American Management Systems Inc. of Arlington has developed an automated debt-collection system designed to help other companies collect money owed and to allow AMS to cash in on a growing market.

The Computer Assisted Collection System (CACS) was created by AMS, a computer systems and management consulting firm, for Wells Fargo Bank, which wanted to improve collections on its 60,000 Visa and MasterCard accounts. According to AMS, the system can improve collector productivity by as much as 150 percent, as measured by the number of accounts worked per person per day, and can reduce delinquencies and losses by 50 percent.

AMS is just one of several firms that have seen an opportunity in debt collection and moved to capture a share of what may be a growing market aiding banks, finance companies, retailers and others.

According to the American Bankers Association, more than $9 billion was owed at the end of 1984 on "delinquent" consumer loans -- those in which one payment was at least 30 days overdue. The rate of delinquency has increased only slightly from the year before, from 1.9 percent of bills owed to 2.1 percent. However, the total amount of consumer credit outstanding increased 20 percent to $468.7 billion at the end of 1984, the ABA said.

One reason so many bills go unpaid, according to AMS and others, is that many businesses still use inefficient, manual methods of tracking debtors and collecting on bad debt. Internal collections operations traditionally have been paper- and labor-intensive, with individual collectors going through files on delinquent accounts, making phone calls, writing notes on cards and sending notes to other departments, said Paul DiGiammarino, an AMS senior principal.

About 50 to 70 percent of a collector's time in a manual system is clerical activity, DiGiammarino said.

The system developed by AMS is designed to automate collections, replacing the cards, files and reports with terminals and managing the flow of information more efficiently.

Wells Fargo, before AMS developed its new system, kept track of accounts on paper cards, which sat in stacks on collectors' desks and were marked and filed and processed through the debt-collection system. Although the manual system worked, Wells Fargo found it was highly susceptible to human error, time consuming and difficult for managers to monitor, according to Wells Fargo.

Using the computer system, collectors can find records quickly and spend more time in contact with customers, providing the personal attention that often gets the best results.

Managers can determine which collectors are most effective with different types of payment problems and route accounts accordingly. For example, some agents may handle debtors in the early stages of delinquency more skillfully, and some may be more experienced with large debts.

The computer also keeps track of promises made by debtors and triggers the appropriate response to those who break their promises. For instance, if a customer promises to pay $1,000 by the end of the month and doesn't, the computer alerts a manager, who then may route the account to a collector who takes a tougher approach or to a department prepared to take legal action.

Managers determine the course of action and can adjust the system as their needs change.

After installing the CACS system, Wells Fargo was able to reduce its clerical staff in collections by 50 percent and found that the number of accounts processed by collectors per day increased 84 percent, the bank said.

CACS is a "very sophisticated events-scheduling and tracking system" that evolved through the need to perform a series of tasks in a certain order and manner, DiGiammarino said. The company therefore sees wide applications in a variety of industries.

AMS officials said they believe the system could be used by state and local governments to collect on taxes, by retailers to collect on revolving credit accounts, by banks to collect on various personal loans, and by utilities, hospitals and phone companies to collect on unpaid bills.

Social service agencies could use such a system to track and pursue child support payments, DiGiammarino said. Wells Fargo now is working with AMS to adapt the CACS system to detect the use of stolen credit cards.

The Pennsylvania Department of Revenue, Wisconsin Gas Co. and American Express are among 35 clients who have purchased the system. Twenty of those clients were added last year, and AMS hopes to add as many this year.

AMS is not in the field alone. Two competitors, Control Data Corp. and Anacomp Inc., produce automated collections systems for financial institutions, and other computer companies offer software development services.

About 1,000 potential buyers exist in North America, said DiGiammarino, who directs marketing of CACS. At about $150,000 a system, that could mean a potential market of $150 million, not including the professional services offered to adapt the product to individual buyers' needs.

The development of CACS is an example of a larger corporate strategy devised by the Arlington firm as part of a turnaround that followed major losses in 1981. One element of the strategy is to focus on product development through building "custom systems" -- software systems custom-built to address specific needs of one client who pays for the service. AMS takes the original solution and develops a "package system" that another firm can buy ready-made to address a similar problem.

Wells Fargo paid for the development of CACS and is funding the development of the fraud detection system. A Seattle bank paid for the development of a version of CACS designed for Wang computers. A financial services firm in Dallas financed the adaptation of CACS to monitor the process of credit application and approval. That has led to a new product, Automated Credit Approval Processing Systems, called ACAPS.

"The market is willing to fund a lot more than people are willing to believe," said DiGiammarino. "You can get clients who know their business to help you develop a product that has applications for others in the market."

Sometimes the original client shares in the royalties from the new product or gets a discount for providing a development opportunity, said AMS President Charles O. Rossotti.