's data center as this transition was already underway before the cyberattack occurred.
• Its cyber security policy was revamped and an updated version of the cyber security awareness training was offered to the entire DACH staff.
• Subsequent workshops with staff involved in cyber incident management were conducted.
• The frequency of test phishing e-mails was increased to monthly from bimonthly to enhance employee awareness around this topic.
• The servicer continues to provide regular cybersecurity training via web-based tools and performing frequent internal and external penetration tests.

Internal controls

The Group applies a three lines of defense model, where management and operations oversight represents the first line, risk management together with the compliance and financial crime team represent the second line, and internal audit represents the third line.

The teams composing the second line report to the Lowell CRO (who in turn reports to the CRO at the Group level), while the internal audit team reports directly to the Group Internal Audit (GIA) head. This allows frequent exchange of information between the Group and Lowell.

Policies and procedures (P&P)

Each of Lowell's subsidiaries has fully documented P&Ps, covering all critical functions and processes. Staff can access them electronically through the intranet and are advised by e-mail when they are updated and uploaded on the intranet. Appropriate control mechanisms govern procedural changes, ensuring sufficient control of the decision-making and approval processes. Team leaders or heads of departments review policies at least every 24 months, which are then reviewed by the risk management team and where applicable by the labor relations manager and worker's council to ensure that they are in line with risk appetite, applicable regulation, and national laws. We note that most servicers we rank review and update their P&Ps more frequently, however, Lowell's P&Ps appear to be well-structured and informative.

Compliance and quality control

Lowell's compliance function was designed to address laws, regulations, and Lowell's DACH code of conduct, which defines AML, data protection, fraud prevention and detection, among other controls. Xactium is a third-party risk management software system used to track compliance-related risks, the potential financial impact if they were to occur, and probability of occurrence.

The Group reports periodically to the board of directors at the Group level and the Lowell supervisory board chairman. The team also conducts an annual compliance risk assessment in cooperation with the subsidiaries, while the CRO reviews and approves each compliance plan at least annually.

In addition, since our prior review, the servicer introduced the following:

• Started using the Lexis Nexis WorldCompliance "Know Your Customer" web too as it provides a variety of identity verification services for AML, counterterrorist financing, and politically exposed person detection.
• Introduced a Group-wide whistle-blower channel that is available to all internal stakeholders to help identify conduct that violates any laws, ethical principles, and governance regulation standards.

A team of five senior call center agents performs call monitoring on roughly 25 calls per month per SIR call center agent to ensure quality assurance, check whether agents are violating any law, and assess the need for further training. Internally appointed trainers address any issues discovered as part of this call monitoring. Depending on the finding, it could result in training across the Group or one-to-one training if these finding are specific to a certain agent's behavior. Call monitoring is not performed on PCS call center agents due to external labor restrictions. However, PCS provides general training to agents on a monthly basis.

Risk management

Lowell's risk management function is mainly focused on the following: operational risks, strategic risks, financial risks, compliance and financial crime risks, and information and data risks. Each department is responsible for risk consultation and analysis, risk reporting, tracking of risk mitigation actions, and escalations across each subsidiary. Each subsidiary has operative risk owners and operative risk business partners. The former are managers in charge of risk identification and oversight while the latter work as an interface with the risk function, dealing with risk communication as well as tracking and implementing mitigation measures.

Lowell merges the risk management analysis results for each subsidiary into a risk library, Xactium, which also supports regional operations and group-wide reporting. There is a monthly risk management committee at the Lowell level and a quarterly Group risk management committee. Lowell senior management also reviews the risk reports on a monthly, quarterly, and yearly basis as they are published.

In 2021, Lowell introduced a new top-down risk assessment (TDRA) performed annually at the Group and DACH levels. During these executive committee meetings, senior management identifies relevant high-risk items listed in the risk library based upon impact and the likelihood of occurrence. Further discussions include measures taken or to be taken, to ensure that these risks are under control. Needed actions are then reflected in the annual planning process. The TDRA is then updated quarterly and shared with the local servicing units who use the results to manage their business.

Internal and external audits

In June 2021, the Group reorganized the internal audit (IA) function and re-established an IA team at DACH level, which was previously performed by the Group, comprising two full-time employees (FTEs) (including the head), reporting to the Group IA. to share findings and resolutions.

