Collections can be an awkward, difficult and time-consuming process for credit unions and their members during the best of times. Now, having been in the midst of the COVID-19 pandemic for nearly a year, there are even more complex considerations as newly, and now longer-term, unemployed members flood phone lines, individual states continue to change regulations around collections, and the impact of an inconsistently executed Paycheck Protection Program (PPP) has yet to be fully revealed. In addition, according to XXX, early 2.1 million U.S. homeowners remain 90 or more days past due, but not yet in foreclosure – 1.7 million homeowners more than the same time in 2020, or five times pre-pandemic levels.
Despite these challenges, credit unions have an opportunity to practice compassion, flexibility and creative problem-solving that can improve the collections experience, now and in the future. Review these five tips financial institutions of all sizes should practice in order to help their members reduce the stress that comes with increased financial uncertainty.
Tip #1: Standardize Processes to Scale People Faster
With many branches closing their in-person operations, and others modified to a new normal state of operations, tellers and other employees are being reallocated to other departments within the credit union to address shifting consumer needs. This means there has been a sharp spike in new employees doing traditional collections and loss prevention activities that require rapid training and onboarding to help customers navigate unfamiliar processes.
Whether done manually, digitally or automatically, internally or through a third-party collections agency, standardized decision-making tools can help employees address the sudden influx of similar deferment-related cases more quickly, with minimal training. For example, for hardship loans, this will help free up more seasoned collections experts to handle more complex cases.
Tip #2: Automate Communications When You Can
While standardizing processes will, by itself, increase efficiency and effectiveness in collections, using automated communication and decision-making tools where possible will help scale to meet demand. Currently, many credit unions find themselves so overwhelmed with inbound calls and requests that they remain unable to reach out to their customers to offer assistance. The problem is compounded by anxious members calling back in to check on the status of their request, bogging down an already overburdened system. Balancing accountholders needing financial assistance with the desire to allocate resources to the increasing refinance and new loan activities for those not negatively affected by the roller-coaster journey of the pact year is a daunting task.
Manually following a standardized decision workflow is helpful, though using an automated technology platform to do this increases predictability and consistency to a greater degree and enables financial institutions to keep members updated about the status of their request. One of our clients, a nationwide lender, has been dealing with a massive number of skip-a-pay requests. These requests are being processed across four different departments. Using Temenos technology systems to handle the distribution, the lender can send an automated communication update to the customer about the status of their request as it moves from each department. Combining standardization with automation has enabled our client to provide great customer service while reallocating work and scaling operations faster to meet growing needs.
Tip #3: Respond Proactively to the Inevitable
With lock downs and closures coming and going, many are still uncertain how long they will be actively employed. To deal with this uncertainty, thousands of members are reaching out to their financial institutions proactively to set up payment plans or modifications before they reach a total inability to pay.
Institutions that can respond quickly to these requests will be looked upon favorably—those who can anticipate these needs and offer solutions before members pick up the phone will receive good will in these trying times. Standardized data that enables quick segmentation of customers based on payment history and financial standing can help identify members that are candidates for skip-a-pay or other modifications, while automated communication tools like email and text can allow employees to focus on more complex tasks. See how First Tech Federal Credit Union leverages Temenos technology to generate customer engagement and value to meet what the new digital banking world needs in this on-demand webinar.
Tip #4: Enable Self-Service Options
Another way to proactively handle increased collections activity is through self-service options. In regular times, collections has a significant emotional component often tied to shame and avoidance—people simply do not want to discuss their financial difficulties with another person.
Self-service options enable credit unions to avoid looking aggressive or uncaring by sending informational messages about self-service portals to report hardship or work out payment plans rather than sending letters or repeated phone calls that most customers find unpleasant. For members, self-service portals can be helpful for those who genuinely want to work with their credit union but have odd schedules, limited access to digital tools or other factors that make it hard to stay on top of payments. Since self-service portals can be accessed via a link in a text message or digital devices, it is more accessible than a digital tool that requires an app download.
An added benefit of self-service options, aside from customer satisfaction, is managed risk. In response to the pandemic, individual states are passing a variety of collections regulations, from restricting the hours in which collections calls can be made to mandating mortgage relief and more. These regulations are different state to state and continue to change, and penalties can be enacted upon institutions caught violating them, even accidentally. The uncertainly of changes the 2021 administration will make further supports the need for centralization and standardization to be ready to reach quickly. Self-service options can help manage this risk by creating self-driven pathways for customers that require minimal communication and activity driven by their financial institution.
Tip #5: Manage Risk with Real-Time Reporting
Speaking of regulatory risk, accurate, real-time reporting will be an essential component of managing confusing, shifting, sometimes contradictory collections regulations. Enacting standardized data processes allows institutions to more easily segment and track activities by state, while automation can help guide activities and communications and reduce the possibility of human error.
Finding a digital solution that tracks activities and communications in real-time is essential to creating efficiencies and avoiding regulatory mistakes: for example, if a customer fills out hardship information on a self-service platform and an employee is scheduled to call them that day, that information needs to be communicated ASAP so the customer does not receive an unnecessary call. Real-time segmentation and reporting also helps employees avoid engaging in collections behaviors that are prohibited by state policies.
Creating a Compassionate Collections Response Starts Now
Credit unions are grounded in a mission to support the communities they serve. Developing flexible, fast, digital processes with the goal of compassionately assisting your members and teams during periods of increased financial instability is what differentiates you from other financial providers. Whether you are evaluating a new collection solution or modifying an existing one, I encourage you to make compassion the driving force behind all of your decision making.
Join this interactive webcast, “Why Compassion in Collections Won’t End After Covid”, for lessons learned from NASA Federal Credit Union about how investing in digital banking solutions and omni-channel communications platforms can facilitate compassionate member communication and self-service. Learn how to proactively communicate and provide a consistent and supportive message to members who have profound questions and concerns about their finances. Webinar hosted by CU Times.com on 3/16 at 2:00pm ET, 11:00am PT.