Money Matters
Money Matters
Navigating the Intricacies of In-House Collections, Member Support, and Cross Collateralization
Navigate the financial fog with expert guidance from Atalia Williams and Cynthia Marshall, the vice presidents who help to steer the ship at Neighbors Federal Credit Union's Collections and Support Center. Imagine a roadmap that not only helps you steer clear of fiscal pitfalls but also shines a light on the hidden alleys of credit union intricacies. That's what you'll get in this empowering episode, where Atalia charts her 17-year odyssey through the financial trenches and reveals why an in-house collections team spells triumph for both the credit union and its members. Cynthia, on the other hand, opens the vault on the Support Center's diverse operations, from IRAs to handling sensitive matters like deceased accounts, all while prioritizing an exceptional member experience.
This financial quest doesn't end there. Prepare to delve into the thorny thicket of cross-collateralization where loans, deposits, and personal rights intersect. We unravel a real-world scenario that spotlights the ripple effects of loan defaults on your assets. But fear not, for we also arm you with the tools to connect with collection agents who are ready to throw you a lifeline, be it through a reassuring phone chat or a face-to-face branch visit. The episode is a treasure trove of strategies to help you break free from monetary constraints, ensuring you're well-informed and prepared to navigate the choppy waters of your financial journey.
Have an idea for a show or a question for Kim? Send us a text message
Welcome to Money Matters, the podcast that focuses on how to use the money you have, make the money you need and save the money you want – brought to you by Neighbors Federal Credit Union.
The information, opinions, and recommendations presented in this Podcast are for general information only and any reliance on the information provided in this Podcast is done at your own risk. This Podcast should not be considered professional advice.
Welcome to Money Matters the podcast that focuses on how to use the money you have, make the money you need and save the money you want. Now here is your host.
Speaker 1:Ms Kim Chapman. Welcome to another edition of Money Matters. I am your host, Kim Chapman. Joining me today is Assistant Vice President of Collections, Atalia Williams, and Assistant Vice President of Support Center, Ms Cynthia Marshall. Welcome, ladies.
Speaker 2:Hi, thanks for having us.
Speaker 1:Let's go ahead and start with Atalia. Give us a little bit about your background here at Neighbors. How long have you been in collections and basically, what are the roles have you held at the credit union?
Speaker 3:Okay, so I've been with neighbors for a total of 17 years. However, I began starting working in the collections department here at Neighbors for 13 years now. I pretty much held it every position. I started off as a front-end collector, which is pretty much the earlier the link with accounts. I went from front-end to back-end collector, which collects a more serious link with accounts, Pretty much the back-end collector. If we're not able to collect the data that resolved the link with C at that point, then we have to make a decision whether the account will need to be charged off of foul suit or recover a vehicle on a vehicle. Also, I held the legal specialist position and currently now the Assistant Vice President of Collections position.
Speaker 1:Okay, ms Cynthia, support Center, that's an unusual title. You don't hear that with a lot of businesses or organizations, so tell us what Support Center is.
Speaker 2:Okay, kim, thanks for asking. The Support Center basically is that support system for the credit union and its members and its employees. We make up four different components, which include IRAs, individual retirement accounts we handle deceased accounts when a member passes away. We also handle legal accounts, so that's when we have questions about payable on death, poas, power attorneys, trust accounts, et cetera. Funding accounts in which, unfortunately, members' accounts are closed due to having a negative balance for 45-plus days. Member experience, that's our surveys and our district shops on our frontline staff. And also file maintenance, where we're auditing what our branch employees are doing.
Speaker 1:Alright, so I want to go back to that. How you although? Collections is a very common term and I imagine most of our listeners are familiar with it, but give us kind of an overview. What does the collections department do?
Speaker 3:Basically save losses, try to resolve, help, help our members through difficult times that they may be having to avoid Taking any further action when it comes to repossession their vehicle or maybe file a sentence the accountant attorney to file suit. We definitely try our best to work with our members to avoid Getting to that point, okay and I know lots of organizations.
Speaker 1:Businesses have collection department, but neighbors has one in house. So why do we have an in house? What are some of the benefits of having our own collection department here versus outsourcing it?
Speaker 3:Collecting debts in house we find can be more successful, cost effective and member-friendly compared to outsourcing. I feel we have access to more resources than it would be a third party collecting on our accounts. We Try to build a relationship with our members to try to understand what they're going through, to see what options we have available To assist them through hard times, to help them resolve their delinquency.
