So, Vedros beefed up the credit union’s collections and financial counseling efforts.
Hiring a “dynamic collection manager” and getting board support for active collections were critical first steps in the rapid descent of delinquencies that occurred none too soon for the small credit union.
“I knew if we didn’t do something, ultimately our delinquent loans could become the death of us,” Vedros says. “Once we started enforcing our rights and using a collections attorney, members started realizing we were serious.”
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Loan delinquency at Total Choice had been consistently higher than average since it converted to a community charter in 200. That trend has reversed.
Total Choice’s overall delinquency rate and net charge-offs alike have fallen sharply since the credit union began emphasizing collections and financial counseling in 2013.
Credit card delinquencies at First Choice have flat-lined as a result of the credit union’s collections and counseling work.
Total Choice’s auto loan delinquencies plummeted soon after Mary Vedros became COO in 2013 and assembled a new collections team.
Mary Vedros, President/CEO, Total Choice FCU
Total Choice also got serious about showing members another way to approach finances.
It instituted a robust counseling program targeted at folks who have either been turned down for a loan or have fallen behind on payments.
Seven of the credit union’s 18 employees are CUNA Certified Credit Union Financial Counselors. They focus on teaching money management skills, debt reduction, and how to avoid predatory lenders.
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Their stated goal is simple: Help members become responsible for their own financial lives.
The counseling process includes a budget analysis; developing a monthly plan for spending, paying bills, and saving; and follow-up sessions.
Counselors are not there to provide therapy focused on personal issues, the guidelines stress. Instead, according to the program’s guidelines, the counselors can “demonstrate ways to make things better for the member” by:
Teaching members how to control spending and reduce dependency on credit.
Discussing ways to enjoy a fulfilling frugal life.
Helping members to know the amount of credit they can afford.
Helping members speed up debt reduction and cut interest expenses.
Helping members resolve errors on credit reports.
An Outline For The Benefits Of Financial Counseling
Soon after Mary Vedros became COO of Total Choice FCU in 2013, the credit union adopted a financial counseling program that includes the following outline for specific uses and benefits of financial counseling:
Enhances member loyalty to the credit union.
Possibly reduces losses due to bankruptcy.
Public relations tool that demonstrates goodwill.
Offers a competitive edge over other financial institutions.
Helps members improve credit worthiness.
Assists members with in-depth workout plans.
Creates a financially strong membership base, which in turn strengthens the credit union.
The counselors meet with their clients approximately four months after the initial visit to review and revise. And the results are usually promising.
“I can think of only one case in which the member did not heed the advice of the counselor and got stuck in an upside-down car loan at a high rate,” Vedros says. “Unfortunately, I think he learned his lesson.”
The more typical ending is happier.
“It’s a true blessing to see members’ joy when their credit rating has improved and their financial life is more secure,” Vedros says.
As for her staff, they feel empowered to help more members when they see the results the members are working hard to achieve.
“When you become a partner to help your members stay on track and become educated about finances and their own situations, you can only succeed,” the Total Choice CEO says.