Delinquency at 4Q10 was 1.76% and represented a 7-basis-point drop from the end of 2009. The numbers bode well for credit unions as they help members move forward into a brighter economic future. Credit card usage is down across the country, and, as the linked article notes, that means two things. First, some consumers are in better shape financially or are simply not making aggressive purchasing decisions. Second, consumers could simply be recovering from all of the debt incurred during the recession (the linked article reports last year’s debt at $13 billion).
Although lower delinquency and better credit management are positive indicators, there are still times when credit unions must approach members about loans that haven’t gone as originally hoped. In these instances, best practices can help cooperatives preserve their interests and the member’s dignity.
Ent Federal Credit Union ($3.1B, Colorado Springs, CO) found a way to help members navigate the tough times. The credit union approaches collections with a pre-emptive mindset. They contact members to solve problems before they become big and have even changed the name of the collections team to the “Member Solutions Group.” The credit union builds its collections team from within which minimizes inconsistent behavior and maximizes member satisfaction.
There is more than one way to manage these potentially prickly relationships. A couple bullet points to keep in mind (with more here):
Communicate early and often.
Make sure members understand your modification program.
Bend but don’t break. Flexibility can make the situation better.
Collecting on loans that have gone south might sound unpleasant, but the reality is that it offers a credit union a way to display value to members. Credit unions can be compassionate but firm and flexible but not a pushover. The member in collections is having a tough time. Make sure you recognize that and succeed in protecting your interests and preserving his or her dignity. You can have the best of both worlds.