The GIA assigns a risk factor to each area of the Nordics and DACH organization's audit universe that determines the frequency of audit reviews. PCS and SIR have an annual audit review, which is in line with industry best practices. Lowell's subsidiaries can also be subject to their clients' due diligence, including audits.

Based on the above, the GIA then drafts a risk-based audit plan, obtains approval from the Group audit committee, and then cascades it to the internal audit team at the DACH level.

The IA team at the DACH level documents audit outcomes and progress of remediation plans, which are periodically reported to the regional and Group executive boards. Lowell uses the Xactium software to track audit findings and the status of the remediation plans that each subsidiary's management implemented. For security purposes, only a limited number of people have access to it.

As of January 2023, Lowell reported three open high-risk findings, linked respectively to the implementation of a customer file inventory system following the massive scan and subsequent destruction of outdated paper files, the update of the DACH change policy to cover portfolio management activities, and the implementation of a process for identifying vulnerabilities.

The servicer is working to close these gaps as soon as possible and we will strictly monitor future updates.

Complaint management

Lowell maintains two quality and complaints management (QCM) teams to manage complaints within each BU. They use a centralized complaints register and system that aggregates its subsidiaries' complaints to ensure consistent complaints management.

Standard procedures include a requirement that all complaints received, whether written or verbal, are sent to the QCM team who is responsible for entering the details into the complaints register. The QCM team investigates the matter reaching out to the relevant operative teams and produces a written response, which is tracked in the register. Additionally, the QCM team reports on the status of complaints to each subsidiary's managing director at least monthly.

Both PCS and SIR have reported a low level of complaints compared to the overall number of cases under management.

Vendor management

Each BU is responsible for vendor appointment, monitoring, and ongoing due diligence following Group procedures. Members from legal, risk, and compliance are also involved with a focus on assessing each vendor's data and information security processes and policies.

Lowell's use of external counterparties is mainly limited to skip tracing and back-office activities (printing, documents management, mail and email services, etc.). Upon loan boarding, the back office selects a skip-tracing company when needed, based on specific features of the portfolio. If the first skip-tracing company is not successful in retrieving the information, the team will appoint a different skip-tracing company until they are successful.

The Lowell legal department is responsible for checking the quality of the support received from external lawyers. PCS and SIR work with only one external law firm whose lawyers do not have access to phinAMV. Lowell's asset managers communicate with external lawyers via phone and/or email and are responsible for recording any new information in the system. Lowell considers that this solution provides a strict control on the quality of the data, and they are not planning to open the system to their external legal network.

Finally, Lowell monitors vendors through specific scorecards produced at least quarterly or more often based on the importance of the service provided.

Insurance and legal proceedings

Lowell has represented that its directors and officers as well as its errors and omissions insurance coverage is in-line with the requirements of its portfolio size. As of the date of this report, no material servicing-related litigation items were pending, although the company set aside provisions for potential litigation related to the cyber-incident.

Loan administration - special servicing

The loan administration subrankings are STRONG for both rankings.

PCS has two offices, one in Essen within the Lowell headquarters, and the other in Munich. The staff based in Essen work mainly on portfolios of loans with lower values (averaging €6,000 per loan), while the staff in Munich mainly focus on portfolios of loans with higher values (averaging €71,000 per loan).

SIR operates from three locations in Germany: Ratingen, Cologne, and Hamburg. The bulk of the SIR portfolio comprises small consumer loans averaging €1,000 and small receivables averaging €640 for insurance, telecommunications, utilities, and mail-order companies. SIR applies a standardized collection strategy over a wider number of cases, so its operations are automated as much as possible.

As of Dec. 31, 2022, PCS' portion of portfolios managed on behalf of TPs was 65% (GBV) and 38% by number of cases. Over the same period, SIR's portion of portfolios managed on behalf of TPs was 38% (GBV) and 48% by number of cases. Lowell's owned portfolios comprised the remainder.

Table 5

PCS consumer finance loans and credits
Portfolio volume (GBV)
	Average loan size (€)	Up to 90 days in arrears (bil. €)	90+ days in arrears (bil. €)	Litigation (bil. €)
Dec. 31, 2022	17,146	-	9.00*	2.59*
Dec. 31, 2021	18,011	-	8.49*	2.45*
Dec. 31, 2020	19,070	-	8.44	2.54
Dec. 31, 2019	18,048	-	8.58	2.52
Dec. 31, 2018	18,741	-	8.87	2.39
* Please note that the servicer wasn't able to provide exact numbers for 2021 and 2022 so these numbers are estimates based on the previous years' split.

