How To Build A Better Collections Process

The need to streamline paperwork spurred Wings Financial Credit Union to rethink its loan collections.

 
 

Top-Level Takeaways

  • Wings has dedicated the better part of 2020 to simplifying and improving its collections process.
  • It also has focused on creating better solutions for members experiencing difficult financial times.

CU QUICK FACTS

Wings Financial Credit Union
Data as of 03.31.20

HQ: Apple Valley, MN
ASSETS: $5.8B
MEMBERS: 292,250
BRANCHES: 29
12-MO SHARE GROWTH: 8.9%
12-MO LOAN GROWTH: 21.0%
ROA: 0.73%

When all other solutions are exhausted, a credit union collects upon a loan by following processes developed over many years. In some cases, however, when a collections process is weighed down by files, wet signatures, and superfluous information, the process doesn’t run as smooth as it should. 

That’s what Clint Hooppaw discovered when he dug into the collections process at Wings Financial Credit Union ($5.8B, Apple Valley, MN) in early 2020. According to the vice president of credit and collections, the large cooperative’s approach hadn’t scaled well with the growing institution. 

“It had been some time since someone asked what information was important and what was just nice to know,” Hooppaw says. “Then, if information was important, why did we have to dig for it? Why weren’t we getting it automatically?”

In his review, Hooppaw found a clunky process that was ripe for an upgrade, from soup to nuts. So, the credit union examined every manual process and report, every piece of paper printed and imaged, to determine if they added value or if credit union was collecting those items simply because it always had.

In the past, a collector would determine the credit union should charge-off a loan and start a paper form that asked for information such as the borrower’s debt-to-income ratio, FICO score, and employment information. Although this intelligence is important when originating a loan, gathering it adds time to the collections process without adding meaningful insight into the ultimate question: Why did this loan charge-off?

After completing the form, the credit union then imaged it and saved it digitally, adding more time to the process.

Clint Hooppaw, Vice President of Credit and Collections, Wings Financial Credit Union

To streamline collections, Hooppaw and his team spoke with the chief lending officer, finance team, and loan review committee to obtain their intel on what a digital-first process with fewer fields and more relevant information would look like. Today, the credit union houses all the information needed for a charge-off decision in its collections software, Temenos. Collectors simply recommend a loan for charge-off, and the recommendation automatically flows into reporting used for approvals and management reports, and ultimately to either an agency and/or attorney for further action.

“We now have a process where a collector recommends a charge-off by filling in a check box and a few pieces of information — like does it go to a collections agency or an attorney,” Hooppaw says. “Then, it’s moved into a workflow where we can generate reports with little additional intervention. This has helped us save 80 hours of time per month.”

That’s not an insignificant amount of savings, but now that the collections department has more free time, what does it do with that?

Collecting Time

Increased automation in the collections process allowed Wings to make two additional changes to its collections department. First, it spun off responsibility for the repossession process to two full-time employees rather than leave it as one part of an individual collectors’ day-to-day roles.

“It’s similar to a salesperson who is really good on the phone,” Hooppaw says. “When you have them spend time filing reports, it interrupts their flow.” 

The credit union’s process to distribute automated letters was another factor that interrupted the flow of collections, a fact that became more apparent as the COVID-19 pandemic persisted and it became clear employees would be working from home for months.

At various stages of the collections process, Wings automatically generates and sends letters to borrowers who are behind on their loan payments. At Wings, the collections department would print a copy of those letters for the records department, who would pick up the letters and scan them into a digital file storage system.

“That doesn’t work well when people are working from home without printers and with no way to get the records,” Hooppaw says. “Even if they could, they’re not driving to a coworker’s house to pick them up.”

Hooppaw consulted with one of his bankruptcy specialists to devise a solution. Now, the collections department saves the letters as a PDF and shares them electronically with the records department. It’s a simple solution suggested by an employee who knew the process was empowered to make a difference. 

According to Hooppaw, that has been a major lesson learned from the past few months.

“If you let the people who work within a system every day run with an idea, they are going to come up with better ones and feel more engaged in their role,” the credit and collections VP says.

Collections Or Solutions?

As the coronavirus continues to wreak economic uncertainty across the United States, collections departments at credit unions will need to continually adjust to new realities. Wings is doing that.

On March 16, Wings suspended all outbound collections activity. Instead, it is now focused on addressing incoming calls from members who know they will have difficulty making payments as layoffs continue. Beginning in May, Wings implemented a return to more proactive collections activity, with a priority on reestablishing contact with delinquent members.

Right now, we need to help our members find better solutions to their financial hardships.

Clint Hooppaw, Vice President of Credit and Collections, Wings Financial Credit Union

Wings also has paused all foreclosure activity, with some exceptions to protect abandoned or vacant properties. And, the only repossessions the credit union is collecting on are those vehicles voluntarily surrendered by borrowers or seized by law enforcement. For the most part, however, auction houses and repo companies were not operating in Minnesota during the stay at home order, but just because it is not actively collecting doesn’t mean it’s ignoring distressed borrowers.  

“We’re asking members make some kind of payment arrangement,” Hooppaw says. “Our tone matters. Our care matters. And, we’re getting results. It makes our team feel good that they can offer solutions in difficult times.”

The credit union is offering payment deferrals and forbearance for members impacted by COVID-19 — whether credit cards, lines of credit, or larger items such as first mortgage and commercial loans. And even as the local economy enters the early phases of reopening, it’s likely members across many industries will continue to earn less than they did pre-pandemic. With that in mind, Wings is likely to take a solutions-based approach to collections for the next several months. And to allow time for those more in depth conversations, Wings quickly enhanced their self-service platforms to allow nearly all payment deferrals to be requested via mobile or online, freeing up staff to work with members.

According to Hooppaw, there have been days in May where every single collections call resulted in a partial payment or the establishment of a payment plan. But, he knows there’s more work to be done.

“We’re always going to have traditional collections work,” Hooppaw says. “But right now, we need to help our members find better solutions to their financial hardships.”

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