Speaker 1:Alright. So under what circumstances Should a member reach out to you? And the next question would be when do collections you know?
Speaker 3:under what circumstances do you reach out to members so you can answer those in either order, well, any time that your face with adversity when it comes to if you're having a financial hardship, you know that you're gonna have financial hardship.
Speaker 3:Call us see so we can see review your account to see what options you have available. We offer hardship extensions for a small fee as well as we work out payment plans to work out to try to bring the account current to avoid us taking further action and Sometimes we may can offer a workout loan where we you can possibly read, we can get you over to our lending rep to see if You're eligible to have the loan refinanced. The lawyer payments to assist you by any means Necessary, but we definitely try our best to help our members. Now we Typically start trying to reach out to our members when it when the accounts get 25 days Plus what do you mean by 25 days plus 25 days past the due date, okay, plus and we send out letters to our members. We try to make contact with our members to see what we can work out to resolve their delinquent account.
Speaker 1:So if a member you said you know members should reach out to you, at what point should it be a week before? If they know a month before? I know typically just from working in the finance industry, most consumers tend to call afterwards. So what is the best time to call is can you ever call too early?
Speaker 3:Never can call too early. We actually prefer you to call early. So, because you want to avoid the account Going so far past due, to avoid any late fees reporting from the bureau, you definitely, as soon as you know that you're gonna have a hardship or your experience in a hardship, you should contact the credit union and let us know the collections of harm so you see what your options are. We have, like I said, we have many options available. So avoid it getting to that point where you are assessed that late fee or Are reported to the bureau where a fixture of your own in a negative way so, like I said before, a lot of consumers will wait, unfortunately, until maybe after they're delinquent, and so what are the real benefits?
Speaker 1:you mentioned some of the the options Maybe go. Can you go into a little bit of detail, maybe explaining? You mentioned an extension for a fee. Give our listeners a little bit more information, wasn't it? What is an extension and then what is that fee? How does that help with the hardship?
Speaker 3:extensions that we offer. We can offer 30, 60 and 90 day extensions. Say, for example, you're due for April 25th and your you call in and request an extension, wanted to extend your payment due to a hardship, do you unemployed, medical reasons? Whatever the reason may be that you know that you're not going to be able to make that payment on the 25th. So what we request, all our request for you to do, is to submit a hardship letter and writing stating explaining your hardship as Well, as we do require a $30 extension fee to be able to process that extension. Once we get it and update the account. If the loan is eligible for the extension, we will. It pretty much extends that maturity date. We'll extend that due date and for the next month, if it's 30 days, to May 25th and in this extension maturity date to where you're avoiding even falling to the delinquent, assess any late fees or reported to the Bureau.
Speaker 1:And is there a difference between an in-house delinquency and when something may be reported to a credit bureau?
Speaker 3:All of it's the same. I mean all of it's going to report on your credit, the same, no matter if we have it in-house or if it's outsourced. All of it's the same. But it's very. Communication is the key. It's very important that you contact us to discuss what your available options are.
Speaker 1:And if I've lost my job, I have no money? I know that I can't pay you, why should I call?
Speaker 3:Well, I mean you never know what may happen in the future. I mean, yes, you lost your job, but I mean you could be seeking for employment. So by just doing an extension, like I said, we can do up to three months of an extension to give you some time To try to look for employment and by that time that extension expires, you and even you may find something. You might find employment before that extension of is due, where you can begin to start making your payments.
Speaker 1:And so one of the real reasons I reached out to you wanted to have you to come in not just to talk about collections, but one specific area of collection, something called cross Collateralization, which I know is probably a very unfamiliar term to many of our listeners. So can you explain to us what cross collateralization is?
Speaker 3:Cross collateral is based Basically using an asset that's collateral for initial loan as collateral for a second loan. It could be a second loan or an account checking our savings account that we can use it against.
Speaker 1:Okay, and so how does? Can you maybe give us some examples of how does it work? And that know that's one of gonna be one of the questions. I want to then swing over to Cynthia, because I know she works with the deposit side of the cross collateralization.
Speaker 3:The way that cross collateral works is the same form of a collateral used to back more than one loan. For example, if someone takes out an auto loan and has an unsecure loan that has been charged off due to non payment, meaning we, if it's charged all meaning the credit union has taken a loss Yet continues to pay the auto loan until paid in full, the credit union can choose to hold that title to that vehicle loan and not release the lien until that charge Off debt is paid in full.
