Dealing with member relations, product development and marketing can be a lot to take on for any staff.
Depending on the size of the credit union, however, tacking on tasks associated with delinquent accounts can be too much of an investment. Many credit unions across the nation are choosing to outsource their collections departments.
Mark Hein, CEO of Southwest Business Corporation, thinks it may be a result of learned behavior from the recession.
"It may have changed their thought process about having to do everything internally," Hein told CU Today. "I would not say the recession taught them a lesson, as much as they learned on their own to be smarter with their resources. The most expensive resource everyone has is people, and if you can find better ways to utilize your people ..."
According to CUInsight, successful management of an organization's delinquent accounts may require an auto-dialer.
These predictive dialers are designed to improve debt recovery rates and cost less than placing individual phone calls; but their sophistication requires configuration, licensing, training and technical assistance to operate. Delinquency rates are proving the dialers may not be worth the upgrades and investment. Despite this May's largest delinquent mortgage increase since 2009, the overall delinquency rate has declined 12 percent year-over-year by May 2015 - resulting in 326,000 fewer underwater mortgages - reported Black Knight Financial Services
How outsourcing can improve operations
If loans and delinquent accounts do not factor heavily into your everyday workload, or your credit union is lacking the manpower to support a collections department, outsourcing may be wise for your branch to explore.
Instead of attempting to recover debts that are already in arrears, an entire staff is dedicated to your explicit collections needs. Your staff now can now turn their attention to "revenue-generating opportunities," as Hein calls them. By focusing on the products that are already profitable, your branch can avoid the risks that come with inefficient operations (violations of the Telephone Consumer Protection Act) and begin to compensate for the any lost funds.
In a SWBC case study featuring California Credit Union, the 85,000 member-based institution experienced a 35 percent reduction in overall delinquency within one year.
Before making the switch
Once you've decided that employing a third party makes the most business sense for your branch, there are still a few precautions to take to ensure your institution gets the most out of its new partnership.
According to CreditUnions.com hidden costs can account for 15 to 60 percent of a contract. Ensure that your credit union is aware of any additional fees associated with managing the relationship and the transition from in-house delegation to a vendor.
Also, be prepared for a breach of contract. Should the provider's services fall short of your expectations, will your branch be required to fulfill the contractual agreement? How will member and executive satisfaction be measured? These are all questions that should be addressed before entering a contract with a third-party, wrote CreditUnions.com
Outsourcing can be an excellent way to increase productivity and cut operational costs when branch goals and third-party services align.