Plan in advance for bad debts | 05/12/2020
Being proactive can reduce loan delinquencies both now and in the future, as members and employees grapple with the impact of the coronavirus (COVID-19) and stay-at-home orders.
This is the advice of Lisa Cox, vice president of loans with $ 100 million in assets. CORE Credit Union, Statesboro, Ga., And Kevin Kesecker, executive vice president / chief administrative officer for $ 3.8 billion in assets SECU, Linthicum, Md.
Cox and Kesecker, both members of the CUNA Loans Board Executive Committee, share their proactive approaches to stay ahead of potential loan losses.
Cancellation of fees, offer of extensions
“We still have a lot of members making their payments, but we also have a lot of people calling ‘what if?’ scenarios, ”Cox says.
CORE Credit Union waives payment deferral fees and offers an initial two-month extension for members who need assistance. Additional two-month extensions may be granted as needed.
So far, 80 members have requested extensions of nearly $ 1 million in consumer loans from CORE’s $ 69 million portfolio. CORE will soon be offering mortgage extensions.
The credit union is also helping members by removing fees for cashier’s checks, excessive withdrawals and telephone payment service, as well as some insufficient fund fees.
Cox says CORE has a “fluid plan” through the end of the year to respond to the virus and its economic impact. The plan is to help members and employees cope; monitoring of delinquency and the status of the community; and adjust the balance as needed.
“We are doing what we can to convince the members.
Members of the tide plus
SECU offers a variety of deferment and forbearance programs, including deferrals of up to three months on unsecured consumer loans and up to six months for home loans, Kesecker says. This can add an additional three months of adjournment if the COVID-19 crisis demands it.
The credit union offers an unsecured personal loan of up to $ 10,000 with a maximum term of five years with a reduced interest rate.
“We are doing what we can to help the members,” Kesecker says.
SECU also participated in the SBA Paycheque Protection Program, obtaining approval for 110 small business loans valued at $ 6 million to date.
The SECU MD Foundation also offers $ 200,000 in grants to members in need. Kesecker says members have increased the amount available with “heartwarming” donations of $ 45,000.
An additional $ 200,000 in foundation grants will help community organizations.
Monitoring internal and external data will be critical until early 2021, Kesecker says. A wide variety of information, such as unemployment projections and home and vehicle values, helps SECU identify more general trends that may impact the balance sheet.
“Preparation and communication are of critical importance,” says Kesecker.
Kesecker and Cox recommend these practices to reduce bad debts:
- Communicate early and often. Use the website, email, and social media to suggest solutions.
- Use clear language and explain key terms. Members may not know the difference between “forbear” and “stay”, for example, says Kesecker.
- Contact members who make inquiries or are late in payments. CORE Credit Union calls each member whose payment is more than 10 days overdue.
- Focus on current members. Press “pause” on programs to attract new members or introduce new loans.
- Be flexible and empathetic. Cox recommends avoiding “one-size-fits-all” solutions because everyone’s situation is different.
- Offer self-service options. Kesecker notes that some people who do not ask for help click on an offer of assistance.
the CUNA advice will hold a virtual roundtable on May 29 entitled “Credit Quality Trends: Where We Are and Where We Are Going. It is available free of charge to members of any ACUN council.