Northwest FCU Cuts Delinquencies, Costs With E-Mails
The Chantilly, Va.-based $1.8 billion credit union teamed up with digital communications provider, DigitalMailer, to develop a system that would replace some collection phone calls and late notices with e-mails. Northwest's collection's staff was making phone calls to members that had delinquent accounts at the 15-day past due mark. With the DigitalMailer system, the credit union started sending e-mails to members at the five-day mark.
"Our collection efforts needed to increase. We knew it would be better if we could make contact earlier, but we needed to do it in a way that was cost effective," said Cindy Cherry, Northwest's collection manager.
Cherry said that the credit union decided it wanted to move up contact when accounts were five days past due, but that would have doubled the work for staff.
The credit union had over 55% of its member's e-mails on file and implemented a new policy that required members taking out a loan to provide a valid e-mail address.
The credit union works with DigitalMailer on other digital communication products, so Cherry approached the provider with the problem.
"I listened to the problem and thought with that number of e-mail addresses, they could stop or knock out a lot of the accounts before they got to the 15-day mark," said Ron Daly, president/CEO of DigitalMailer.
Cherry and her staff created what they wanted the e-mail to say. They were able to personalize the e-mail with the members name, the loan name that was delinquent and the amount of the delinquency. The credit union could also include payment options and link to the credit union's Web site where members could make payment.
The collections department then had to build a report of the accounts that were five-days delinquent.
"The first thing we do in the morning is go into the report, download it to an Excel spread sheet, transfer the sheet to the DigitalMailer template and the e-mails go out within 10 minutes," Cherry said.
During the first week, Northwest sent out delinquency notification e-mails to 673 members. Of those 673 e-mails, 423 members followed up with payments, a 63% response rate.
Over the past two weeks, Cherry said the credit union has sent out 1,605 e-mails, and 845 members paid the amount owed before the 15-day mark.
A factor that contributed to the high response rate, Cherry said, was that her department has changed its name from the collections department to the member solutions department.
"Members were actually anxious to call and talk to someone about their accounts because they didn't have the negative expectation that comes with calling a collections department," she said.
Replacing phone calls with e-mails, Daly said, increases responses because with mobile Internet access, e-mail is now everywhere.
"With phone calls you have to leave messages on the member's home line that they may not get or they may forget about. This shows the value of keeping and using current e-mail addresses."
With the new system, the credit union receives a list of e-mails that were returned due to bad addresses. Employees can look through the list and check if there are typos in the addresses or if they need to make contact with the member to get a correct address.
The system also tells the credit union which e-mails and how many e-mails were opened by members. The information gets listed on the member's account so if the account goes to 15 days, the collections employee can see that the member received and opened the e-mail when contact is made by phone.
"It helps give our employees an idea of what type of account they're dealing with. If the member says they never got the e-mail. the employee can see that they not only did get the e-mail, but they opened it. It gives them an idea if this is someone that is trying to pay but can't or if this is someone that is just not going to pay," Cherry said.
Time wise, Cherry said that it took the collections staff approximately five hours to build the report and four days of tests and tweaking to get everything set up. On a daily basis, it takes the staff three minutes to input the report and send out the e-mails.
Overall, the new system has cut the number of 15-day delinquent accounts in half, Cherry said, which means that she didn't have to increase staff.
Prior to the new system, the credit union was seeing three times it's normal delinquency rate, so even with numbers cut in half, the credit union is still dealing with a high volume.
"We can do more quality collection rather than quantity collection now, which I've always thought is key. But it's important to understand that our volume is still high."
This is the first credit union that DigitalMailer has implemented the automated collections e-mail system with, but Daly said he will be looking to bring it to other credit unions.
"This is technology that bank and credit card companies have used for years, it's just about getting credit unions to start using it."