Strong loan growth continues competitive pricing often leads to increased bad debt
WYOMING, MN (April 27, 2015) — Current economic forecasts indicate that loan growth will continue for the rest of 2015 and 2016. CUNA’s Credit Union Trends Report indicates that in February 2015 credit unions increased their loan portfolios by .22% up from .11% in February 2014 and loan balances grew at a 10.9% annual pace. CUNA is predicting that loan growth should remain at about 10% for the next 2 years. A recent Wall Street Journal article cites that the overall consumer base is healthier due to a stronger economy and falling jobless rates. While a perfectly balanced loan portfolio is the ideal for lenders, it may not be the reality when consumers have more flexibility and more capacity to make purchases – wherever the terms are the best. In a competitive pricing environment credit requirements are often loosened, resulting in increased bad debt.
Knowing that an abundance of new loans are being written, the credit union collection department will want to be thinking proactively in preparing for the increase in delinquent loans. Here are some things to think about:
- Weigh department capacity vs the efficiency that will be needed to handle more files.
- Review collection policies and practices – are they clear and at every desk?
- Review space, time and resource (people) constraints.
- Take a look at areas that staff doesn’t have expertise in and will need more training.
- Set up a call frequency schedule and make early dials of past due accounts a priority.
- Create a fallback plan for times when the workload stretches staff too thin to be effective.
Taking a proactive approach to managing the collection department will ultimately reduce bad debt and improve cash flow. The best results will include a resource review, a training plan and knowing what you need from an outsource partner:
- Look for a history of experience specifically with credit unions.
- You’ll want an extension of your staff, not a call center.
- Look for collection expertise that your staff doesn’t currently have.
- An outsource partner should have a visible CU philosophy, even to delinquent members.
- Through the collection process, you’ll want your outsource partner to strengthen member relationships and to have a mindset that the goal is to help the member become financially righted.
CU Recovery and The Loan Service Center collectors are solution providers with the credit union member philosophy as the basis of all interactions with the members. There is no status quo with CU Recovery. As the needs of credit unions change, so do the services provided.
About CU Recovery & the Loan Service Center
CU Recovery, Inc. is a full service collection agency, working exclusively for credit unions, dedicated to maximizing recoveries on charged off loans. The Loan Service Center, Inc. provides staffing solutions for credit union collection departments to minimize losses on their delinquent active loan portfolio. The CU Recovery Collection Academy is held in October of each year and is a resource for continuing education to assure the success of Credit Union collection departments in meeting their member service and delinquency reduction goals. For more information: www.curecovery.com.