Ascend United, the Washington league-owned subsidiary that assists CUs in selling debt, has signed with Massachusetts-based Credit Collection Services (CCS) to aid in debt recovery.
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Using a collection service with a national reach such as CCS should help credit unions to recover 65% to 70% of funds owed, if the collection agency if successful, said Roxanne Kruger-Monahan, senior VP-member and business development for the Washington league.
"Ascend United initially stood on its own as a debt sales company," explained Kruger-Monahan. "It pools debt through partnerships with 23 state credit union leagues. These pools of debt then are sold nationally to companies and individuals who attempt to collect on the debt and make a profit."
"Debt sales are a relatively new concept to the credit union movement," she continued. "Credit unions are comfortable creating files for collection agencies, but are hesitant to allocate resources for preparing for a debt sale, especially since they see the return as only a few cents per dollar."
Not A Complete Write-Off
Despite the small return, Kruger-Monahan said Ascend United encourages CUs to participate in a debt sale rather than simply writing off the loan. Alan Aleia, senior vice president in charge of business development for CCS, said the relationship developed after he met Nancy Bullock, the former chief operating officer of the Washington CU League, at a conference. At the time, Bullock was the manager of Ascend United.
"We talked about debt sales, and I asked her why Ascend United was not working with a credit collection agency for credit unions that were not quite ready for debt sales," recalled Aleia.
Ascend United had stiff requirements for a collection agency, he said, including a national reach and extensive experience with the entire process, including possible court filings. "I could see our process was readily transferable to the credit union movement, because we have attorneys in all 50 states. We can litigate an account anywhere in the country," Aleia said. "We can enforce a judgment and collect. Once an account comes to us, we can handle it from cradle to grave."
Another requirement Ascend United had for a potential collection agency partner was a gentle touch. Fred Davila, who on Oct. 7 was named the new director of Ascend United, told The Credit Union Journal he learned an important lesson in his 14 years of experience helping credit unions with outsourcing projects, as well as collections.
"Credit unions worry how their members are handled," said Davila. "They are hesitant to use collection agencies."
Kruger-Monahan agreed. "Philosophically, credit unions view members as still a member, even if they caused the credit union a loss. They are careful who they turn the accounts over to."
Aleia said CCS understands the expectations, as he has worked with health insurance companies, hospitals and utilities. "These are regulated industries, and ones that give a service to people. So we know how to be aggressive without being so aggressive," he said.
Davila and Kruger-Monahan praised CCS for its "sophisticated collection techniques," including heavy reliance on technology.
CCS charges a contingency fee of 30% of the amount collected on accounts referred by client CUs. After six months of collection efforts, the account either is returned to the credit union, or sent to Ascend United for debt sale. In a debt sale, the CU recovers about four or five cents on the dollar.
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"Most collection agencies put a lot of effort into an account when they first receive it," said Davila. "As long as they have contact information, such as a phone number or an address, they stick with it. But if they lose contact with the debtor, then they don't do much."
Aleia expressed some disappointment that the partnership between CCS and Ascend United has "gotten off the ground a little slower than expected."
"Based on the need that's out there, I thought there would be more," he said. "There needs to be education, so credit unions can find out why they would benefit from outsourcing and letting the experts focus on debt recovery."
Ascend United will use postal mailings and e-mail to get the word out to CU league members, Aleia said. In addition, Ascend United and CCS will hold a series of Web demonstrations and one-day educational programs on receivable management.
"I hope in the next 30 to 60 days, we will create awareness," he said.
