SEATTLE – Three burly guys with tire irons in their hands comeknocking on the door late at night demanding payment on a “loan” –or else. That may be the television or movie image of those in the“collections” business. It may even be the perception of some inarrears who are called by aggressive and abrupt collection agentsdemanding payment. “Lots of people are having a pretty tough timeout there these days and you can't automatically assume they're alldeadbeats and trying to cheat you,” said Karlena Pierce of SeattleMetropolitan Credit Union. So rather than taking the “pay up ordie” approach, Pierce has totally revamped the credit union'scollections department to work with members who are delinquent ontheir loans. Her efforts range from renaming the department toselling people on the concept of credit union loyalty. “First andforemost, we decided to change what we represented,” Piece said.“We dropped the whole name `collections' and changed our name to`accounts recovery.' Every time people say to a member, `Youraccount is in collections,' it has different meanings, differentstigmas. It automatically puts people on the defensive.” Along withthat, the four-person department which Pierce heads, decided totake a different approach to collections, one that sold members ontheir loyalty to the credit union. “We have to sell a concept, aconcept of people's loyalty to the credit union and what thatrepresents,” she explained. “To get people to buy into that weobviously have to approach it differently. But that's how we'll getthem to pay us and put us first and think of us an entity that theywant to belong to, not just another Bank of America.” As creditunions continue to grow and become full service financialinstitutions, Pierce says the difference between them and banks isbecoming blurred in the minds of consumers. “A lot of larger creditunions are turning into full service financial institutions,” shesaid. “They look a lot like a regular bank. We need to make suremembers understand the differentiation between the two.” Toaccomplish that, Pierce said the credit union needs to have empathywith its members and to stand out. “We want to stand out as thepeople who are going to be there to rework accounts, to helpmembers budget better, help them get control of everything,” shesaid. “We look for different ways to make things better if we can.“We need to make people aware that if they pay the credit union,the credit union is going to be there for them in the future, whileABC lender may not be,” Pierce added. “We don't want our members tofeel that they're a number, because that's not what they are to us.We need to make sure we can retain those members and make themprofitable members.” That approach is paying off for accountsrecovery. For December 2003, its loan delinquency rate was .39,which Pierce said was “almost unheard of for a credit union oursize.” It was also the credit union's lowest monthly delinquency in10 years. Overall, the 12-month average was .50, she reported.Among problem lending areas are auto loans, with repossessions upsignificantly. For the first six months of 2003, the credit unionsold some 70 cars, the same number that were sold during all of the2002. Pierce blamed much of the increase on young people and newimmigrants who often only considered the monthly payment for avehicle, not the full cost of owing and operating it. She saidmembers falling behind on mortgage payments was also an issue. Lastyear, rates were so low that people purchased homes withoutrealizing all the other costs associated with home ownership, sheexplained. Still other members with impeccable credit in the pastnow have money problems after an unexpected job loss, injury toearly retirement. Seattle Metropolitan, which began in 1933 toserve employees of the city, has grown to more than 37,000 memberstoday and about $380 million in assets. Pierce, who has worked atSeattle Metropolitan for 10 years, including eight years incollections, was named manager of the department in May 2003. “Ihad zero background in collections,” she recalled. “I really didn'tknow what I was getting into. The approach then was quitedifferent. I just did the `smile and dial' kind of calls, remindingpeople that they had a payment due.” Pierce gained collectionsexperience on the job as well as from involvement in otherorganizations, notably the Northwest Credit Union CollectorsAssociation. She was named president of the organization in June.She credits her staff with a willingness to work with members andto “embrace change” as the department was revamped. Other creditunion employees were also educated about collections. “What wewanted to do . . . was give them an overview of what it was reallyabout,” Pierce explained. “It's not always about the negative. It'snot always about we need to repossess a car or we need to forecloseon a house. It's also about coaching and educating members aboutwhat their finances are all about. We look at the big picture andhow we can help. We try to give them some ideas about how to takecontrol of their financial well being.” Pierce noted that while theaccount recovery department tries to work with members, it isn't apushover when it comes to collections. “We're not pushovers by anymeans . . . there are times when it does take being a little moreassertive with members,” she said. “But we try to stay away frombeing aggressive. We don't want to be the average bill collector.”The “kinder and gentler approach” has been especially important asthe economy in the Pacific Northwest has tanked. As a result,household debt, loan delinquencies and personal bankruptcy haveincreased. Pierce estimated that at any given time, .5 to .75% ofmembers have fairly serious credit problems. Pierce said that sincea charter change about two years ago allowing Seattle Metropolitanto serve anyone in the state of Washington, collections has becomemore complicated because many new members don't have a bond orloyalty to the credit union. “The larger you get as a credit union,the loyalty kind of diminishes,” she said. “I really think it does. . . I think credit unions have gotten away from what makes themdifferent. I think we need to go back to that. “We need toestablish who we are with them (members) and make them aware ofwhat we're all about,” she added. “We're not just a regular Bank ofAmerica or large financial institution. We're family.” -


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