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How Credit Unions Can Prevent and Recover Credit Card Charge-Offs

How Credit Unions Can Prevent and Recover Credit Card Charge-Offs
Posted: Mar 30, 2016
Categories: Credit Cards
Comments: 0
Author: Barney Moore

Torrance Community Credit Union recovered 100% of its charge offs for 2014

Charge offs on credit card balances have been on the decline since the peak of the great recession.  But, they still represent a bottom line reduction to income that are avoidable when properly managed by the credit union with cooperation from the borrower.  One credit union, Torrance, California-based Torrance Community Credit Union utilizes four strategies when it comes to charge offs.  Their approach, which starts with preventing charge-offs, is working. The 7,600 member credit union managed to recover 100% of its 2014 credit card charge-offs according to a recently published article in CU Times.

The article outlines four strategies that Torrance Community Credit Union successfully implements to eliminate or greatly reduce charge offs.  Their straightforward approach is surprisingly simple and highly effective.  Torrance Community starts the “recovery” process at the beginning of the loan process including providing educational seminars, for example, on how to improve credit scores.  They act proactively with members who appear to be struggling and will call them at the first signs of trouble.  Offering incentives like extended payment plans and waiving interest and fees for members that have not been able to meet their obligations is also beneficial. Credit unions can use the opportunity to build relationships and loyalty with members who have fallen on hard times by not immediately turning account holders over to collection agencies.  Understanding a member’s situation is critical.  Torrance Community feels the member must have the money and the desire to pay back what they owe.

Torrance Community works with CSCU Senior Portfolio Consultant Dean Knudtson who said he has never seen a credit union with a 100% recovery rate. Knudtson works with member credit unions to analyze their credit and debit portfolios, including approaches to reduce the impact of charge-offs.

 

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