[RECORDING] Arrears & Collections: Latest trends, ideas and support for Credit Unions and Community banks

Recording and notes from the recent webinar for the Credit Union and Community Banking sector – the arrears and collections process.

The dialogue covers various aspects, including the rising levels of arrears, the impact of digital tools in collections, and the adoption of new regulatory practices.

Presentation pdf

Key Topics Discussed

  1. Key focus areas included credit union and community banking, particularly in collections and recoveries.
  2. Discussions on increasing arrears levels, driven by rising living costs and interest rates.
  3. Emphasis on the impact of the cost of living crisis on the credit union sector.
  4. The influence of digitalization in collections processes and customer contact.
  5. Concerns around the use of Individual Voluntary Arrangements (IVAs) and their regulation.
  6. Challenges faced by credit unions in lending decisions and risk assessments.
  7. The importance of early engagement in the collections process.
  8. The role of digital tools like benefit calculators and open banking in improving financial services.
  9. Discussions on the financial hardship and vulnerability of customers.
  10. Future outlook for 2024, focusing on digital advancements and industry collaboration.

Key Takeaways

  • The credit union sector is adapting to challenges posed by the cost of living crisis.
  • Digital tools are becoming increasingly important in collections and customer engagement.
  • Regulatory changes, particularly around consumer duty, are impacting the sector.
  • There is a growing concern over the use of IVAs and the need for better regulation.
  • Credit unions are focusing on responsible lending amidst rising arrears.
  • Early engagement with customers in arrears is seen as crucial for effective collections.
  • The sector is witnessing a shift towards more digital and data-driven approaches in lending.
  • The importance of understanding customer vulnerability is emphasized.
  • The future focus includes enhancing digital capabilities and fostering industry collaboration.
  • Adapting to regulatory requirements remains a key challenge for credit unions.
  • There is a need for a single regulatory voice and better collaborative frameworks in the sector.
  • Liquidity concerns and savings patterns are changing, affecting credit unions’ strategies.
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Summary of Webinar Chat

Question [Sue Cross]: Can I ask – will this presentation be available with all the commentary after the event as I would like to share with my board?

Answer [Kevin Still]: The presentation will be available and the recording. There will also be other deliverables like the IE Hub 2023 report.

Comment [Jason Eaves]: Overall IVA numbers are down in 2023, DRO numbers are up.

Comment [Jason Eaves]: There were 7,235 Breathing Space registrations in August 2023, which is 19% higher than the number registered in August 2022.

Question [Kevin Still]: Will the Credit Information Market Study have an impact on CUs in terms of data sharing?

Question [Jon Timmis]: Who is looking to use their new Hire Purchase powers to get into/push further into automotive finance?

Answer [Sue Cross]: We are not – not big enough to take on that activity. Focus on payrolls, small savings, and lending more to new people.

Question [Kevin Still]: Are CUs using cloud-based, pay-as-you-go affordability and early arrears management tools?

Answer [Dennis OConnor]: I was at a conference a few weeks ago and saw some very interesting tech tools for early arrears detection and management that we are looking into.

Question [Jason Eaves]: Is anyone having any success with pre-emptive activity? Both identifying increased risk and successfully engaging members pre-arrears?

Answer [Sue Cross]: Jason, we are starting to look at early warning signs but very manual at the moment. We do monitor very closely first 3-month payments of new loans and this has paid dividends.

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Question [Sue Cross]: Is there a profile of workplaces where loan sharks are more prevalent??

Question [Louise Yates]: IVA’s: Mis-voted rather than mis-sold? Creditors like CU’s want to be more involved in the process but engagement with IVA and DM firms difficult and manual (before Trustfolio). We all want to understand whether the debt solution is the best option for the consumer and creditor. We can’t wait for regulators. We have the opportunity to work together to improve provision by harnessing the power creditors have in the process.

Question [Joyce McVay]: Is there any CUs that offer digital loan signing and what is the cost affect of this to take to Court.

Answer [Ross Edwards]: Digital loan signing has no impact on the ability to start court action. The costs are the same.

Comment [Joyce McVay]: In Scotland this is different. We can register a wet signature loan and go straight for an Earnings Arrestment. With a digital signed loan, we need to go to the Court.

Question [Jason Eaves]: Given the impact of bad debt costs, are any CUs using/considering debt sale to partially offset?

Answer [Ross Edwards]: Our CU passed debt to 3rd parties in past (prior to 2013) but ended up calling it back to recover ourselves, as they were not very effective.

Question [James Laird]: Is there a list of ethical and ‘good’ IVA companies?

Comment [Daniel Calcott]: It may be worth exploring alternative options in relation to managing overdue payments.

Question [Sue Cross]: John – last point is very important – what do we exist for – to help people become more financially confident?

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Answer [Jason Eaves]: Credit Unions lend money to members who are technically insolvent. There is an overlap between groups of people Credit Unions are willing to lend to and these same people being eligible for BO/DRO/IVA etc. This is the crux of our challenge.

Question [Louise Yates]: Somebody mentioned at the start. IVA firms were not treating CUs appropriately. Can you give me more information?

Answer [John Haslam]: Email me, please!

Answer [Sue Cross]: Louise, happy to speak about this.

Question [Sue Cross]: Thank you to all involved – some excellent discussions and hope these issues feature at forthcoming ABCUL conference.

Question [Lauren Langton]: Excellent call, input and thinking, although would love to talk more about potential growth in the sector.

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