Speaker 1:So you're saying I have two loans with a credit union. One of them is unsecured and one of them secured. That's my car loan. So I'm gonna make the payment on that if push comes to show up. I'm making the payment on my car loan. I didn't pay my other loan and it becomes delinquent and maybe charged off, considered a bad debt. I keep paying my car loan because, hey, I want my car. I paid it off and now I'm looking I want to be able to give me a new car and I need that title to be able to trade it in. So that's where things kind of take a turn, because you're saying if I haven't paid the other loan, what would happen or what might be a scenario? I might not get my title? That's correct.
Speaker 3:We will hold that title until that charge off debt is paid in full. That's when the cross collateral takes place. We actually could choose to repossess that vehicle. We just hold the lien. We don't release the lien. We hold the title until that debt that we took a loss on is paid in full. And when I say not just unsecure loans, it could be a credit card debt that we taking a loss on. It could be a check and a savings account that you may own that you allow the charge off. We do have the right to hold your title to your vehicle loan. If you have a vehicle loan, if it's paid off, but you have other debt that you owe the credit union.
Speaker 1:Okay, and of course, it's not only just when you have loans. Cross collateralization can involve your accounts. So I ask Cynthia can you give us a little information in terms of how can cross collateralization impact a member that doesn't have loans?
Speaker 2:Sure, let's say you have. I've seen the example of a parent opening an account years ago for a child and of course if the child is under the age of 18, the parent must remain on the account. Once the child becomes 18, they can remove themselves, with both signatures, of course, but let's say they did not. So you have a joint loan with your child and then you have an account a checking account that becomes negative, ends up being charged off, meaning that it remained in a negative state for 45 days, so we're going to close it and then you're going to owe us that debt. But let's say, the account that you have that's joint with your child has money in it. We have the right as the financial institution to pull that money out of that joint account, any account that your name is on, and apply it to any other debt.
Speaker 2:I did have bring a copy of the accounts agreement and disclosure and I just wanted to read a couple of sentences under joint accounts. And it reads if your account is owned jointly, then all funds on deposit are owned by any of the joint owners. Case in point my joint account can be used to satisfy any debt that I have at the credit union. And the second sentence is any funds on deposit may be utilized to satisfy any debt or garnishment of any owner of the account, which goes back to explain what the example that I just used. I have a debt under my name only, but I have an account in which someone else is on. I can use those funds to apply toward the debt that the account owner has.
Speaker 1:So you said this is in the disclosure, so is this optional? When I come in as a member and open up an account, can I waive my rights? Can I say I don't wanna have cross collateralization associated with my account?
Speaker 2:It is not an option to waive. It's part of our disclosure and, of course, once you sign to open an account, you are agreeing to the information in the disclosure.
Speaker 1:So can you give us some additional examples? So you said, okay, I'm joined on my child's account and then one of us doesn't maintain our account the way that we're supposed to. It's charged off and then you can come in and take the money. Is that something that you have a discussion with me first? Is it optional? Do I get advance notice? How does that work?
Speaker 2:The way that we have it set up once the account reaches 20 days negative status, a letter is automatically generated and mailed out. If the negative balance has not been satisfied by the 30th day, another notice goes out. So we've notified you twice by mail that your account is subject to be closed.
Speaker 1:I tell you, can you tell us what are the major benefits of cross-collateralization? Are there benefits just for the credit union? Are there any benefits to the member?
Speaker 3:Definitely benefits to the credit union because we pretty much hold them responsible for paying a debt that was charged off or we took a loss on by them having an auto loan, which are having any type of collateralized loan. That definitely benefits us where we can hold that title, cause a lot of times when you pay off your auto loan or any type of collateralized loan, you want your title. So you're gonna pretty much try to do whatever it takes to try to get that, to work out some type of arrangements to have that title released and to pay off that debt that you owe, the other debt that you owe that we took a loss on.
Speaker 1:And so we talked about it being used in two different aspects, in terms of deposit accounts and loans, and Cynthia mentioned it being in the disclosures. Is there any other point in time that a member is advised, for example, when they take out a loan? Let's say they've had a deposit account with us for years, but now they're taking out a loan. Is there something different that they're provided with or that they signed to? I guess? Reiterate again that, okay, you're taking out this loan or you have multiple loans, that reminds them that these loans are somewhat tied together.
