• There are 9 MILLION families facing negative equity in their homes.
• There will be an estimated 1.9 MILLION repos this year- up 15% from last year.
• 34% of consumers with a scoreable credit report have at least one collection item.
• Mortgages made after Jan. 2005 to prime consumers already have an 8.5% delinquency rate. That is up 491% from mortgages made previous to that time frame.

So, what must we do in our “collections” world to be ready for what may come next? 2008 has been full of tumult, no one really knows what will come in 2009. I began to look at things I have been doing and realized it has helped. I will list some of these things and a few others that we all should consider.

First: Look at every area of the collection process within your group. Ask these questions; What can we do better and/or with less resources? Can we eliminate a step or two and make the process faster? What are we doing that is really not giving us a return? No payments/money coming back for the effort expended? If you can’t track it and it is not “required” – you may want to modify or stop it.

Second: In order to apply individual pre-planned collection action to each account as needed, consider segmenting your list by assigned risk levels. You may already do this by name and known payment habits. But consider assigning a user field with a service level code that will immediately indicate what step of the collection process is taken when the member/debtor goes past due.

For instance, when Mr. Jones comes past due, we know he has not responded to system generated notices. Key him out of the process and begin calling him at 5 to 10 days past due. Don’t waste time or valuable resources on a known factor. Alternately, if Ms. Smith pays consistently at 15-20 days and self cures before 30 days, you may want a notice for her at 23 days past due. This process may take time to set-up, but even a savings of 10 to15% in postage and printing costs will be worth the effort.

These codes can be developed from payment history for those with history or codes from the underwriting process can be equated to collection service codes. All this in order to better manage the limited resources most every collection department is faced with in these times.

I would also recommend collection review meetings weekly and not just monthly. Review the phone scripts and verbiage that you are using. Consider re-vamping and applying tighter standards to better fit the economy you face. What are the answers to excuses and delays you are getting now? Close the “loop of grace” that is extended after the grace period. Begin shorter follow-up times after a broken promise. Call that afternoon or next day at the latest for someone who did not bring you a payment. I look to call between 3:00PM and 4:00PM for members that are to show up that day by 5:00PM.

We all must consider this the “Real Deal”. People are predictable in numbers and not as individuals. So, if your first efforts don’t produce results on the first member, don’t give up. Collections is applying certain types of pressures to certain individuals to obtain certain results. The results are only certain if the pressures are consistent.

If you have altered or changed some things in your collection process and would like to share them, we would be glad to publish what has worked for others in order for as many to benefit as possible from new techniques. Email us with your hints and helps.

Technorati Tags: Collection Techniques, Review Your Process, Save Time/Money

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Typically, personalized letters may not be written until the 30th day of delinquency. That may change as we see consumers continue to struggle. There are many types of letters I will send. The format generally is a block format that I honestly borrowed from an attorney several years ago. Below is a sample letter that I would send to a member who may not have a good contact number and has not responded to other system generated letters..

Sample Guilt Letter

This letter is used selectively, but I have had to use it more often lately. There is a good response most every time with this letter. I also change the wording of the last paragraph ever so often and may bold an important phrase. On the bottom left corner of the envelope, I will write “Personal, Private”, in hopes that will cause them to open the letter…

Using personalized collection letters does take a little more forethought and planning. Also, before you use any letter make sure you have the correct approval to send it. The comments I have received over the years include statements like-”Your letters are so serious”, “Have you referred me to a collection agency, yet?”; “I knew I had to pay after reading your letter.” This type of collection letter does not reach everyone, but it does affect some members and they pay on time from then on.

If you have suggestions, letters or letter techniques that work for you; let us know. We are always open to what has worked for others. We will review them and share them in a later post.

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The phrase “move the fence” means to move the line back a few days. If at 35 days you start looking at accounts, then start looking at 28 days. If you don’t even get serious before an account goes 45 days, the move your line back to 30 days and start working accounts sooner! My goal is to look at every account that is 12 to 15 days past due to spot trouble and get ahead of it. There are many ways to do this and it may take a combination of several of them to accomplish the goal. You may have to reassign duties to other collectors. You may have to work one more night a week or a half day on Saturday. You could start sending the personal collection letters sooner and drop one of the automated notices. You could use automated phone calls through our website – www.auto-dialer-solution.com But, the entire process will be good for you and the Credit Union/Financial institution as a whole. Here is what you can expect as some of the benefits for moving the fence and start working accounts sooner…

• The Speaky Wheel Gets the Grease! It is true! When you squeak earlier and longer you get the member’s attention and their payments.
• You must train your members to pay you sooner. You teach them by your attitude and sense of urgency. When your attitude of what is acceptable changes, then they will know and act accordingly. Remember, people are predictable in groups not as individuals.
• Major Benefit: if you “rehab” a member so they start paying under 15 days past due and something happens to their finances, you have more time to help them than if they were floating at 45-50 days past due. 