Table 6

PCS consumer finance insurance and receivables
Portfolio volume (GBV)
	Average loan size (€)	Up to 90 days in arrears (bil. €)	90+ days in arrears (bil. €)	Litigation (bil. €)
Dec. 31, 2022	1,076	-	0.14*	0.10*
Dec. 31, 2021	1,062	-	0.14*	0.10*
Dec. 31, 2020	1,311	-	0.14	0.12
Dec. 31, 2019	909	-	0.17	0.13
Dec. 31, 2018	929	-	0.14	0.10
*Note that the servicer wasn't able to provide exact numbers for 2021 and 2022 so these numbers are estimates based on the previous years' split.

Table 7

SIR consumer finance loans and credits
Portfolio volume (GBV)
	Average loan size (€)	Up to 90 days in arrears (bil. €)	90+ days in arrears (bil. €)	Litigation (bil. €)
Dec. 31, 2022	935	-	0.17	0.28
Dec. 31, 2021	1,023	-	0.17	0.29
Dec. 31, 2020	1,041	-	0.33	0.38
Dec. 31, 2019	1,074	-	0.35	0.39
Dec. 31, 2018	1,117	-	0.36	0.35

Table 8

SIR consumer finance insurance and receivables
Portfolio volume (GBV)
	Average loan size (€)	Up to 90 days in arrears (bil. €)	90+ days in arrears (bil. €)	Litigation (bil. €)
Dec. 31, 2022	712	-	0.44	0.33
Dec. 31, 2021	670	-	0.41	0.33
Dec. 31, 2020	638	-	0.33	0.38
Dec. 31, 2019	623	-	0.28	0.35
Dec. 31, 2018	586	-	0.3	0.33

New-loan boarding

Lowell has a well-established and tested boarding process adopted by all of its operative subsidiaries including PCS and SIR.

Lowell has a centralized business process management group, which leads the portfolio boarding activity. For each new boarding, the unit identifies the boarding project team which uses Confluence software that supports document sharing, milestone tracking, and communication.

Lowell also has a centralized service center in Gelsenkirchen, which manages the mailing and archive service. It is split into two teams:

• Inbound mail (42 FTEs), and
• Outbound mail and archive (45 FTEs).

Every morning the inbound mail team opens, selects, and scans mail and newly received documents for new boarding and old cases. Each document is associated to a case in the loan management system using a barcode and/or numeric code, specific to each position. The outbound mail team receives instructions through the system about outgoing communications related to specific cases or general campaigns. The servicer uses machines that can open, close, and apply stamps on letters as well as scan and print a large number of documents. All documents are kept in fireproof rooms. Servicing staff can request original documentation from the service center through phinAMV.

In our opinion, the archive and mailing system is robust and has been well tested over time.

Payment processing

The Group applies common and robust payment processing for all its subsidiaries across a single accounting system that provides a consistent way to plan, account for, and report on cash activity. The Lowell payment department is comprised of 46 members, 10 of whom are fully dedicated to processing incoming and outgoing payments for PCS and SIR, more than 99% of which are received electronically. Also, electronic statements received from banks allow for automated uploads to the servicing system and general ledger accounts for direct posting to individual debtors and automated reconciliation. The payments team performs a manual reconciliation for any unallocated payments from borrowers, typically resolving suspense items within 24 hours for PCS and 48 hours for SIR, which is quicker than peers. As of Dec. 31, 2022, 87% of the payments were automatically reconciled.

Client management and investor reporting

Lowell's client management team has nine members, specialized by asset class or a combination of asset classes, who are responsible for business development through the maintenance of the relationship with existing clients, and market outreach to attract new clients.

The client management team and other relevant staff attend daily internal meetings to discuss client topics as well as weekly external meetings with each client to discuss updates from the servicer and answer questions they may have.

The reporting function is split into investor reporting sitting at Group level and including three FTEs, and client reporting sitting at DACH level and comprising 28 FTEs. The latter is split between complex client reporting, sitting under the operations department, and standard reporting, sitting within the IT department. The teams produce various internal and external reports for management, investors, and clients. Lowell distributes external reports via secure file transfer protocol or emails, both of which are automated.

