One of the unfortunate outcomes of COVID-19 is the financial burden on our credit unions and their members. At United Solutions, we are seeing very different responses from credit unions with regards to collections. Some credit unions have asked our collections team to start collecting earlier and harder on loans, while others have requested a softer approach with “friendly reminder” calls. All Credit Union professionals want the best for their members and are trying to be kind and considerate in these uncertain times. However, the reality is that many members are delinquent right now, and this delinquency is a problem for credit unions.
In the beginning of the pandemic, all credit unions were shutting down in person services and shifting their focus to digital solutions such as home and telephone banking. In time, credit unions became more creative; offering financial counseling, short-term loans, loan extensions, Skip-A-Pay Programs, and COVID-19 deferments. All these programs provided much needed assistance to credit union members. These programs also demonstrate the emotional connection credit unions have for their members that is often missing with their larger financial institution rivals. Now that we are adjusting to our “New Normal,” what’s next in collections for credit unions?
It is important to understand the difference between delinquency caused by COVID-19 and normal delinquency at the credit union. Organizations are using business intelligence to identify COVID-19 delinquency. They are examining first time delinquencies, a discontinuation of direct deposit, transaction histories that indicate Cares Act payments, CRM data with specific key words, and even a recent date of death on the account. We need to understand how individual members are affected by COVID-19. Are they able to make repayment? Do they have other assets or forms of income? Do they expect to get back on their feet quickly? Have your collections officers and call centers collect the necessary information and update your database for future analysis. A point of caution; these newly delinquent members may suffer from embarrassment, humiliation, and depression.
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