How McCoy FCU Reduced Its Delinquencies 45% In 6 Months

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ORLANDO, Fla.-McCoy FCU reduced delinquencies by 45% during the first half of 2010 by getting aggressive with collections.

The CU began calling delinquent members more often, repossessing cars sooner, and making it clear to members that their obligation to the credit union is not going away. To be able to do those things and more, the $430-million MFCU reorganized its collections department and outsourced early stage collections to Lending Solutions Inc. (LSI), based in Elgin, Ill.

"We were well over a 4% delinquency rate at the start of the year," explained Kevin Freeman, VP of loan services for McCoy. "But we made some very good strides through spring and they held through the summer."

Some of the success is due to restructuring debt, but much of the credit goes to staying after members. The CU increased its callback frequency to every two or three days, depending on the size of the loan. A person whose delinquency is for a loan of $10,000 or more is contacted every two days, below $10,000 a person is reached out to every three days. "The squeaky wheel gets the grease," Freeman noted. "These members owe other institutions. If we are not in front of them reminding them they owe us, that payment could go elsewhere."

David Brooke, LSI EVP, shared that collections calls are as much about timing as frequency. "When we make contact with members for McCoy, we find out when those members get paid. If they are getting paid on a Thursday we are on the phone with them Friday morning."

Repossessions are now made when members are 45 to 60 days delinquent, as opposed to 90 days or longer, MFCU's former policy. "Word of mouth around town is that McCoy is more aggressive with collateral," Freeman said. "That's encouraged members to pay."

Outsourcing early stage (15 to 59 days) delinquent accounts to LSI relieved staff workload, which allowed the team of 14 to focus on the more difficult collections-60 days and beyond. Freeman said LSI collectors have been effective at preventing early stage delinquencies from slipping past 60 days. An additional clerical person was hired to take away much of the paperwork and phone answering duties the CU's collections staff had shared.

"During the day collectors got bogged down with paperwork and inbound calls," Freeman said. "Say you are working on a skip trace, you get a call, and then you have to take a half hour out of your day when you should be concentrating on the skip trace."

Having staff focus on specific tasks, has improved performance. Team members are now more specialized and experts at what they do, contended Freeman. "Now we have four strong collectors making nothing but calls, one person handling inbound calls, one person on bankruptcy and delinquent mortgages, one person on repos, one on modifications, etc."

The costs associated with the changes-an additional staff member and charges from LSI-are easily outweighed by the reduction in write-offs. Freeman said the credit union had been writing off about $1 million a month. "We dropped that to under $700,000 in August and I expect it to be under that total in September," Freeman said.

While Brooke said LSI charges in the range of $30 per account per month to do its full-service work, that cost varies a great deal based on discounts for volume and commitment. "And a credit union's collections needs change al the time," he added.

In the midst of all the "tough work" the collections department performs, Freeman said MFCU tries to have fun when it can. "We brought in a bell we ring if someone collects a 60-day or greater delinquency. We all clap our hands and yell. It helps to make things a little lighter and builds a sense of team, because the staff knows that each collection results from the contributions of everyone."

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