A study by Northwestern Mutual shows that over 26% of Americans took part in some form of payment deferral plan last year. While deferments provided much-needed relief to consumers, they also created some risk for lenders. As these plans come to an end, credit unions are now tasked with helping members get back to making payments.
It’s a challenging environment for collections right now, with many Americans feeling the financial impact of COVID-19. One question that is top of mind for credit unions is how to successfully collect without compromising member relationships. In my experience, it’s by taking a fresh approach to collection that is rooted in empathy, collaboration, and problem-solving. Here’s how credit unions can implement a compassionate collection approach:
- Take a People-First Approach
Whether you handle collections in-house or work with an agency, the way each member account is managed can have a major impact on revenue recovery. Especially during difficult times like now, treating each member with respect and empathy is the first step to building trust. Establishing this foundation can help you get to a productive place to collect revenue more quickly.
Tip: Assign each account a dedicated collection account executive. This creates a better end-to-end experience for your member, so they can build a rapport, and avoid having to repeat uncomfortable or embarrassing details to multiple people. Especially if you are managing many members in collection, working with a reputable collection partner who follows this approach can help alleviate the administrative and time burden from your staff.
- Seek to Understand the Member
There are many reasons a member may have missed a payment, from a simple banking error on their end to significant financial hardship. Seeking first to understand why an individual didn’t pay their bill sets you both up to have a judgement-free conversation that gets to the root of the problem quickly. A consultative approach empowers your collection team to collaborate with consumers to find long-term payment solutions, not just quick fixes that don’t address the core problem. Prioritizing this approach can require more resources upfront, but if done correctly, can help members stay on top of their finances in the future.
Tip: Develop a guide for your collection team that explains common problems and possible solutions. For example, for a member who says they just forgot to pay their loan, you could make it a standard response to offer an auto-pay option, if possible. A collection agency should be well-versed in all possible scenarios and can help educate your team on best practices.
- Empower Members through Education
Your collection team should use this opportunity to provide educational opportunities wherever possible. Helping your members understand both the collection process, and what they can do to stay in good standing with your credit union can assist them in navigating repayment now and avoiding a collection issue in the future.
Tip: Develop a digital financial literacy and education library that your members can access. Providing access to tools like this can help empower better financial decision making, even helping individuals stay out of the collection process in the first place. Working with a collection agency who already offers this resource will ensure that you’re providing information that meets all legal and regulatory requirements and allows for more meaningful relationships with borrowers.
There has never been a better time to implement a compassionate approach to collection. With many Americans in increasingly challenging financial positions, this approach is more likely to resonate on a personal level and result in better recovery for your credit union.
About Jacob Corlyon
As a co-founder and CEO of Capital Collection Management (CCM), Jacob is responsible for overseeing all facets of the business and its operations. His deep industry experience is underscored by his extensive knowledge of consumer, commercial, and healthcare collections. Jacob is also the president of the New York State Collectors Association and believes in a compassionate collection style, with the mission to rethink, reimagine and recover.