In a financial landscape where many people are struggling with high inflation and cost-of-living increases, credit unions are increasingly grappling with bad debt and the complexities of collecting overdue loans.

According to S&P Global, the net charge-off ratio for credit unions hit a 12-year high in Q4 2023. The National Credit Union Administration (NCUA) reports a similar upward trend in delinquencies. The delinquency rate at federally insured credit unions was 78 basis points in the first quarter of 2024, up 25 basis points from the Q1 2023. Additionally, the net charge-off ratio was 80 basis points, up 29 basis points compared with the first quarter of 2023.

These numbers paint a clear picture: recovering past-due loans is crucial to credit union health.

However, navigating the complexities of collections requires expertise in regulations and a delicate touch with members. This is where a Credit Union Service Organization (CUSO) specializing in collections can become an important ally to your credit union.

Ensuring Regulatory Compliance

Navigating the regulatory landscape of debt collection is a complex undertaking that uses up valuable time and resources. The Consumer Financial Protection Act (CFPA), the Fair Debt Collection Practices Act (FDCPA), and the Fair Credit Reporting Act (FCRA) set stringent standards for collections practices. Violations can result in steep civil money penalties and damage to a credit union’s reputation.

Partnering with a CUSO for collections that is well-versed in the regulatory landscape helps credit unions avoid regulatory pitfalls and maintain compliance.

Preserving and Enhancing Member Relationships

A professional collections partner understands the process is not just about recovering money; it’s about maintaining—and even enhancing—member relationships. They leverage personalized communication to reach out frequently but respectfully, fostering a collaborative environment to get members back on track.

Beyond communication, a CUSO should know how to use advanced tools like skip tracing and effective policy analysis to identify delinquent members and develop optimal recovery strategies.

The ideal CUSO operates seamlessly as an extension of your credit union, working diligently to recover outstanding balances while treating members with dignity and respect.

Partnering with a CUSO collections specialist will empower your credit union to:

• Reduce delinquencies and charge-offs, freeing up resources for core member services.
• Catch delinquency issues early, preventing members’ situations from becoming more difficult to resolve.
• Mitigate regulatory risks, ensuring compliance with complex collection laws.
• Preserve member relationships, fostering trust and loyalty.

And, perhaps most importantly, partnering with a CUSO collections specialist frees up your credit union to focus on what matters most—your members. Discover how CU*SOUTH can transform your collections process and help your credit union thrive.