In addition, Lowell provides a proprietary online portal to its clients to meet their requests and enable easier and real-time access to their portfolio information. The portal allows clients to access information on each individual claim (status, process, history), basic reports, and a dashboard on their overall portfolio.

Special servicing

Lowell provides special servicing support to its 10 subsidiaries, grouped into two BUs. The first BU includes PCS, and focuses on the management of unsecured loans and credits with a higher GBV amount. The second BU, which includes SIR, focuses on the management of smaller unsecured loans, receivables and other credits. The two managing directors of each BU report to Lowell's COO.

When Lowell adds a new portfolio, a business process management officer sets up the internal workflow process consistent with the established client agreement. The workflow becomes part of the automated process and new assignments received from the same clients are distributed to loan managers according to the criteria set at boarding and in line with the client's agreement and compliance related issues. Processes are similar for portfolios managed on behalf of TP clients and for owned portfolios. Lowell's collection strategy attempts to find an amicable settlement with customers rather than pursue legal recovery, which saves Lowell time and benefits the clients' reputations which often maintain long term relationships with the debtors.

Lowell's BUs work in tandem with the Lowell Service Center (SC), which provides back-office activities, such as postal and archive management, to support the collection activities.

Each BU includes the following sub-units:

• Portfolio management, which includes loan managers who define each portfolio's collection strategy and instruct SC's communication center accordingly and the legal support group when necessary. In addition, loan managers are in charge of maintaining relationships with new and existing clients;
• Communication center, in charge of phone collection activity and customer service, based on the loan managers' input;
• Performance management, which monitors operational and economic performance and aims at improving processes by developing new approaches or workflows; and
• QCM team, as described in the complaints management section.
• The collection strategies of the first BU, including PCS, are typically less automated and more case driven than the collection strategies applied within the second BU, comprising SIR, which work with more standardized and automated processes and procedures. Therefore, SIR can handle a higher number of loans simultaneously compared to PCS.

PCS and SIR use the same version of the phinAMV receivables management system. This system performs account stratification based on debt amount, debtor financial situation, age of debt, etc. Lowell also obtains updated credit bureau reports on customers in arrears, depending on client agreements.

The communication center team can work on the standard workflow (initial approach, payment agreements, and reminders), or special campaigns.

After a set period, the communication center will start calling the debtor, attempting to agree on a payment arrangement or a final settlement.

Lowell's communication center uses the Genesys phone system, which is equipped with a predictive dialer, connected to phinAMV.

Incoming calls trigger a pop-up window that presents data on the debtor and the claim, and the communication center agent is required to input a short summary of the discussion with the debtor into the system.

At the beginning of 2022, Lowell introduced an online borrower portal which provides loan information to borrowers and self-service functionalities for certain borrower requests, including digital payments, settling payment agreements, and uploading/downloading relevant documentation.

The terms of most Lowell TP servicing agreements do not require it to measure specific KPIs such as collection targets. Following common industry practice, TP clients in Germany do not disclose collection targets, and most of them engage more than one servicer to compare performance and retain the higher achievers. However, Lowell uses internal KPIs to measure the performance of its collection activities.

Lowell reports that it has never lost a key TP contract due to performance-related issues nor following the cyber incident. Management believes this reflects positive collection results over time and prompt reaction to the cyber-attack. In addition, the servicer reported collection results over the last two years that exceeded the recovery targets they established for their directly owned portfolios.

Related Research

• Select Servicer List, May 5, 2023
• Servicer Category Descriptions Expanded And Revised, Feb. 28, 2022
• Servicer Evaluation: Lowell Financial Services GmbH, May 21, 2021
• Servicer Evaluation Spotlight Report: Environmental, Social, And Governance Factors Have Consistently Powered Our Servicer Evaluation Rankings, Nov. 16, 2020
• Analytical Approach: Global Servicer Evaluations Rankings, Jan. 7, 2019

Servicer Analysts:	Corrado Boschi, Milan (39) 02-72111-259; corrado.boschi@spglobal.com
	Chiara Sardelli, London + 44 20 7176 3878; chiara.sardelli@spglobal.com
Analytical Manager, Servicer Evaluations:	Robert J Radziul, New York + 1 (212) 438 1051; robert.radziul@spglobal.com