Filed under: collections, credit unions | Tags: collectability, delinquent acocunts, fiscal strength, Receivables Management Industry
By Terrence R. Heffernan, Esq.
Delinquent loans obviously jeopardize the fiscal soundness of any creditor. Studies done by the Receivables Management Industry have demonstrated how the collectability of a past-due account decreases dramatically with the age of a delinquency. For example, one study determined that 61 days past due was the optimal time to place an account with a third party collector. The study’s research concluded that at 30 days delinquent, there was a 62% chance of recovery, while the recovery percentages decreased to 53% by day 60 of delinquency, 48% by day 90, 40% by day 180, 33% by day 270, and only 20% on accounts past-due for a one year period.
Lenders must therefore have an effective mechanism for resolving delinquent loans in a timely fashion. Even credit unions, which inherently place a premium on customer relations and personalized banking, may occasionally be forced to call upon outside collection assistance as a “necessary evil”. For any credit union, the decision to employ an outside collection agent is never an easy decision.
Anyone wrestling with the Hobson’s Choice between an ineffective in-house collection program versus the fear of employing an external collection program might take comfort from knowing that professional third-party collectors are not the unregulated, uncaring individuals often portrayed in the media. To the contrary, debt collectors must follow specific federal guidelines that establish consumers’ rights and collectors’ responsibilities. Examples are the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The majority of such federal laws also contain provisions requiring data security and confidentiality. In addition, individual state laws and regulations may impose requirements over the safekeeping of sensitive consumer information, including requirements that collectors inform consumers in the event of a security breach of consumer information. Specialized federal laws such as the Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability Act of 1996 impose additional standards to protect against the unauthorized access of consumer’s confidential information.
To dispel some of the myths regarding professional collection agents, it is not true that collectors continually hassle people who cannot pay. Apart from such conduct being both illegal and ineffective, professional collectors are trained to listen to what consumers have to say and thus determine if they indeed have the ability to pay the past-due account. The most effective collectors do not engage in intimidation. The professional collection agent is an able motivator and communicator. The best collectors work with people to get their accounts back into good standing.
Professional collectors do not force people into bankruptcy. Doing so is clearly counterproductive to the objectives of both the creditor and the collector; when people file for bankruptcy, their financial obligations are usually extinguished, which would result in the lender and the collection agent receiving very little or nothing. Good collectors know that people with financial problems often require assistance in resolving their accounts without expensive litigation, and many need the flexibility of alternative payment arrangements to work out their financial problems. While a collector’s job is to collect, in reality the job often includes counseling.
Another myth is that collectors deal mainly with the poor and the helpless. The reality is that professional collectors quickly grasp that debtors come from all levels of society. In fact, many debtors are like you and me, who for whatever reason are experiencing an unusual financial problem. Effective collectors know they must treat each person as an individual and with respect in order to understand each person’s specific situation.
If your Credit Union is experiencing difficulty in resolving delinquent accounts through your internal efforts, I hope this article may reduce apprehension of utilizing an external collection agent. As stated above, the longer an account is unpaid, the lower the possibility of repayment. Finding a collection agent who supports your fiscal strength and also preserves your community reputation should be a stress-free process. It’s only a matter of trust.
If you have any questions regarding this advisory, please contact Mr. Terrence R. Heffernan, Esq. Terry is a partner in the Legal Action Recovery department of Weltman, Weinberg & Reis Co., L.P.A. in the Columbus office. He can be reached directly at 614-857-4390 or via e-mail at email@example.com.
On my last day at the conference, I decided to visit Credit Union House. This is a terrific resource for credit unions that need a place to plan and meet while in Washington D.C. They had an open house and I stopped by on my way home.
If you have a chance to attend a function there or better yet, hold an event there, I highly recommend it.
Business Development Specialist Maren McBride gave our group a tour and can assist anyone in making arrangements at Credit Union House. The contact information is available on their website.
The annex is also available and is quite beautiful.
It’s hard to summarize my experience this year at the GAC in so many words. Some of my friends who didn’t attend worried that things would be gloomy because of the economy and the regulatory environment. I can emphatically say it was just the opposite. There were a lot of optimistic people with the energy to face the challenges of the industry head on. I left the event more energized than when I arrived.
Filed under: Uncategorized
For those of you who have not been to CUNA’s grand affair, I have to give you a sense of scope. The GAC is big! Have you ever seen an exhibit hall like this?
CUNA hired Elvis there to help spread the word. He looks pretty happy.
The general sessions of the GAC are also huge.
Today’s turn out was terrific. The speakers ranged from several Congressmen to Board Member Gigi Hyland to the still amazing Alan Greenspan. Here he is with Paul Berry (the very talented host of the general session):
Putting on a show of this size is nothing less than an epic production. CUNA does it like no one else. I didn’t observe any problems and I would have been surprised if I had. I don’t think I’ve ever seen any logistics issues in any of these conferences I’ve attended over the last 12 years. They are pros.
On my way out I encountered some friends.
Anthony Demangone, Carrie Hunt and B. Dan Berger. Anthony is NAFCU’s Director of Regulatory Compliance, Carrie is NAFCU’s General Counsel and Dan is Exec VP of Government Affairs. They were here for a meeting. While it lasts, the GAC is truly the center of the credit union world.
I also ran into some of the GAC Crashers that I talked about yesterday. Some of them are staying in a hostel, with 6 guys in a room. This makes me very glad for my hotel accomodations. All of them seemed to be in quite good spirits despite staying up late and getting up early. Ah to be young again.
There are break out sessions this afternoon and more functions tonight. I’m leaving tomorrow, but I’m hoping to do one more post covering this most excellent event.
The Credit Union National Association puts on a tremendous event every year in Washington, D.C. A few years ago they moved it from a hotel to the D.C. Convention Center.
It’s very impressive. There are so many people here, it’s inspiring and humbling. It really shows the power of the Credit Union Movement. Everyone who plays a role in credit unions is here. From employees to volunteers to regulators to vendors. Thousands and thousands of credit union people have converged on Washington to meet, discuss issues, and do business. There might be a little fun involved too. The energy created is palpable.
I had to take a couple of pictures of my friend Brent Dixon and his crew of under 30 folks.
Brent organized a “Crash the GAC” group of 20-somthings who were going to attend even though they couldn’t afford the registration fee. When CUNA heard about it, to its credit, all of the crashers were given free admission. This is wonderful in so many ways. The credit union movement needs young people to get involved and these folks are bright and committed.
Alas, I’ve aged out of the under 30 crowd a very long time ago. But I do admire their energy and enthusiasm.
I’m hoping to post more pictures and have more comments about my time in Washington, D.C. this year. It certainly is an awesome start to the conference.