Decentralized Collections

hand of businessperson reaching out to take hand of person drowning in pile of bills and notices
Contributing Writer
member of Bellco Credit Union

2 minutes

North Carolina credit union leverages strong member relationships for a successful collections strategy.

If collections are moving to automated, multi-channel messaging directed by a small team of specialists, $41 billion State Employees’ Credit Union, Raleigh, North Carolina, is a bit of an outlier. It’s running a decentralized, primarily manual collections operation across its 268 branches. Its 2,600 lending officers are the collectors for the loans they make, explains Alan J. Salzano, SVP/loss mitigation. “Success in collections starts with underwriting,” he explains. In other words, if you make the loan, you’re responsible for the consequences.

That sounds a bit old school, and it is, deliberately, says Salzano. “We’re keeping the activity local and close to the members. Our people often know the borrower who is missing payments and may know the circumstances or at least who to talk to. We’re sticking with a strong relationship strategy. The local presence brings a lot of knowledge and awareness of territorial economic challenges, and that helps us be more sensitive in working with members through hardships. Remote collections would not necessarily provide this level of understanding and consideration.”

The lending officers generate their own letters—on paper, with postage stamps. And they make their own phone calls, dialing the phone number on the loan documentation and talking to the member or leaving a message. The personal touch is paying off in avoiding losses, Salzano reports. The credit union’s charge-off ratio is 0.43%.

State Employees’ CU is not entirely old school, however. “We just installed our first collection software last year,” Salzano reports, “and that has helped our efficiency tremendously. The data needed for collections is all available in one location now. Staff doesn’t have to toggle back and forth between different systems. It’s easier to document and generate messages. They can now click on boxes to select and produce a letter. There’s less legwork.”

The lenders/collectors don’t personally repossess cars, he explains, or handle any of the collateral disposition responsibilities when a loan becomes uncollectible. “The local lenders are responsible for the early stage collections when it’s likely we will collect,” Salzano explains. “Once it comes to foreclosures and repossessions and legal filings, we move that to our loss mitigation operation, which is centralized and specialized. We don’t want branch staff tied up with that heavy lifting, once it is apparent that collection efforts have been exhausted at the branch level.” cues icon

Richard H. Gamble writes from Grand Junction, Colorado.

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