Year Brings Make-Over To Many Collections Policies
SAN ANTONIO-CUs have learned a difficult lesson about collections-many long-held practices simply don't work anymore.
Experts agreed that CUs had to become more aggressive with collections to get results, and to do that they had to gain a clear understanding of each delinquent member's entire financial situation.
The $6-billion Security Service FCU here was able to lower its delinquency rate by 37 basis points from the start of the year by making some significant changes to its collections operations, explained Nancy O'Malley, VP of asset recovery. "We had to change our focus to be successful and understand the totality of the individual's problems. If you focus just on getting the car payment but the member is not making the house payment and credit card payment to another financial, your effort will be short lived. You have to look at the entire family debt structure today."
That leads to assembling a plan to get the family through difficult times, stressed O'Malley, adding that also gives the CU a member for life and reduces operating expense.
SVP John Worthington said the CU focused on making the collections team's job more fun. Noting that it's a tough job that has gotten even harder, the CU began weaving in programs that make the work less stressful. For example, when staff work overtime on Saturdays, senior leadership serves them breakfast and everyone dresses up according to the theme of the day. "We are trying to make the job more fun," Worthington said. "And that is the key to having people in this type of environment be successful."
John Dowling, sales executive at Lending Solutions Inc. (LSI), Elgin, Ill., said that many of the credit unions working with LSI quickly understood the standard of waiting 45 or 35 days to get involved with a delinquency had to get moved up to 15 days. "If the member is delinquent with the credit union, chances are the person is delinquent with other entities. So the squeaky wheel gets the results. You have to get involved early on and be consistently involved with collecting that delinquency."
That can mean even bumping up efforts up with payment reminders, making courtesy calls before full-blown collections efforts. "We have also seen more credit unions turning to outsourcing to help them manage the workload and increase their efforts with members."
Dowling cautioned that it's too soon to think that the delinquency problem is improving and that CUs can back off on aggressive collections programs. "Look at the numbers. The credit union delinquency ratio has not improved much in 2010."