The extra effort is always worth it. Avoid the last minute collections on the last day of the month that make the job so much more stressful. Start moving the fence first in your thinking and then in your actions. Make a list of steps to retrain your members to pay on time and start making the changes- today. Get help. Pull others in and help them see how the entire Credit Union will benefit from these steps. We often need to train front line staff to properly convey the importance of paying loans on or before the due date. Do not train your members to relay on the grace period before they pay!

It is important to take these steps now. As volatile as 2008 has been, who really knows what will happen in 2009? Please, don’t ignore this advice and regret it in July or August of 2009…..

Technorati Tags: Attitude, Collection Techniques, Evaluate

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How do we Crunch the Numbers? I can share with you what I do and there are other collectors that have been in the business for years that would teach other ways. About the third week of the month, I review the loans that have not paid and could roll to the 60 day category. I review activity for the loans and what promises have been made. Next, I look at the largest balances and review down to the smallest balances. This gives me some idea of what loans will be moved off the list by month end. From there I gather a “hit” list of loans in decending loan balance order that helps me focus my attention in order to bring the best results by month end. What is the next step to help this member pay- Call, letter or even a personal visit? If no contact has been made, why? Do we need to skip trace the member to make contact?

Next, what loan volume needs to be moved off the list to bring the DLQ% under the previous month’s DLQ%? We used to call the “making the break” in finance company collections. Each month the goal was to lower the DLQ% below the previous month’s numbers. That was a starting place. How much loan volume decreases your DLQ% by 1.00%? or even 0.50%? If you don’t know, take a minute to figure it out. For example;
Outstanding Loans $10,000,000
Ten Percent $ 1,000,000
One Percent $ 100,000
One half a percent $ 50,000

Adjust the numbers accordingly. If you have $20M in loans, then follow the pattern. Then who on your list needs to pay in order to bring your numbers down to your goal – the fastest? In the above example, if I needed to bring the DLQ% down a half a percent, I look for loan balances that add up to $50,000. Then arrange my time to work on them first while not ignoring other members either.

Hopefully, this will give you some insight on how I arrange my time to bring the best results possible every month. If your work load has increased like mine, then you are looking for ways to work smart and not just hard.

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First, I went to visit member that I suspected did not work on Saturday. I knocked on the apartment door and no answer or sign of life. As I finished the note to leave in an envelope, up the stairwell comes a lady with two cute boys following in behind. “Mommy, open my gun!” Each had a play gun that they needed help getting out of the wrapper. She stared at me and I asked if she was ER. She said yes and I introduced myself. She seemed flustered and tried to talk above the noise but could not. Finally, when the boys were able to play with their toy even while it was in the wrapper, we could talk. She and her husband had split, her brother was living at the property we had financed. She did not have money today. She would get in touch with her brother and make the needed payment by the last Friday of the month. This was some progress. I accepted that and told her to contact our office by Wednesday. At this writing, she has not. But, I also obtained some good information on the ex-husband who is several months past due! It lead me to find an address for his mother – several miles away, that was a bonus!

Next, I visited a member in a mobile home. They had an amazing feature to the front door. When you knocked, the TV went off inside! After several knocks, I realized the TV would not come back on and I would not get a personal greeting- except from the hungry cat! So, I left a note and lingered a bit. Still there was no TV noise…. Hmmm, that was some smart door!

Results so far, not great. But, I was making a good statement about how serious each member’s loan was to the CU. Next, I went out of the town on a country road. I came upon the house for the member and suspected it was abandoned. The grass was very tall, in fact taller than the dog that made its way to the fence to bark at me! Before the dog could find his way out of the grass jungle, I had checked the electric meter in the back and it had a good tag on it, so the house was occupied. Another knock on the side door was answered by an older teenager. He was polite and took my note. His mother would not be back until after 8:00PM. I also asked him for a contact phone number, he gave me the mother’s cell number! That was a good improvement! Later that evening, she did call my cell and has already paid more than one payment and will pay again by month’s end. That helped a lot!

Results: maybe 2 for 3. The next place was much further out of town. In fact the address was a private gravel drive that had three choices – left, straight or right. I chose left and up the ROUGH rut filled drive way I went in Big Green. Glad Big Green is high off the road. I may have drug bottom in a normal sedan! As I approached the house, the father of the member was outside. The member’s car was not to be seen. I asked for AR. The father said that is my daughter- can I help you? I identifed myself but did not tell him I was from the CU. (I would have if he had asked.) After I gave him my cell number and a few pleasantries, I left. The result was the member called me within a few minutes and promised up to pay more than the normal payments for the next two Wednesdays! At this writing, she has already paid her loan under 60 days and will be current soon! She just needed a gentle reminder. I suspect she will return my calls if I ever have to call again!

