Advantages of an Empathetic Collection Approach

Credit unions are renowned for building and maintaining member relationships that span decades, and sometimes generations. However, even in times of prosperity, a rigid, impersonal debt collection approach can jeopardize those hard-earned relationships and harm your brand.

In the current economic landscape, which has been highly affected by the global pandemic, nurturing your members throughout their payment cycle, even in collection, is more important than ever. With many loan modifications and payment deferrals ending soon, getting members back on track with their payments as soon as possible is critical. Whether you manage collection internally or work with an outside partner, an empathetic approach can strengthen your member relationships and improve your bottom line. Here’s how:

1. Member Satisfaction

The foundation of empathy is respect and understanding. Putting yourself in your members’ shoes when approaching collection will help put you in a consultative mindset when working to recover past due accounts. Contrary to popular belief, collection can be a very collaborative, interactive process, with advantageous results for creditors who work first to develop a foundation of trust with their borrowers.

For example, consider beginning the collection conversation by asking your member “why” they haven’t made their payment, not just “when” they’re going to. Reframing this basic ­question can quickly get to the core of your member’s inability or unwillingness to pay. Starting from a place of discovery can help put your member at ease and make them more receptive to working toward a solution.

You may also consider employing communication methods that your members are more likely to be receptive to, like email and text. A significant portion of your borrowers’ collection experience depends not just on what you say to them, but how you say it. Making engagement as painless as possible can help to keep your relationship in a positive place while also increasing your odds of recovery.

2. Brand Preservation

Members who are treated with sensitivity and professionalism are more likely to come out of your collection experience with renewed confidence in your credit union. No matter how hard you’ve worked to build your brand among members and in your community, disparaging online reviews or even word-of-mouth can have a highly detrimental impact on your perception – and your bottom line. You can avoid this outcome by:

• Establishing and maintaining open lines of communication with members, so you can set expectations and make your credit union available for questions or concerns about repayment; and
• Ensuring you and/or your collection partner stay hyper-compliant to all collection laws and regulations, which can vary from state to state.

Following these guidelines will help keep your brand in good standing with members in collection, allowing you to focus on growing your business, not defending it.

3. Revenue Recovery

Perhaps most importantly, taking an empathetic collection approach can increase your chances of recovering lost revenue. Engaging members from a place of mutual problem-solving, not from blame, sets you both up to come to a solution, like establishing a budget that prioritizes repayment or reevaluating original payment terms to see if you can offer members any more flexibility. Avoidant behavior or “screening” collection attempts is often an indicator of fear on the side of the borrower. You can help soothe this anxiety by offering a true omnichannel communication approach, first establishing contact via phone to put a human voice behind your efforts and then following up with the member’s preferred communication method. For many credit unions, this means working with a collection partner that has the technology to offer text and email solutions as part of the recovery process.

Even though attaining a true empathetic collection strategy is possible, it can require significant resources, compliance expertise and technological capabilities. Ongoing training, formal accreditation and role-playing scenarios are essential to both remaining compliant and ensuring collection success. If you’re managing your collection process in-house, you know first-hand how strenuous this can be. A reputable partner whose collection approach is rooted in empathy can work directly with your internal team, providing the expertise and support to produce results. If you already have a collection partner, you may consider vetting them for these criteria in order to evaluate whether you’re getting the level of service that you – and your members – deserve.

From your borrowers to your brand to your revenue, an empathetic collection approach can have significant positive impacts on your business. By overhauling this often-overlooked part of the revenue cycle, you can work to minimize unrecovered earnings and reinforce your member relationships in the process. While the long-lasting impacts of COVID-19 on the financial industry remain to be seen, solidifying your collection strategy will help you protect your credit union now and in the times to come.

Jacob Corlyon Co-founder and CEO, Capital Collection Management Syracuse, N.Y.