ELGIN, Ill. -
"These people certainly have no loyalty to the credit union," said John Dowling, director of client sales development for Lending Solutions, Inc., here. Indirect lending, he said, could cause credit unions some anguish as many of the loan owners are non-traditional members who frequently don't even know who financed the auto purchases.
Credit unions will have to train their collections officers to be more aggressive for two reasons: CUs traditionally have been a bit easier on their own members and a medium- to small-sized credit union might have a staffer wearing too many hats. While keeping good member relations in mind, Dowling said initial phone contacts by CU collections in indirect auto lending needs to be moved up to five days after a delinquent payment, versus 15 for a long-time member.
Though credit unions may want to consider having different standards for indirect members, the problem may not be isolated to indirect loans as delinquencies in real estate loans are also on the rise. Still, Dowling said he doesn't expect credit unions around the nation to sustain a huge impact from the mortgage drawdown as they have only 1% of all mortgages.
The combined effects of a potential slowdown in the economy and members who feel little of the traditional credit union spirit will require more work. Dowling recommends that CU collections staff make contact by telephone five days after even the first delinquent payment.
"It shows you're serious and sets ground rules," he said.
Dowling said the more frequent the contact, the better for every one involved. Dowling said to contact as often as every other day, calling first on a Tuesday and then making another call on Thursday. The time of day also matters, Dowling said, with LSI collections staff calling in the evening or while an auto loan holder is at work.
"We also call on Saturday as well," he said.
Dowling said a big red flag would be a member who misses the very first payment on an auto loan. The account should be pulled up on the computer screen immediately and collections staff should ensure that the loan is secure. As always, a simple phone call can go a long way.
"Is the payment in the mail? When can we expect it?" Dowling recommended asking. "It's not a hard call. Respect still stands, but firm and aggressive."
Dowling said a credit union that is overrun with delinquent accounts or has a small staff can outsource to a firm such as LSI, which has 50 collectors on staff who are required to make as much as 100 calls each day.
The collections center staff answer each call in the name of each client credit union to help calm a member who might be struggling with auto payments.
"We don't want them to feel they've been turned over to a collections agency," he said.
Dowling said many credit unions choose to solve their staffing problems by outsourcing collections, even though their delinquent ratios are in good order.
