Preemptive Collections

Targeting would-be delinquents is the name of the game of pre-delinquency calls, which is exactly what Security Service Federal Credit Union is doing.

“We get high contact rates pre-delinquency,” said Nancy O'Malley, J.D., vice president of asset recovery, last week at the Collections & Credit Risk Conference in Las Vegas.

The principal goal of these calls is “exploratory education,” if the customer gets into trouble later, she maintains.

To discover who these future delinquents might be, the credit union purchases a third-party score to determine risk. This score looks at what kind of transactions a consumer is making, and his or her history, like whether the consumer used to never carry a balance and now does. This means they are “probably on a pathway to exhaust their credit” to the point where they can’t pay at all, she said.

Once Security Service determines who these consumers are, they call them and invite them to classes on reducing credit.

“We go into reeducation mode,” said O’Malley. “At this point they aren’t delinquent, so it’s a way to establish a relationship and work with them.”

The aim of this effort is if the potential debtor transforms into a debtor, he or she is more likely to pay the credit union first, before other creditors, as he or she has cultivated a relationship with her company.

To measure whether pre-delinquency calls are worth it, O’Malley said it takes at least six months to ascertain. And for the credit union, results appear positive.

“We think they pay us before they pay others,” she said.