By Ray Birch
SAN DIEGO—Paying collectors for how they’re rated by delinquent buyers?
It’s had “stunning results,” according to one company that has moved from the traditional reimbursement structure heavily tilted toward dollars recovered toward one that pays rewards on how delinquent borrowers rate their experiences.
CU Revest made that change in late 2016 and has more than tripled its annual dollars recovered, said President Mike Joplin, adding that employees are happier as well as debtors, who are not filing complaints against the company with the CFPB.
“We have had a stunningly improved performance regarding collection dollars,” said Joplin. “Before we made the change a top-flight, well trained account officer collected about $18,000-$20,000 a month. Last month our best performer collected $61,000 and $52,000 the previous month. So, the average collection total has almost tripled.”
With three times more money coming in, that means three times the money heading back to credit unions, said Joplin, who explained CU Revest first removes its operating expenses from the dollars recovered and then splits the profits with its credit unions.
Owned by Four CUs
CU Revest is a CUSO owned by four CUs—Kinecta FCU in Manhattan Beach, Calif.; TwinStar CU in Olympia, Wash.; Desert Financial FCU in Phoenix, and ORNL FCU in Knoxville, Tenn. As CUToday.info reported, the company is helping credit unions not only recover charged off loans, but also bring delinquent borrowers back into the credit union as members in good standing with sound FICO scores. The CUSO has a program that helps delinquent borrowers improve their credit scores by repaying their charged-off debt.
CU Revest said it has been able to bring 3,500 members back to CUs and more than $12.5 million in charged-off dollars since it began serving credit unions in late 2014. It was named NACUSO’s 2017 CUSO of the Year. About 100 credit unions work with CU Revest, ranging from $19 million in assets up to $15.5 billion.
Joplin said the thinking behind restructuring collection officer compensation is that happier employees whose goal it is to make borrowers happy is a much better way to do business than compensating staff based on how much money they collect, which often leads to an adversarial relationship between the collector and the debtor.
“You have a collections officer who is worried about taking care of his family and paying his bills and he can’t do that because some delinquent borrower is not paying his,” said Joplin. “That makes collections officers angry and puts them on edge. And, if the account officer is getting paid more money by extracting more money from the debtor, that inherently puts the two parties at odds.”
Reworked Compensation
The new CU Revest compensation structure delivers a larger base pay and deemphasizes commission, said Joplin, noting that removes a lot of worry from the minds of collectors about their ability to pay their own bills. The company also instituted an attractive benefits package.
“We looked at the overall picture and said let’s change it all,” explained Joplin. “We gave the team a pay raise, gave them 100% medical, dental and vision. We gave them a generous vacation allowance—19 paid days off a year.”
CU Revest then got rid of its original compensation structure that rewarded for dollars collected, but still allows account officers to receive bonuses and overrides based on how they treat borrowers.
“So, we obliterated the old compensation structure but said you can still receive additional compensation if you have relationships with members who provide testimonials about how well they were treated,” explained Joplin.
Deeper Conversations
What the new structure leads to are deeper conversations with borrowers that address debtors’ issues, producing solutions that work, said Joplin. He said it is much easier to get a debtor to talk with a collector when they feel that person is doing more than just trying to “extract cash” from them.
“They understand we are here to help them get back on their feet financially,” said Joplin. “So, they are not ducking and dodging the collections guy and we build relationships with them, which makes it much easier to get the credit union’s money back.”
Another benefit is that the borrower-friendly approach reduces the number of consumer complaints against CU Revest made to the BCFP. Joplin said the CUSO was considering the changes long before the Bureau began cracking down on debt collectors.
“But when we saw where the agency was going, we said that what we were thinking about was right in line with what the BCFP wanted from collections companies,” Joplin said. “We have had virtually no complaints filed against us with the BCFP since we began this this new program.”
Online Settlement
What CU Revest also does is allow borrowers to settle their debt via the CUSO’s website.
Joplin explained that when a debtor is sent their first letter they’re told they can negotiate a settlement with the company online.
“They can go in 24/7 and negotiate with our computer system,” explained Joplin. “You can go back and forth with the computer three times per session before we ask you to contact one of our account officers. For those who settle online, it usually takes eight tries, which tells us they are trying to work their best deal.”
But the system won’t make a settlement that is unreasonable for the credit union, emphasized Joplin.
“The system knows who you are, it knows your background and financial situation. So if you are a guy who has worked at the Post Office for many years and is a free-and-clear homeowner, if you offer ten cents on the dollar to settle there is a good chance the computer won’t accept that.”
The online debt settlement feature was added to remove the embarrassment of talking to someone about the delinquent debt.
“Embarrassment is a big barrier to collections and can prevent someone from ever speaking with you,” said Joplin.