“Understanding and correctly managing a collections program is an absolutely essential part of any healthy lending program, whether you are making personal loans, credit card loans, auto loans or mortgage loans,” Svehla said. She added that its necessity stems from the reality that some percentage of loans will always go bad, and a credit union needs to have a mechanism in place to address what happens when life intrudes onto a loan's carefully planned payment schedule. 

“We evaluate our loans across their entire life cycle, and that includes collections” Svehla said. A healthy lending program needs to have more than just strong marketing and underwriting components, what she called the popular parts of lending. It also has to have a strong component that address what happens when loans get into trouble–the unpopular part of lending. Making loans is easy, she said, everyone likes notifying members to let them know their loans have been approved, but that's never the entire story.

“Not all loans are alike, not all members are alike and some members and loans will have more problems than others,” she said. “That's just life. Collections are how you help your members deal with those challenges.”

Svehla also acknowledged that, due to the Great Recession and slow recovery, she and the other staff at Grow Financial have had plenty of experienced at honing and improving their collections and other loss prevent strategies.

“It has been crazy,” Svehla said, referring to the economic headwinds Grow Financial has faced and observing that she began her career in collections with Grow Financial in 2008, right at the point when Florida began heading into the very teeth of the Great Recession and its impact on members. At its worst, in 2010, 3.92% of the credit union's loans, worth 2.94% of its assets, were delinquent and 2.04% of its average loans charged off. The numbers dropped in 2011 and then again last year, to where 2012 ended with 2.12% of the credit union's loans, or 1.40% of its assets, delinquent and 1.46% of its average loans charged off, according to NCUA records.

But while the credit union's statistics suggest Grow's improving loan picture, the real details come in the actual money saved. According to credit union records, since Svehla assumed the helm of the lending program in 2011, overall gross charge-offs dropped by more than $8.5 million, gross auto charge-offs by more than $1.8 million and gross credit card charge-offs by more than $1 million, all while recoveries increased by more than $1 million.

“We are getting better slowly,” Svehla commented about the Florida economy and the credit union but added that the state's unemployment rate still remained higher than the national average and that Florida is still one of the states with the slowest pace of foreclosures in the country. This means that the impacts of the recession on the real estate and mortgage markets, as well as on Grow's bottom line, would continue to stretch out over time.

“I don't predict how long it's going to take to see the real estate market really recover,” she said. There was some hope that a silver lining to the long foreclosure process might be that credit union might be able to avoid taking possession of some of its troubled properties as a stronger real estate market makes short sales more likely and less damaging from the credit union's point of view. According to NCUA records, Grow foreclosed on 14 real estate loans this year.

Svehla also sought to streamline the communications between all parts of the lending operation so that what collection staff were discovering about troubled loans could be communicated to and understood by other staff in other parts of the loan cycle. In this, Svehla said she puts more value on data about delinquency than data about charge-offs, since charge-offs are so often a lagging indicator.

“Most charge-offs are so old that when you analyze the loan problems, you find out you are not making loans that way any longer anyway,” she said. She puts more stock in delinquency numbers because they often provide more of a real time window on what's going on in a given loan program.

For example, Svehla related how data that was coming to collections staff about new car loan delinquency led auto lending underwriters to start looking more carefully at how they evaluated auto loan applications from borrowers who were in a new job for the first time or after a long time away from work. “We decided we needed to see more time in that job for some of these loans,” she said.

Central to Grow's collection philosophy is to see whatever is happening with a loan in the context of the overall member relationship with the goal of preserving that relationship into the future. A member with a delinquent loan because of job loss or other family or career difficulty will likely not be in that situation forever, Svehla observed, and when they come out of it they are likely going to need another loan for something else.

By training collections staff to work with members to come up with a workable solution to their loan problems, Grow helps members continue to build trust and reliance on the credit union even through a dark point in their financial lives. Doing this, she pointed out, means the credit union has a pool or members who are even more loyal to the credit union and who willing to stand by the institution that has stood by them in the past.