Credit unions seeking to boost their collection efforts should take an AVENUE approach, says Martin Sher, co-CEO of AmSher, Birmingham, Ala., as reported in the CUNA Lending Council white paper, “Collections: Not a Cookie-Cutter Operation.”
AVENUE is an acronym for successful collections:
- Application: Get good information on the loan application.
- Verification: Confirm the application information.
- Expectations: During the loan closing, ensure the borrower understands the rules for repaying the loan.
- Nice courtesy call: Make a reminder call before the first payment is due.
- Urgent follow-up: Call as soon as a payment is past due.
- Exceptional business: If you do all the right things, members will want to do business with you—they may even come to your credit union for their next loan.
“Collecting is like sales—we’re selling people the benefits of paying their bills,” Sher says. “We help people figure out ways they can raise the money to help pay. Collectors may think of things the debtors haven’t.”
He advises credit unions to start the collections process as soon as members are past due. “Collectors sometimes think a person will get angry if they call too soon, and take it out on the credit union. But time is the weapon of the debtor—the more time passes, the less likely you’ll collect.”
Steps for success
Other advice the white paper offers for successful collections:
- Communicate your clearly articulated collections strategy to everyone from frontline staff to the board.
- Give collectors autonomy. Allow them to authorize skip payments, late fees, or settlement offers. A strict, top-down management structure isn’t efficient.
- Implement flexible collection policies. Don’t tie yourself down by, for example, limiting the number of months you’ll offer loan extensions.
- Develop creative loss-avoidance procedures. Consider, in extreme circumstances, rewriting a loan at 0% if that’s all the member can afford. Doing so could help your CU retain a member and avoid a loss.
- Hire the right staff. Be willing to spend the money needed to maintain sufficient, experienced staff. While the collections function isn’t a revenue-generator, it can be a money-saver.
Also, look for self-motivated people with a good attitude. Collectors, Sher says, should:
- Believe in their abilities, and have confidence and self-esteem. It takes energy and enthusiasm to succeed.
- Treat the credit union’s money as they would their own. This builds urgency.
- Avoid taking things personally. Most collections calls are unwanted, and people may be inconsiderate. Collectors must stay professional.
- Assume they’re going to collect money each time they contact members.
“Collections: Not a Cookie-Cutter Operation,” is available free to CUNA Lending Council members; $50 for nonmembers.