FORT WAYNE, Ind. — Skyrocketing unemployment is not leading to a similar rise in delinquency at Three Rivers FCU thanks in large part to a complete overhaul in the credit union's collections methods.
Beginning in the first quarter of 2008, Three Rivers made a major change to collections, renaming the department "credit solutions" and re-training its staff to become credit consultants that can get to the root of the problems their members were having and figure out why there were so many repeatedly popping up in collections routes.
'Tell Me Where It Hurts'
"It's like going to the doctor; we have to figure out why the person is here. Tell me where it hurts so I can prescribe some kind of medication so we don't have to be caught in this quagmire of recurring phone calls and not getting anywhere," John Garner, VP-Lending said of the new credit solution philosophy. "We know it is saving us a bunch of time because we're not making a bunch of phone calls for one member [anymore]."
After the $531 million institution decided to make the change at the end of 2007, it took about six months to re-train the existing collections staff and get the team in place. Garner said that time was critical as employees had to become familiar with Three Rivers FCU's consumer loan processing software system because they would be the ones handling the modifications, workouts and refinancing that the members needed, something that had always been handled at the branch level.
"We felt it was imperative that the person who starts that [credit solutions] discussion finishes that discussion," Garner explained. "We felt the relationship was being built through the dialogue with our credit solutions staff and we didn't want to lose any of that bond that we were building."
That bond, combined with the focus switching from trying to get payments to trying to figure out a long term solution appears to be stemming the delinquency tide in a state that has been devastated by the collapse of the auto industry.
Reportable delinquency has increased from 0.33% in 2008 to 0.57% this year while 30-day delinquency is up from 0.393% to 0.497%, figures that Garner believes would have been much worse if the credit union had not been pro-active.
Stemming Tide of Delinquency
"Unemployment rates have risen in the markets we serve dramatically-to 15% unemployment in many of the counties we serve," Garner told Credit Union Journal. "Delinquency is increasing. However, we feel our delinquency would be significantly worse if we had not deployed the Credit Solutions framework and philosophy. The national average for 60-day reportable delinquency is around 1.05%. Therefore, we are pleased our average is half of that national average figure."
One key component in a successful transition from a traditional collections department to one that focuses on long-term solutions is training employees to have open and empathetic conversations with members instead of working from a script. Three Rivers FCU utilized role-playing sessions to help staff understand how those conversations should work.
"We really want that member on the other end of the phone to hear that empathy that 'yes I need a payment, but the reason I'm calling is because I need to understand what is going on in your life to cause this pattern to replicate itself,'" Garner said. "A lot of these discussions are very humbling for the person on the other end of the telephone. We try to handle it with tact and grace when we have these conversations."
