The recent expansion of services builds on ISS' launch in 2002's  mission of helping smaller credit unions collaborate to deliver more services to members. Rhodes said research gathered from the credit unions that used the CUSO when it first rolled out determined that outsourcing collection services produced better success ratios and better collection rates than in-house programs. 

CU Collections currently serves 20 credit unions nationwide ranging in asset sizes from $10 million to $1 billion, according to Kenneth deMello, former CEO of ISS and chief financial officer for FedFinancial. The CUSO's niche is found among credit unions with less than $200 million in assets, he added. 

“When the CUSO started, we were a $35 million credit union. Jon and I used to work at a credit union with $7 million in assets so I understand their needs,” deMello said. “We really saw the struggles of trying to keep up.”

Still, larger credit unions tend to have specialized collections in areas such as auto, indirect and home equity lending, deMello said. Some are willing to outsource these segments of their portfolio to collections entities outside of their credit unions, which presents more partnership opportunities for the new CU alliance to capture, Rhodes noted.

The timing of the collaboration between CU Collections and CBHV was partly motivated by an increase in the regulation in the area of collections, deMello said. 

“It's a concern for us. It's not just a numbers game anymore. For some credit unions, it's not just 'are we keeping up to date with regulations' but' could there be a future lawsuit if we we're not collecting properly,'” deMello said. 

Of CBHV's nearly 450 to 500 active clients, the firm provides third-party collection services for roughly 20 credit unions, according to Eric Najork, CHBV president. The family-owned firm was founded in 1974 by Ralph Najork, Eric's grandfather. His father, Fred Najork, is a past president of the collections firm and a former president of the New York State Collectors Association. 

“We are very impressed with the results that CU Collections has achieved for its clients and are not planning for any major changes within its operation,” Najork said. “We will, however, use our market knowledge developed over 35 years in the collection industry, to augment their already impressive offerings.”

According to “Collections in a Post-Recession Environment,” a 2011 white paper from the CUNA Lending Council, a segment of members who had delinquent loans in the post-recession environment were from formerly affluent households but still had relatively high credit scores. These households were able to use their assets to cope with financial demands as they adjusted to being unemployed or underemployed but as their assets were exhausted and members were unable to find jobs, some households fell behind on payments, loans entered collection and some had to file for bankruptcy. 

The paper's findings, which were gathered from lending and collection leaders at six credit unions, found that credit unions can meet members where they are through updated collection procedures, technology, loan modifications and engaging members early in the collections process.

Meanwhile, it was important for CU Collections to find a partner that shared the same values of helping credit unions to help their members, Rhodes said. FedFinancial turned to Greenberg Advisors LLC, a Rockville, Md.-based provider of merger and acquisition strategic advice with the financial services and business services. The six-month search included conversations with between 80 and 100 firms, according to deMello. The list was narrowed down to roughly six to 10 serious buyers, he added. 

In addition to CBHV's early-stage, pre-charge-off services complementing CU Collection's post-charge-off collections services, deMello said it was one belief that ultimately stood out from other the others.

“Everyone else initially asked, 'How can we maximize profits?' CBHV asked, 'How do we keep staff and clients happy?' That was huge for us,” deMello recalled.