Improve your collections communication strategy to provide compassionate member support while mitigating your credit union’s risk.
Sponsored by SWBC
Today’s economy is not a forgiving place. With high inflation and interest rates, it can be challenging for members to manage even small expenses, let alone costly bills like auto loans and mortgages. Cox Automotive recently reported that 1.89% of auto loans were severely delinquent. MAISY states, “U.S. seriously delinquent mortgages are predicted to jump from 0.5% at the end of 2022 to an estimated 1.13% by the end of 2023.”
Times are tough, and some members will need to catch up financially. It happens. That does not mean it is easy for members to admit when it happens to them. And whether it is due to pandemic support ending, the price of gas, or how much it costs to make an omelet lately, one thing is sure: We could all use a little tenderness right now, especially your members.
Remember that they are not the problem; their financial predicament is, and it is up to credit unions to provide solutions. Here are some ways to improve your collections communication strategy to provide compassionate member support while mitigating risk for your institution.
Digital Communication Is Key for Collections
Developing a communication strategy incorporating text and email is a smart way to improve collections efforts on past-due accounts. It also shows that your credit union is committed to providing outstanding service to your members.
At SWBC, we conducted internal research that showed automated messages reduced the average number of first letters sent to borrowers by up to 15%. Why? Members prefer—and respond more consistently to—electronic communications methods.
In many cases, communications options such as text, email and interactive voice response (IVR) systems can help members resolve past-due payment issues through tasks such as making a payment in full, moving their payment date, requesting an extension and scheduling periodic payments.
Get the Big Picture on Members’ Financial Situations
Understanding your members’ financial situations—before you even reach out—is the first step in a solutions-focused collections communication strategy. It helps better assess risk and provides insight into their dilemma, giving you a clearer idea of how to help.
Start by reviewing your members’ accounts to familiarize yourself with their payment history. You might even want to run soft pulls of their credit reports. The following issues are good indicators that a member may be in (or quickly approaching) financial trouble:
- increased NSF activity;
- significant changes in credit scores (notably decreases);
- increased number of unsecured credit accounts;
- rising debt;
- increased delinquencies (especially auto and mortgage); and
- changes in repayment habits (like paying minimums instead of overages).
It is essential to intervene as quickly as possible to find sustainable solutions that are mutually beneficial for both members and your credit union.
The Message Matters in Collections
Empathy is essential for helping past-due members get up to date. It is just as difficult for them to admit their financial predicament as for credit unions to hear. Possibly more so. Whether your staff is communicating with them via phone, chat or email, try these compassionate responses for more productive conversations:
- Express sympathy and let them know you are there to help provide a solution.
- Let them know your credit union also understands the problem and is committed to finding a middle ground.
- See if there is a manageable amount the member can pay immediately and craft a payment plan for the rest.
- After reaching an agreement, tell them you will follow up in 90 days to review the plan and adjust, as necessary.
The current economic situation aside, delinquencies across various forms of credit are likely here to stay, reminding us that these solutions are not just for the short term. Instead, they are part of a comprehensive collections communication strategy to build lasting member relationships and mitigate risks for your credit union.
Need more tips on improving your financial institution’s collections process? Download our position paper, Modernizing Your Collections Operation, to learn more about overcoming economic headwinds and staying on top of member delinquencies.
Steve Castner serves as a regional VP/sales at CUES Supplier member SWBC. By leveraging the risk management products and solutions of SWBC’s Financial Institution Group, Steve helps his clients manage expenses, lower delinquencies, and protect themselves and their members with innovative technology and consultative-based solutions. Steve has 20 years of experience in sales and client service.