Speaker 3:Now, once we have an account say, for instance, we have an unsecured debt that's in the collections department that's passed due and delinquent, and one of the collectors contacts that member and they they notice that there is an auto loan that they're continuing to pay but they're not paying on their unsecured debt that collector will acknowledge and make that member aware. Hey, just want to make you aware, fyi, and we also have a notice delinquent notice that we sent out that your vehicle loan is cross collateral against your unsecured debt and we explained to them if you choose to pay off your auto loan, we won't release that title until that charge off debt is paid in full. So we do make them aware by phone and as well as we sent, we have a notice that will send out if we notice that that member is refusing to pay that unsecured debt but continue to pay their auto loan.
Speaker 1:And is this a practice that is common for financial institutions, or is this something more specific to credit unions?
Speaker 3:I believe it's more specific to credit unions. Now, in the loan contract that we have here on our loan liner with neighbors, the verbiage is located in our security agreement where it explains the cross collateralization clause.
Speaker 1:And I know on the deposit side, usually you know from experienced members are somewhat caught off guard because, like you said, you may have an account that you're joined on with another person. You're keeping your account on point, everything is good, but it's that joiner. What can that person do to protect themselves? If I'm joined on that child's account or join on another family member's account and I'm not even thinking about cross collateralization, I don't even know what it is, but now they're hearing about it and you know that, okay, he doesn't keep his account, you know positive all the time or maybe there are late notices. What can that member do or that consumer do to protect themselves from this cross collateralization impacting them and taking away their assets?
Speaker 2:Well, number one the first option, of course, is to be removed from the account. Anytime that we do have the removal of a joint owner, both parties must sign agreeing that this person will be removed. So at that point, you've cut off all contact to where we cannot cross your account with theirs. As far as satisfying any type of debt, that's going to probably be the best option that there is. Also, too, you may in addition to removing yourself, you could possibly add overdraft protection, and that's something that you can control, because if they are utilizing it too much in your opinion, then you can always call to cancel that service. And it's only on you because it's coming from your account, your primary account, so you have the power over that. You won't have to have the actual account owner to step in and say I want to remove it as well. We won't require both signatures to cancel that service.
Speaker 1:Okay, outside of our disclosures, are there any other resources our members can look to to get additional information about cross collateralization?
Speaker 3:The only resources that we will have internally to provide to our member about cross collateralizations, what we would normally do if the member questions about the clause, we will provide them a copy of their contract showing them under the security agreement where the verbiage is explained in the cross collateral of the rights that we have, and so, of course, ideally, this definitely is an advantage for the credit union.
Speaker 1:And I just kind of want to circle back. Are there ever any circumstances where having this clause cross collateralization is an advantage to the member themselves?
Speaker 3:Most definitely when we require for them to pay that charge off debt that we took a loss on in full to release that title on their vehicle loan. Then of course we will update the credit report showing that that debt has been paid in full. So that's definitely a major impact to show that that member satisfied that debt. Okay, and what about on the deposit?
Speaker 2:side. Cynthia, the benefit of cross collateralization on the deposit account side is that the negative account balance if there's enough funds in that other account to satisfy the balance number one we avoid having the account charged off at that time. And then let's say, if it's after the fact that the account has been charged off and the funds are available and we pull the funds to satisfy the debt, then, just like with the loan side, we will update the applicable companies to show that the debt has been paid in full as well.
Speaker 1:Okay, and so I just want to kind of circle back to the fact and just kind of put emphasis that, because we do have an in-house collection department and I know that we're a digital era are members allowed to actually come in and see a collection agent one-on-one, and is there really any advantage over face-to-face versus the phone, or what options do members have to reach out to a collection agent?
Speaker 3:We do. We typically normally discuss the accounts by phone, but if they choose to come in to a local branch to want to speak with a collections officer, we do sometimes meet in person. I find some members in person meetings are more personal. As far as advantages, we're going to offer the same options whether it's over the phone or in person. We're going to make sure that we do everything in our power to help and assist our members through difficult times.
Speaker 1:Okay, well, thank you, ladies, for joining me. I hope that this has definitely provided some insight to how our collections department can definitely assist our members if they're facing financial difficulties, and definitely address that topic cross-collateralization that far too often members don't understand what it is until they're faced with a negative circumstance. So, thank you, ladies, thank you very much.