Three Steps to Increased Collection Rates

What can your collections department do to increase collections while strengthening member relationships?


In the current environment, how is your collections department performing? Delinquencies have risen to 1.13% at September 30. While an increase, these delinquencies are certainly manageable given the larger economic context. Loans that are between 30 and 60 days past due have increased to 1.22% at September 30, up 14 basis points over the second quarter. What can your collections department do to increase collections while strengthening member relationships?

In April of 2006, Fair Issac published a white paper detailing key steps to increasing collections. While the majority of the steps may be geared towards a profit-driven organization, some still apply to credit unions. The full white paper can be downloaded here

Define Your Objectives
Depending on geographical location, local economic conditions, and the credit union’s balance sheet you may be looking to maximize the recovery. Others may be looking to increase relationships with members by providing workouts or extended repayments. There is a balance, but a clear definition of what you want your collectors to accomplish is necessary.

Mark Everson, EVP of Wings Financial Federal Credit Union ($1.9B in Apple Valley, MN), remarked that, “Due to the airline industries trouble since 2001, many of our members have seen their wages cut or are working fewer hours for almost a decade. When it comes to collections, first and foremost we want to help our members. However, we are much more willing to work with members who recognize us as their PFI, rather than members who may just have a basic share account with us.”

Make Your Policy Clear
When management has decided on a course to take, how do you explain or establish expectations to your collectors? First of all, do they understand the difference between a credit union and a bank? Have they moved to collections from another area of the credit union or another organization? Previous collections experience in another environment may color their experiences at your credit union and attitude towards your members.
What about the involvement of the rest of the organization? Do your MSRs understand what to do when someone who is past due comes into the branch or calls with questions? How easy is it at your credit union for a delinquent member to make an immediate payment by phone or online?

Measure Results
Once objectives are in place and you have effectively relayed those to the organization, are the results you need getting done? Managing a collections department means organizing metrics that originate in many areas of the credit union: Accounting, Call Center, Lending, etc.

The metrics you use to measure performance should also align with your objectives and mission. Balances saved per hour or workouts per week may indicate a focus on the member relationship, while other metrics measure productivity, the overall past-due portfolio, and the management of the collections department.





Dec. 1, 2008


  • This is an increasingly important issue facing credit unions and the next 12 - 24 months will be a challenge with rising unemployment and continuing housing & economic instability. This article could have provided real world success stories from credit unions with strong collection practices and results, instead it provides fluff suggestions that are obvious - communicate expectations & track results. As for Wings - again the obvious - work with multiple relationship members and give little latitude to single service members - not exactly cutting edge.
  • I agree with the piror comment. The steps discussed here are obvious.