Results: maybe 3 out of 4. (The one from the mobile home still has not paid as of this writing. But, last month she did pay after I left a note on in the door.) Next, went even further down into the country. This address was also a gravel road that had several choices of paths to take. I chose correctly however, no one was home but another cat! This cat attempted to kiss my face while I wrote the note. It was weird. First time seeing me and the cat wants a kiss? Anyway, turns out the member has separated from his wife and does not live at that address, I found out later. I did confirm his cell number, but unsure where he lives at this time. Now, we are only 3 for 5. But, we have bonus information on a severely past due member.

This adventure was part of the training for past due members. Some member/debtors need to know that we take the loan seriously and that we will come meet them if necessary. It is part of the “squeaking” we need to do sometimes to get the loan payment! Also, in the future, they know what steps we will take to collect a payment. Again, it is not the most efficient, but in the last few months, I have seen the need to use this technique to collect payments.

Technorati Tags: Field Calls, Personal Visits, Results

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Recently, I allowed a few scanned documents to be filed with the court without proper redaction of the information. According to my attorney, FD a MAJOR sin. He advised there was nothing to do except count this as a future liability for the CU. Any financial loss of the member due to the information breach or even only perceived as the possible source of the personal information breach would be the ongoing responsibilty of the CU that filed the documents. The member’s attorney filed a motion to have the claim documents sealed against public access. My attorney also said that the CU could have been accessed the fees for the debtor’s attorney that filed the motion. The Judge’s decision did not require that. Yea.

RULE 9037 – short recap: SS numbers- only last four digits. Use only initials of minor children. Include only the birth year of member/debtors. Account numbers- count backwards four digits including the suffix, use only these four numbers.

This case was the same case posted earlier in regards to the 341 Meeting in Charlotte, NC August 21, 2008 that was a little stiff.

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Verification tools are offered on our website www.skip-trace-solutions.com. I used a simple “People Search” and verified the social belongs to a man in TN. “Drivers License Verifier” shows the name and address do not match. Finally a “Reverse Address” verification showed the address is a business address in Brooklyn, NY with three businesses and three different names and telephone numbers. Okay, this was too easy. The US Postal Money Order included in the envelope appears legitimate. The big give away, the applicant claimed to be related to the Operations Manager!

The verification process is so vital. Fraud through bogus accounts constantly plagues our industry. Examine your new account opening procedures. Make sure you have the tools you need. What could have happened here? He may have attempted a bogus check deposit at a shared branch and a quick withdrawal. Glad this CU will never know a loss on this bogus applicant.

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You may not be able to make personal visits due to the location of your member, but if you do; I have listed below some guidelines and safety tips for this part of collections.

·    Plan your route with maps and account notes and copies of titles, if needed. Leave a list of stops with someone in the office. At a minimum, tell them where you are going and what time you should be back. Make sure they have your cell phone number.

· Take plain white envelopes to leave messages at the home. Also take plain white note paper. When leaving an envelope with a note, write the member’s name on it with the words “personal, private” in the bottom left corner. 

·   DO NOT LEAVE BUSINESS CARDS just stuck in a door. Especially, if your title is on it. Always put a note or card in an plain white non-see through, envelope. 

· Take a charged cell phone. I started when cell phones did not exist. I had to call in at pay phones! (they were a dime in most places..)

· Approach a home slowly and watchfully. Do not run toward a house, it may startle the people inside.

· Always Smile when talking to the person who answers the door. It puts them at ease.

· As with the phone, ask for the member by first name only-Hey, is Greg in?

· Listen and ask only pertinent questions. Do not appear nosey.

· Be respectful, say “Yes” and “Thank you” and “No, Ma’am”, and “Yes, Sir”!

· Do not mention that your member is past due on a loan when speaking to a third party. If asked, “Why are you here?”, you may say something like; “Well, Tom has personal business with our Credit Union and I need to speak to him.”

· Do not block people in when you park. This can appear aggressive. The exception would be if you are repossessing and the unit is there. I have parked behind the car that I want to secure. 

· If there is no one home, be cautious about going to the back of the home. Neighbors talk.

· If no one is home and there is doubt about the member still living there, consider going to a neighbor to verify residence. Do not say where you are from, just say something like, “Hey, I rang the door bell and no one answered, do you know if Billy is home?” Then just listen. Most neighbors love to talk.

· As with any visit to a member’s home, if you feel unsafe leave.

· Do not stare into windows, this can be seen as invasive. And- that’s right- neighbors talk. Especially about unknown visitors.

· Have some identification that you work for the CU in case you are stopped by authorities.

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