The landscape has changed dramatically for lenders in the past months. It is important for financial institutions to examine the data that is available to help pivot priorities as we enter the second half of 2020. This blog examines the projected delinquency rates and the following items financial institutions should be doing to prepare:
- Study the industry data and apply it to your specific organization in order to pivot priorities to meet the needs of your community.
- Educate your staff on safety, options for borrowers that are struggling, and resources on how to have sensitive crucial conversations.
- Fine-tune the collections process as delinquencies are projected to double that of 2019 (CUNA).
Learn more about what your financial institution can do at this time.
As we entered 2020 the thought of a global pandemic was a longshot, CUNA Mutual Group reports that the unemployment rate was 3.5%, 275,000 new jobs were added to the economy and personal income was up by 0.6%. Everything was going great and financial institutions were positioned for asset growth and expansion. But as February came to an end the world quickly entered a new reality. Now, as we approach the halfway mark of 2020, banks and credit unions need to adapt to the new landscape and begin pivoting priorities.
In this blog we will review the projected delinquency rates and what financial institutions should be doing at this time to prepare their organizations for the remaining half of 2020. It's vital to truly understand what is going on from a financial data standpoint and how to adapt to meet the needs of the consumer.
Study the Data
As mentioned in the introduction, the unemployment rate was at an all-time low, which created more opportunity for consumers to spend confidently, purchase homes and cars. This has unfortunately changed drastically in the past months, due to the stay-at-home orders nationwide. Financial institutions must be taking advantage of the data that is available and make educated decisions and make changes to their 2020 plans, budgets, and goals.
The CUNA Credit Union Trends Report states, “The COVID-19 pandemic is expected to decrease credit unions’ loan growth rate to only 2% in 2020, down from 6.5% last year, due to dismal new auto sales and weak home sales”. Data also shows that auto loans have decreased by 50% in February of 2020.
CUNA’s report projects that due to the COVID-19 pandemic, credit unions’ charge-off rates are expected to double that of 2019 as well as their expected delinquencies. Being armed with projected data is vital in order to set the correct priorities and the correct course of action. Every financial institution must examine their own data and trends. Those combined with industry insights will paint a more vivid and accurate portrait.
Educate Your Staff
As plans and processes are shifting, it’s important to educate staff. Obviously, the number one priority is staff safety and making sure they can fulfill all their duties in a safe manner. It is also important to ensure that they are educated on data trends and what next steps your organization is taking in order to adapt.
Educating your staff is extremely important at this time as they are the ones that will be having difficult conversations with members of your community. Ensuring that your staff has information on all qualifying programs to guarantee that your members and customers fully understand all stipulations and there is no miscommunication.
More than ever before, your staff will be having crucial conversations as many borrowers will find themselves in difficult financial situations. It’s important that there are training materials and resources available for your team to guide them and ensure that every situation is handled properly.
Fine-tune Your Collections Process
Unfortunately, as the CUNA report states, delinquencies are projected to double. As a result of this uptick, there will be a greater need for collections within every financial institution. With higher operational costs due to new safety regulations that every financial institution is prioritizing in order to protect their staff, an outdated collections process simply is unacceptable.
Every financial institution chooses to go about collections in their own way. Some require each member of the institution to work on a certain amount of collection cases weekly, while other institutions have dedicated personnel. Regardless of the specific process, you want to ensure that your team has a system that is simple to use and easy to learn. An intuitive system will help members of your team who may not be familiar with the process, jump in and fill the growing need for that time period.
The ability to create dashboards helps tremendously with management of daily goals for your collections team. Additionally, custom queues help each team member work efficiently and get through their tasks. Another item that will help fine-tune your process is having the ability to connect to your core system for more up to date information, accessibility and the reduction of tedious tasks. As mentioned above, data is a vital component to success, ensure that your system has a built-in data and reporting feature to ensure you are maximizing on your efforts.
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