OXFORD — Two boyhood friends turned the tedious, thankless job of collecting bad checks into a multi-million dollar business. John Lewis, 29, and William Alias III, 27, former roommates at the University of Mississippi, have been selected by Ernst & Young as two of Mississippi’s leading entrepreneurs for their role in establishing Security Check, a check collection business.
Several years ago, a need for extra income led the two Ole Miss business school students to sell discount packages to La Mystique, a local hair salon favored by college students. When several checks bounced, they recouped the money themselves and an idea was born, Alias said.
“We met a guy who was really good with computers and he helped us create a program that could track checks as they flowed through our system,” he said. “Once we had a system in place, we knew we could start collecting checks for other businesses, too.”
The basic concept was simple: collect a bad check, return the face value to the merchant and pocket the returned check fee.
“Merchants are so busy that it’s difficult for them to take time to track down bad check writers so it was fairly easy to talk them into it,” Alias said.
Between classes and after school, the pair collected bad checks from their apartment until the business outgrew the space. Then they purchased a nearby facility and hired a few pleasant-sounding college students to man the phones.
“We want to keep the location in Oxford because of the availability of college students who, like we wanted, can work flexible hours and make good money,” said Alias. “We give bonuses based on production. If a collector gets a letter that says they were nice, we give them another bonus.”
More than 200 employees, a labor base of the “best and brightest,” Alias said, make more than 20,000 calls daily from the Oxford facility, where all bad checks, averaging around $20 each, are routed. Security Check’s database lists about 4.5 million habitual bad check writers. Among their clients: NPR, the nation’s second largest credit card processor.
“The bad check industry is a $40-billion industry,” Alias said. “This year, more than 750 million bad checks will be written in the U.S.”
Security Check collects the maximum state-allowed service charge, which ranges from $15 to $40, with an average of $25. In Mississippi, Missouri and Kansas, it’s $30. Tennessee allows a maximum $29 service charge while Alabama’s is $27. In Georgia, Louisiana, North and South Carolina, the maximum fee is $25.
In Arkansas, where the maximum charge is $20, the duo is lobbying for a $5 increase in the next legislative session, Alias said.
“The average bad check is higher that what we collect, with the national average around $400, but our accounts are mostly grocery stores, convenience stores, fast food restaurants and places that typically receive a lower dollar check,” he said.
Once Alias and Lewis had the infrastructure in place, they turned their focus nationally to expand through franchise programs. Their goal? A franchise in every area code in the U.S.
“In the last two or three years, we built an infrastructure that can handle hundreds of thousands of checks every month,” Alias said. “We have a total of 31 franchises and just sold three additional ones — two in Colorado, one in North Carolina — in the last two weeks.”
Franchisees sell and service accounts; Security Check collects, reports and also services accounts. Profits are split 50/50. Alias declined to reveal the franchise fee.
“Of all the franchise programs we’ve studied, the start-up is very, very minimal for the return on investment,” he said. “There’s an unlimited amount of money you can make, depending on how many accounts you want to sell and how hard you want to work. For example, McDonald’s will only do so well. The best one may do $2.5 million a year; the worst one may do $1.5 million a year. With Security Check, the potential is unlimited. But if you don’t sell accounts, it makes nothing.”
The biggest hurdle to overcome was keeping the business organized as the company rapidly grew.
“We’ve been able to accomplish what we have because of our computer system, a lot of hard work and the University of Mississippi — students and faculty,” Alias said.
Hugh Sloan, Ph.D., an associate professor of marketing and logistics at the University of Mississippi, has been studying data-entered information on each check that could assist the two in more effective collection activities.
“The Oxford community is very proud of William and John,” said Sloan. “It’s a pleasure to have a working relationship with local businesses and try to provide assistance in areas in which they need assistance.”
Alias said their priorities include taking care of collections personnel, running the business efficiently and setting up separate sales and service offices in the U.S.
“Our business is operating better than it ever has and there’s no reason for the service to ever break down,” he said. “It will get even better as the business grows and we’re determined to do that. The only way excellent customer service would ever diminish is if employees stopped respecting customers. That won’t happen here.”
Contact MBJ contributing writer Lynne Wilbanks Jeter at firstname.lastname@example.org or (601) 364-1018.