Reducing losses & strengthening member relationships with winning collection strategies

In today’s economic environment, credit unions are confronting a growing challenge: rising delinquencies and the need for effective, member-centric collections strategies. Collections has always been a delicate business to manage; however, there are practical, proven tactics that credit unions can easily follow to manage collections without compromising member trust.

The outdated one-size-fits-all approach doesn’t work like it used to when it comes to collections. Modern collections demand tailored outreach, a clear understanding of compliance requirements, strategic use of third-party support and above all, empathy.

Here are the most important practices to follow for credit unions looking to refine their collections strategies:

Phone calls are no longer the gold standard in collections because people simply don’t pick up the phone anymore. Instead, effective strategies now include a blend of email, SMS and phone communication.

Email has emerged as a surprisingly effective and underutilized tool in collections strategies. Like phone calls and text messages, many people access their email on mobile phones, but emails are less regulated than texts. They are also much more effective, with open rates as high as 80%. Additionally, emails are often tied to longstanding accounts, unlike phone numbers, which are frequently recycled. This reliability, combined with email’s flexibility to include payment links and personalized messaging, makes it an essential piece of any first-party strategy.

The notion that every delinquent member should be treated the same is outdated. Instead, outreach should be tailored based on the age of the delinquency, the type of loan and the risk profile of the account. For example, early delinquencies might benefit from soft reminders via email and SMS, while high-risk accounts may warrant quicker escalation to phone calls and more assertive communication.

This approach helps to “nudge” members early (often before they realize they have missed a payment) while reserving more direct outreach for accounts that require intervention.

With regulatory oversight from the Consumer Financial Protection Bureau (CFPB) and the Telephone Consumer Protection Act (TCPA), understanding the compliance landscape is essential.

While email remains a relatively compliant-friendly channel, credit unions should still ensure opt-in language is embedded in loan agreements to authorize email and other forms of contact.

For third-party collections, Regulation F introduces constraints like the “7-in-7” rule, which mandates no more than seven contact attempts in seven days, and “1-in-7,” limiting actual conversations. These rules have increased the importance of multichannel communication and strategic timing for financial institutions.

From scoring accounts based on likelihood to pay, to leveraging push notifications in mobile banking apps, new technology is making it easier to engage members and prioritize high-probability recoveries.

For example, AI can help financial institutions identify the one out of 50 or 100 charge-offs that is most likely to pay. Rather than wasting effort on low probability accounts, data-informed prioritization ensures collectors invest their efforts where they can make the greatest impact. Push notifications also offer high trust and visibility, especially when paired with branded messaging through mobile apps. These messages sidestep regulatory red tape while keeping members engaged.

Lastly, credit unions and other financial institutions should understand that holding onto charge-offs for too long can cost them when it comes to member engagement. Once an account reaches this stage, in-house teams often deprioritize it and members become desensitized to outreach.

Outsourcing quickly after charge-off not only signals severity to the member but also improves the likelihood of recovery. Credit unions should take advantage of the window of opportunity when members are still reachable and willing to engage.

In a rapidly shifting financial landscape, credit unions can’t afford outdated collections strategies. By blending technology, personalized outreach and compliance rigor, financial institutions can improve recoveries—all while building trust. For credit unions in need of additional resources, outsourcing charge-offs can be a good option to enhance control and recovery.

Effective collections is not about being aggressive—it’s about being timely, respectful and human. Whether through flexible repayment options or seamless digital tools, the goal should always be to support members through recovery—not punish them.