I talked recently with Joel Bowen, President of the California Credit Union Collectors Council (CCUCC). He shared his perspective on the state of credit unions as we continue to emerge from the pandemic.
As we’ve heard from other lenders, delinquencies in general are down since the spring of 2020 when COVID-19’s effects were first felt in the U.S. In California, involuntary repossessions are very low as consumers are able to pay off debts because of stimulus checks, higher unemployment payments and rent or mortgage forbearance.
Another trend Joel discussed is that loans that were past-due before COVID-19 are an even greater challenge to resolve now. With loan moratoriums in place, consumers had the opportunity to go “off the radar,” giving them time to move or hide their assets as they continued to depreciate. In migration studies conducted by DRN in the spring of 2020, we saw that movement by borrowers of more than 50 miles increased by 125% between January and March of that year. From our case study, “As people are sheltering in place for extended periods of time, they may be doing so with family or friends. This means borrowers are likely moving to new addresses while they ride out the pandemic. While planned as short-term changes, these moves may become longer-term depending on the length of the shutdown and individuals’ family and job situations.” In many cases, these somewhat unplanned relocations left lenders without updated address information, making clients and assets harder to find.
The greatest concern from credit unions – and lenders in general – is the wave of delinquencies expected to come in the last half of 2021. The influx of extra cash in consumers’ pockets will likely decrease as some of these income sources diminish. Joel sees credit unions preparing for this by attempting contact with members now through traditional methods like emails, phone calls, text messages and letters. The goals are to confirm location of assets and members’ contact information and build on their member relationships. This – along with analytics tools like Risk Scoring – helps lenders understand their members’ ability to continue payments over the long term and assess risk levels. Knowing sooner than later which assets are most at-risk can help lenders plan for more successful repossessions down the road. Joel pointed to use of DRNsights as critical to collections teams’ ability to make better risk decisions.
That said, repossession is typically a last resort for credit unions, who often need the cash flow provided by keeping loans current – not to mention their member-focused approach to lending. Credit unions typically have a strong community presence and want to protect member relationships rather than quickly move to repossess.
Joel’s key message to credit unions and consumers is the importance of communication. Credit unions always prefer to work with members on loan terms rather than write off loans and put vehicles out for repossession. Credit unions value their member relationships and are typically very willing to be flexible … but contact and communication are critical.
Interested in learning more about DRNsights and how it can help you make better risk decisions? Contact us here.