Many of us have experienced a 'wake up' call in; some event that forced us to change the course of our life or career. For Ent Federal Credit Union's collections and lending departments, that call came early in January 2008. Based in Colorado Springs, Colorado, Ent had felt somewhat insulated from the growing housing market problems in Florida, California, Nevada and Arizona. After all, the local real estate market had not experienced double-digit home price increases between 2002 and 2006. Our median home price to median household income ratio, along with our great scenery, gave us the best of both worlds - affordability and quality of life.
But that day in January forced Ent to examine the possibility that we could have our share of challenges. On that day, an established member with an 800 FICO score decided to drop off the keys to his house, rather than talk to our Collections department about his situation and work out a solution. Our member had purchased a second, more affordable home on the East Coast, planning to live there year-round, once they sold the home in a suburb of Colorado Springs. Apparently, the member had the Colorado house on the market for 18 months and finally grew tired of making two mortgage payments. Without sound advice from an experienced Realtor, the home sat on the market in good but somewhat outdated condition. That is, until the member decided that there was no other option than to give us the home back, with a mortgage that was just 2 days past due.
Ultimately, Ent's management and loan specialists came to realize the potential trickle-down impact of the sub-prime mortgage mess and the volatile energy markets could be bigger than we had previously imagined. Based on an increase in past due 'prime' auto loans along with this mortgage problem, Ent believed the current economic issues could potentially impact a group of members who had never had any financial problems before.
Without previous financial problems, our typical member’s only exposure to a "collector" was probably from reading horror stories in the financial press or upsetting portrayals on TV and in movies. It didn’t matter that Ent's collection philosophy included something other than yelling and screaming. It appeared our members were conditioned to expect us to act like an intimidating, high pressure collection agency.
Our number one challenge became how to eliminate the barriers between our members in need and our staff that could assist them. Thus, our Member Solutions department was born. A member in trouble might reluctant to talk to Ent's Collections department. However, if they could call and experience the same type of helpful employees who originally granted their loan, we could work together to understand their problems and come up with a viable solution.
Beginning with a couple of collectors who had typically handled initial past-due calls, we assigned them to this new department. They were experienced in listening first and talking second, as Ent's philosophy toward building a pro-member Collections department had already been established. We prefer hiring current employees who understand member service rather than experienced collectors with all of their bad, often aggressive, habits.
Following coverage of our revamped Member Solutions department in our newsletter, coupled with employee education on the initiative, the phone calls started coming in to our dedicated phone line. We heard from a variety of members: some were going to be just a few days late, while others had serious financial problems caused by job loss, divorce, or poor money management skills.
In many ways, solving our member’s financial problems was much like taking a new loan application. You have to start from scratch. You need to know exactly the member's income and financial obligations. Old School collecting is basically asking for money; Member Solutions is all about asking for information and using it to determine what our members can do to pay their debts.
After more than six months of "Member Solutions experience," our positive member impact is reflected in these statistics from our $1.8 billion portfolio:
Inbound calls to Member Solutions per month/average
60-day delinquency ratio
Our department uses a variety of approaches and solutions to assist the members. In some cases, the member simply needs to defer one or two payments to help them through a difficult time period. We most often use this type of arrangement when the member has faced a period of unemployment. In other cases, we'll agree to carry a loan 30 to 60 days past due when the member can make a regular monthly payment, but can't cure the past due amount. Ent will also agree to do a modification of the debt, reducing the payments to a level that is not only manageable for the borrower but also allows us to collect the loan in a reasonable period of time.
Recently, we initiated a home equity portfolio analysis to identify potential problem loans. We updated credit scores, compared them to our original score, reviewed in detail members with large declines. Then we added updated home values to develop a list of borrowers we could not afford to wait to hear from. We identified about 10 loans and turned them over to our Member Solutions department to contact.
In each case, we developed a plan to provide some temporary relief in the form of lower payments and a reduced interest rate. We looked at this offer as our way to stimulate and reinforce consumer confidence. After all, there isn't a lot of positive news about the economy and the financial markets right now. The end result is that we made contact will all of these borrowers, and they were grateful that we took the time to identify them as members who needed help before they became past due with us. All of these borrowers were less than 30 days past due with Ent, yet had experienced significant problems with other creditors.
Ent's entire lending staff is involved with the process for Member Solutions. Loan originators and underwriters are on the lookout for members in need. In some cases, the request for emergency funds or a consolidation loan can point to a member who needs something more than a quick fix. Our underwriters are also very aware of the need for a proactive solution. From reviewing charge-off loans, we saw that many of our large losses could have been predicted, because we had all of the information we needed from a previously denied loan application. Our underwriters now understand the worst thing they can do is simply deny a new loan to a member with existing loans. These members are referred to Members Solutions for immediate intervention.
As our experience with Member Solutions grows, so does our list of potential problem solutions. We are constantly challenging our notions in an effort to be even more member- focused. Collectors are focused on one thing: collecting money and assisting the financial institution. Member Solutions knows that if we don't understand our member’s problems and don’t help the member develop a potential solution, we won't help either the member or our credit union. And that attitude will help avoid another unwelcome wake-up call, for a struggling member or for us.