With uncertainty still high, credit unions must respond to late payers with compassion and ongoing, impactful communication.
COVID-19 has impacted nearly every employment sector.
In the U.S. alone, it’s estimated that almost 57 million jobs became vulnerable due to the COVID-19 crisis. According to global research firm McKinsey & Company, this figure encompasses permanent layoffs, temporary furloughs, and reductions in hours and pay. The company’s April 2020 article “COVID-19 and Jobs,” also reports that an increasing number of white-collar jobs are at risk: “While leisure and hospitality accounted for most of the earliest layoffs and furloughs, the share from industries such as retail trade, manufacturing, nonessential healthcare and professional services has been growing.”
This translates to potential tough times for credit union operations. “Take this bird’s eye view down to the regional and local level where credit unions serve, and the impact is equally as harsh,” says Steve Balmer, managing VP/delinquency management for CUESolutions Silver provider PSCU, St. Petersburg, Florida. “Many individuals can’t work from home—including the service, retail and travel sectors. These areas all saw dramatic drops in output, which immediately impacted their workforce.”
A May TransUnion study found that 59% of Americans’ household income had been negatively impacted by COVID-19, and two in three Americans (66%) were concerned about paying their current bills and/or loans. In addition, 31% of impacted consumers planned to pay a partial amount on their next loan payment.
PSCU expects delinquency to worsen over the next six to 12 months and that, for some areas of the country, figures could be 10 to 15% higher than the previous year. This means credit unions need to pay close attention to collections. But what exactly should they do?
Volume and Innovation
Balmer says to prepare for escalating volumes and communicating with members in nontraditional ways. “These may be enhanced digital interactions and connecting with members via their preferred device or channel,” he explains. “Also, be ready to help them manage their financial challenges, both in the short and long term.
“Tools can be deferred loan payments, loan work-out programs, fee forgiveness and access to financial education,” he adds, “but the key is to be diligent with your interactions and willing to understand your member’s predicament. Now more than ever, the listeners will become the best collectors.”
In all, credit unions need to have compassionate, empathetic communication that attends to each member’s unique situation.
“There are many variables to consider: employment, near-term financial outlook and the opportunity to remediate the borrower’s position over the next three to six months,” Balmer suggests. “Regardless, the effort should never take a cookie-cutter approach. In the past, collections could be viewed almost as a numbers game, with successful outcomes based on the sheer number of calls a collector could make. The calls were quick, focusing on the nonpayment, and the numbers (moving the needle) were most important. For success today, post-COVID, watch for the methods and expectations to shift dramatically. All will become centered on how to best serve your member.”
Service in the Mix
Balmer advises that collectors be encouraged to spend more time on each call, to review and understand the member’s financial situation and determine the best solution.
“This enables you to transition calls from a ‘collections’ perspective to that of ‘member service’ and see greater success from your efforts. This outreach will not only pay dividends for the payment due today, but also—and more importantly—the long-term relationship you have with that person.”
Through any crisis, people will remember how they were treated and who was there to help them. In turn, credit unions should evaluate their capacity to handle the higher delinquency volumes now expected.
“To transition from a ‘numbers’ to a customer-centric approach, start by reviewing your employees’ training needs,” Balmer says. “This is essential to learning and practicing empathy and could be new territory for some collectors.”
Also, consider reassigning to collections employees who have an aptitude for listening. The key is to have training for these individuals so they can assist immediately. Balmer defines this new method of collections as the “listening approach.” Other solutions will center around technology, digital platforms and self-service opportunities.
Balmer recommends that credit unions:
- Realize and project what new volumes may look like. Evaluate unemployment figures in the sectors your credit union serves. Consider the hidden and less-than-obvious retail sectors too.
- Ensure staff is professionally trained, engaged and prepared to work with members.
- Reallocate member service staff as needed to assist and provide relief.
- Consider third-party assistance to add bandwidth.
- Determine a feasible, compassionate solution for each member.
He adds that credit unions will need to strike a balance between a borrower’s creditworthiness and need for credit balances from a risk management perspective. “For example, a long-term loyal member may need a line increase to manage finances today and provide future dividends and opportunities. Today’s genuine member experience will build loyalty for tomorrow.
“The long view is critical,” Balmer stresses. “Remember, the stimulus money will last only so long. Now is the time to get ... ready to serve your members with real-life solutions, while assessing your need for credit balances.”
DIY Versus Third-Party Solution
When outsourcing collections, a credit union can still set the parameters under which the collecting will be done when it uses “first-party” outsourcing, which acts as an extension of the credit union’s own collections capability. In “third-party” outsourcing, the entire collections process is handled by the credit union’s vendor.
On its own, a CU can implement technology solutions that are effective against early-stage delinquency and implement manual collections processes for the more difficult situations, such as high balances,” Balmer notes. “As an example of how to leverage a third-party solution, credit unions can tap into our tenured, customer-centric staff trained to make and manage calls. These individuals are well-versed in the credit union space and understand the credit union vision while recovering debt.”
Balmer says both long- and short-term delinquency management solutions are relevant in the wake of COVID-19. “We realize credit unions may not need long-term assistance with all loan types, yet these opportunities to serve the member during the pandemic allow the institution to allocate tenured staff internally to meet current and changing demands best.”
Whether they outsource collections or not, PSCU Owners and other CUs can achieve a higher level of collections efficiency through Optimus, a cloud-based collection and recovery software platform that PSCU now offers through its recent partnership with Telrock, which has its U.S. headquarters in Atlanta.
“It provides a powerful platform for managing all types and stages of account delinquency. Automation and ease-of-use drive collection efficacy, along with enhanced manageability,” says Balmer.
Credit unions can also use the platform for additional in-house delinquency management efforts: omnichannel collections, embedded digital channel communications, an integrated self-serve portal, real-time processing, and an intelligent agent desktop to collect remotely easily and securely.
Heading into 2021, credit unions will be entering a new “collections reality”—and this changed environment represents a significant shift in how credit unions will need to engage going forward, adds Rob Fite, VP/business development for Telrock.
“More than ever, results will depend on a collection software’s ability to provide a much higher degree of agility, responsiveness, control, usability and automation,” he says.
Unique solutions and approaches are needed in the ever-changing collections climate, concludes Balmer. “But with appropriate planning, training and taking a member-centric approach, credit unions can be successful in building new member relationships and managing delinquency in a post-COVID-19 world.” cues icon
Stephanie Schwenn Sebring established and managed the marketing departments for three CUs and served in mentorship roles before launching her business. As owner of Fab Prose & Professional Writing, she assists CUs, industry suppliers and any company wanting great content and a clear brand voice. Follow her on Twitter @fabprose.