EDITORIAL
Amid the unprecedented crippling economic lockdown, the calls by the many members seeking financial assistance in the form of loan deferments, is being largely passed down onto the collections departments nationwide. Unfortunately, while credit unions had been experiencing a prolonged economic boom with record loan growth and low delinquency, many had made reductions in collections staff positions, and accordingly. Now, with the sudden change of economic conditions, many collections departments are feeling overwhelmed, understaffed and ill-equipped to manage the intense volume of incoming calls from members seeking financial help in the form of loan deferments. This high volume, coupled with pre-pandemic loan modification underwriting guidelines and unrealistic service level agreements (SLA), have the makings of a public relations nightmare and a collections tsunami in the very near future.
Over the past week, I’ve spoken with several credit union collections staff members from different organizations and had been advised that they are inundated with incoming calls from members requesting loan deferments and modifications and are working 12-14 hour days just to answer questions and assist members. As taxing as that is, they are frequently unable to return contact requests or return phone calls until as long as five days, while upper management has set unrealistic service level agreements, often as low as 24 hours. While obviously, collections efforts are extremely limited in a time like this, the staffing levels for these departments were set based upon outbound call expectations, not incoming and the frustration growing in some shops.
While different credit unions are using different strategies to support the increased call volume, such as the call center (who still need to assist with standard member calls) and the lending departments to assist in the volume, hiring is still, for the most frozen at pre-pandemic levels and budget adherence is inhibiting proactivity. This lack of proactive staff management is overwhelming to these departments and there could be fallout.
Some credit unions, like Florida’s Vystar Credit Union, are taking unique, member beneficial and efficient measures, such as offering across the board two month automatic deferrals on all of their auto loans and credit card accounts (with obvious restrictions), which undoubtedly must reduce the amount of incoming calls dramatically, while alleviating the manual processing and decisioning of every single application. This is clearly the most efficient and member friendly strategy and I’m sure their collectors are relieved not to have to manage all of that extra call volume.
Oddly, I am also hearing, that while the call volume and member demands are high, some credit union CEO, CFO or CLO’s seem reluctant to loosen their deferment underwriting guidelines, despite guidance from the National Credit Union Administration (NCUA) on March 22nd encouraging them to do just that and even authorizing six month loan deferrals with no troubled debt restructuring (TDR) ramifications. This inaction comes with the risk of damaging the credit union brand to the public and arms their most fervent opposition, the American Bankers Association (ABA), with yet more arguments against credit union’s tax-exempt status.
It is no surprise that collections departments have been seriously overlooked and understaffed for many years and are in serious need of increased staff levels to manage both the increased loan deferment requests as well as the eventual aftermath and the delinquency that will follow. With over 3M people newly unemployed in one month alone and more than 75% of the US population in one form of lockdown or another for weeks to come, there is no more critical time to ramp up collections staffing levels and make efficiency improvements than now.
Kevin Armstrong
Editor
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