Seattle Metro Accounts Recovers - `Not Your Average Bill Collector'

SEATTLE – Three burly guys with tire irons in their hands come knocking on the door late at night demanding payment on a “loan” – or else. That may be the television or movie image of those in the “collections” business. It may even be the perception of some in arrears who are called by aggressive and abrupt collection agents demanding payment. “Lots of people are having a pretty tough time out there these days and you can’t automatically assume they’re all deadbeats and trying to cheat you,” said Karlena Pierce of Seattle Metropolitan Credit Union. So rather than taking the “pay up or die” approach, Pierce has totally revamped the credit union’s collections department to work with members who are delinquent on their loans. Her efforts range from renaming the department to selling people on the concept of credit union loyalty. “First and foremost, we decided to change what we represented,” Piece said. “We dropped the whole name `collections’ and changed our name to `accounts recovery.’ Every time people say to a member, `Your account is in collections,’ it has different meanings, different stigmas. It automatically puts people on the defensive.” Along with that, the four-person department which Pierce heads, decided to take a different approach to collections, one that sold members on their loyalty to the credit union. “We have to sell a concept, a concept of people’s loyalty to the credit union and what that represents,” she explained. “To get people to buy into that we obviously have to approach it differently. But that’s how we’ll get them to pay us and put us first and think of us an entity that they want to belong to, not just another Bank of America.” As credit unions continue to grow and become full service financial institutions, Pierce says the difference between them and banks is becoming blurred in the minds of consumers. “A lot of larger credit unions are turning into full service financial institutions,” she said. “They look a lot like a regular bank. We need to make sure members understand the differentiation between the two.” To accomplish that, Pierce said the credit union needs to have empathy with its members and to stand out. “We want to stand out as the people who are going to be there to rework accounts, to help members budget better, help them get control of everything,” she said. “We look for different ways to make things better if we can. “We need to make people aware that if they pay the credit union, the credit union is going to be there for them in the future, while ABC lender may not be,” Pierce added. “We don’t want our members to feel that they’re a number, because that’s not what they are to us. We need to make sure we can retain those members and make them profitable members.” That approach is paying off for accounts recovery. For December 2003, its loan delinquency rate was .39, which Pierce said was “almost unheard of for a credit union our size.” It was also the credit union’s lowest monthly delinquency in 10 years. Overall, the 12-month average was .50, she reported. Among problem lending areas are auto loans, with repossessions up significantly. For the first six months of 2003, the credit union sold some 70 cars, the same number that were sold during all of the 2002. Pierce blamed much of the increase on young people and new immigrants who often only considered the monthly payment for a vehicle, not the full cost of owing and operating it. She said members falling behind on mortgage payments was also an issue. Last year, rates were so low that people purchased homes without realizing all the other costs associated with home ownership, she explained. Still other members with impeccable credit in the past now have money problems after an unexpected job loss, injury to early retirement. Seattle Metropolitan, which began in 1933 to serve employees of the city, has grown to more than 37,000 members today and about $380 million in assets. Pierce, who has worked at Seattle Metropolitan for 10 years, including eight years in collections, was named manager of the department in May 2003. “I had zero background in collections,” she recalled. “I really didn’t know what I was getting into. The approach then was quite different. I just did the `smile and dial’ kind of calls, reminding people that they had a payment due.” Pierce gained collections experience on the job as well as from involvement in other organizations, notably the Northwest Credit Union Collectors Association. She was named president of the organization in June. She credits her staff with a willingness to work with members and to “embrace change” as the department was revamped. Other credit union employees were also educated about collections. “What we wanted to do . . . was give them an overview of what it was really about,” Pierce explained. “It’s not always about the negative. It’s not always about we need to repossess a car or we need to foreclose on a house. It’s also about coaching and educating members about what their finances are all about. We look at the big picture and how we can help. We try to give them some ideas about how to take control of their financial well being.” Pierce noted that while the account recovery department tries to work with members, it isn’t a pushover when it comes to collections. “We’re not pushovers by any means . . . there are times when it does take being a little more assertive with members,” she said. “But we try to stay away from being aggressive. We don’t want to be the average bill collector.” The “kinder and gentler approach” has been especially important as the economy in the Pacific Northwest has tanked. As a result, household debt, loan delinquencies and personal bankruptcy have increased. Pierce estimated that at any given time, .5 to .75% of members have fairly serious credit problems. Pierce said that since a charter change about two years ago allowing Seattle Metropolitan to serve anyone in the state of Washington, collections has become more complicated because many new members don’t have a bond or loyalty to the credit union. “The larger you get as a credit union, the loyalty kind of diminishes,” she said. “I really think it does . . . I think credit unions have gotten away from what makes them different. I think we need to go back to that. “We need to establish who we are with them (members) and make them aware of what we’re all about,” she added. “We’re not just a regular Bank of America or large financial institution. We’re family.” -