Collect Debts and Keep Members

Elizabeth LaSane
January 9, 2012 | COMMENTS

“Did you forget? Your payment has not arrived.”

Our members dislike the dreaded late payment notice as much as we dislike sending it. During tough economic times everyone feels uncomfortable when asking for money and collecting on an outstanding debt for your credit union. Imagine further, the discomfort when you may not have money to give due to the loss of a job or reduced income. The key is negotiation and being able to truly step into a members shoes to understand their position. In order to lessen the discomfort and secure payment while retaining your member you must tread lightly.

Try a “gentler” approach using these practical tips:

• Send a tasteful letter or payment reminder. Draft an empathetic letter or reminder that makes light of their negligence. In these busy times, people have multiple things on their mind and may simply forget. Make it easy to pay by providing online payment tools or a self-addressed stamped envelope. 
• Familiarize yourself with the members account. Just as you would prepare for an effective sales call you must prepare for an effective collections call in advance. Briefly review the collection history and transactions to determine when and how payments are being made on the account. Review any updated credit reports and collateral to evaluate possible collection tools available to assist the member.
• E-mail may be the answer. Sending a pleasant e-mail requesting the member to follow-up with you may encourage them to be more open and honest regarding their financial situation. Sometimes the lack of a face-to-face environment can be a benefit as it eliminates the fear of hearing the sound of disappointment. The member may actually ask for your help.
• Watch your tone. Most members are embarrassed when they cannot pay their loan. We must maintain our tone at a normal level and always be courteous and respectful when communicating in calls and/or email. Being mean or nasty will not help in collecting the debt and can raise the blood pressure for you and your member!
• Don’t take it personally. Remember the member is upset at their situation not at you even if they use the phrase, “YOU.”
• Encourage communication. Ask open and closed end questions. Pause to prompt the member for their input. The few seconds of silence will be uncomfortable for both parties, but it will force the member to join the conversation.
• Never demand. Be open to what the member has as a plan to cure their delinquency. Remember plans must be mutual.
• In cases of true hardship be open to compromise. Determine if the situation is long or short term so that the method of conclusion will resolve the issue.
• Keep promises realistic. We would love for all members to be able to repay right away and many members will promise the unrealistic to get you off the phone. The truth is that many cannot pay as quickly as they may commit. If the member is promising more than they can do, ask them to reconsider. This is especially true if the collateral is an automobile. They are struggling to keep the payment current. What about insurance and maintenance? Also, collections professionals should not promise more than they can realistically do such as salvaging credit or waiving late fees. This will result in a loss of creditability for the credit union.
• Educate the members. Inform members on what options are available in the event of default so that there are no surprises. If you agree to accept a settlement, advise the member up front of Internal Revenue Service (IRS) requirements before money is exchanged. Credit unions and other creditors must file a forgiveness of debt on all accounts with remaining balances greater than $599. This may change the member’s decision as this will create tax liability. Additionally, educate the member on credit bureau reporting instances of late payments, no payment, charge off, repossession, foreclosure and settlements.
• Leverage. Offer to waive certain allowable fees to secure immediate payment. This creates goodwill and extends a helping hand.
• Ensure timely follow-up. If you accept a promise to repay for a Monday and you don’t receive it, follow up on Tuesday. This will let the member know you are holding them accountable for what they stated they were going to do.
• Apologize when necessary. Never make for an unworkable relationship by not admitting when you or your credit union is at error.

By collecting debts properly and with dignity, you can keep your members andcollect your money without hurting anyone’s pride. That’s a win-win!

Reprinted with permission from the Texas Credit Union League (www.tcul.coop).