For example, some utilize third- party workers to get a hold of delinquent account holders after hours, when they’re typically easier to reach, he said.

“It’s not black and white – we see a mixture,” Mossman said of CU collections outsourcing. “They’re testing the waters.”

The $2 billion Michigan State University FCU completed a trial run with a third party who contacted members to remind them of late payments, but found the level of service to be lacking, said Sara Dolan, vice president of adjustments for the East Lansing, Mich., institution.

“We found that our members frequently had other questions about their accounts that the third party could not answer because they only had access to the delinquent account information, and this didn’t meet the level of service that our members expected,” Dolan said.

Cathryn Gorman Wolfkill, recovery manager for the $7.8 billion Alliant CU in Chicago, said while her CU works with a third-party collections agency, it does so in select instances. “We make sure it’s a last resort,” Wolfkill said. “We’re very selective about the information we put out to a third party.”

For the $508 million, Beaverton, Ore.-based Rivermark Community CU, collections outsourcing isn’t currently cost effective, Collections Manager Tom Winckler said. Instead, CU collections employees are trained to focus on an area of specialty, such as bankruptcies, repossessions or garnishment.

Aside from making third-party outsourcing decisions, credit unions face new collections challenges as they monitor the evolution of their post-recession loan portfolios. Winckler said Rivermark’s total delinquent loan dollar amount is three times higher than it was in 2007, but the increase is due to a rise in delinquent first and second mortgages, he said.

“It’s a different portfolio,” Winckler said. “I almost feel like I’m more of a property manager.”

Winckler added that high unemployment rates have required his CU to tackle delinquencies sooner than it has in the past in order to more efficiently find solutions for struggling members.

Rivermark typically calls members 15 days after a payment is due, follows up every other day and considers a variety of non-payment resolution options depending on individual circumstances, he said.

Michigan State University FCU also saw a delinquent loan increase as the economy faltered – Dolan said its delinquent loan to total loan ratio jumped from 0.84% in 2007 to 1.46% in 2008 and 1.74% in 2010; it’s since fallen to 1.52%. The CU generally handles collections by mailing a written notice at seven days past due and making a phone call and/or sending an e-mail at 15 days past due, Dolan said.

Arranging for a recurring payment, such as an automatic transfer or ACH, is the preferred non-payment resolution method for Michigan State University FCU, Dolan said. And in special circumstances, the CU will offer options such as state mortgage payment assistance programs, loan extensions, credit counseling and debt consolidation.

“If the member is having a financial hardship such as a job loss, the adjuster assigned to the account will review options to assist the member until they find new employment,” Dolan said.

Wolfkill said Alliant CU’s initial contact and follow-up schedule depends on the loan and member – grace periods, mailed payments and the member’s history are taken into account (for example, they’ll call members who “need a little extra nudge” earlier than others).

The CU utilizes software from Akcelerant, which Wolfkill said allows staff members to track every collections file, seamlessly connect to third-party collections products and get ahead of schedule on their entire collections process.

Mossman said generally speaking, one of the biggest collections challenges credit unions currently face is handling “specialty processes” such as bankruptcies, foreclosures, repossessions, legal matters and fraud. “Right now, it’s not just about handling the delinquent account,” he said.

Akcelerant also works with 125 banks nationwide, and Mossman notes that the collections challenges faced by credit unions and banks are “essentially the same,” adding, “consumers are consumers, and some are not going to pay.”

Dolan, Wolfkill and Winckler all noted their CUs offer complimentary programs to help those members in financial binds. Michigan State University FCU connects members with the Michigan State Housing Development Authority’s Help for Hardest Hit program and credit counseling service Greenpath, Inc. In-house financial counseling is also provided to assist members with budgeting, Dolan said.

Alliant CU offers a financial assistance program for every product it sells, which Wolfkill said helps members figure out their financial situations and helps the CU see members’ situations clearly. And Rivermark Community CU begins giving struggling members financial counseling early in order to find tailored solutions to their dilemmas, Winckler said.

“We’re here for the member to do what we can,” Winckler said. “We don’t consider ourselves ‘collectors’ as much as we do ‘problem solvers.’”

The Top 8 Elements of a Successful CU Collections Program

Focus on finding a solution for the delinquency, not just on collecting today’s payment. Dolan stressed that each member’s situation should be handled differently – one may need long-term assistance, while another may just need a reminder. “The key to successful collections is developing a relationship with members so they will share information early in the collections process and work with you for a solution,” she said.

Communicate with other CU departments. Wolfkill said good communication throughout the entire credit union is key to fully comprehending members’ financial situations. “Maybe there’s something going on upstairs that can help us understand what’s happening down here,” she noted.

Be flexible and listen. Good listening skills are crucial when you’re dealing with members facing financial hardships, Wolfkill said.

Implement an effective follow-up program. Winckler said a follow-up system that’s firm and diligent lets members know you’re serious about collecting their money. “You have to be empathetic and show that you care, but follow-up is the most important thing,” he said.

Train a highly skilled staff. Both Mossman and Winckler noted the importance of having good collections employees who are fully trained on how to handle members (Winckler said that his staff follows a mantra of “smile and dial”).

Establish and track key performance indicators. In order for your collections program to perform at its best, you must identify signs that tell you when collectors are doing a good job, Mossman said.

Utilize collector incentive programs. Mossman also emphasized the importance of rewarding collectors for their successes in the workplace. “That really keeps collectors focused and helps motivate them,” he said.

Share and collaborate. Both Wolfkill and Mossman mentioned the value of joining user groups with other credit unions through which you can share ideas and develop best practices on how to increase recovery.