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T H E ON LY A LL-DIGITA L ALL-B USINESS R ESOUR CE FOR CR ED IT UNIONS THE MORTGAGE LENDING ISSUE INTRODUCING OCTOBER 2017 VOLUME 12 ISSUE 10 FINANCIAL BUSINESS NETWORK COMING JANUARY 2018 You want to do the best for your members -- deliver the most value and create a first-rate experience for them. We get it. We ve served thousands of credit unions over 140 years so we understand your needs and the challenges you face. We are committed to your success -- and to helping you serve your members at the highest level. Working with Harland Clarke you can do more. get 2017 Harland Clarke Corp. All rights reserved. Do more with Harland Clarke. Harland Clarke is proud to be the exclusive sponsor of International Credit Union Day TABLE OF CONTENTS OCTOBER 2017 VOLUME 12 ISSUETAB 10 THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS What does a 75 High Quality monthly magazine. Website with 72 back issues 700 articles available On Demand RANC THE B IN H BUS RAIN ESS T SUE ING IS VOLUM JUNE 2014 6 9.95 E 9 ISSUE RESOURCE FOR CREDIT UNIONS THE ONLY ALL-DIGITAL ALL-BUSINESS THE MOBILE BANKING ISSUE 4 APRIL 2017 VOLUME 12 ISSUE Making Noise with a Silent Ad Campaign EVA LAMERE ALSO IN THIS ISSUE thE E-Comm ERCE ISSUE lending tools for a New generation of homeowner eMortgages by Keith Kelly may 2014 volUmE 9 ISSUE 5 9.95 Defining Accurate Base Pay Compensation and Its Importance for the CEO JERRY P. NELSON All The CU g) (CU Trainin Stars cy) Paul Nunn Hollis (CFO Curren liance Update) Emily More rson-Kapke (Comp Ande Jennifer (CU Mobile Mortgage) Keith Kelly s (CU CEO) James Collin (Lending Solutions) son Rex John k (CU Content) Laura Enoc Dios (CU Outreach) Miriam De by Roy W. Urrico Credit Unions Keepin g Up With Banks for Mobile Banking Services Products Per House hold What Does it Mean to Your Staff by Jack Kelly 6 8 14 18 21 25 UP FRONT Title here Tim O Hara 27 29 32 36 Aligning Business Strategy with Data Strategy by Laura Enock Nunn Jennifer Hollis Paul Emily Mor from left Rex Johnson Top row James Collins Miriam De Dios Middle row Laura Enock Bottom row Anderson -Kapke Keith Kelly DATA ANALYTICS s Collins by Jame Way The Best nches Bra to Build ock is to Kn wn Them Do ing The Chang siness Bu Face of Lending IN BRANCH PRODUCT SALES Nick Brown Brester Knowlton 7 Steps to a Complete Sales Process BRANCH STRATEGIES Our Brand Is... CU TRAINING Kenneth C. Bator MORTGAGE LENDING Robin Grimes Bridge the Digital Branch Divide Meredith Deen Deploy technology to enhance personal service and create a competitive edge How a Comprehensive Real Estate Program Transformed Our Business CU COLLECTIONS Mike Hales CFO CURRENCY Alec Hollis Risk Management The Key to Profitability DEBT COLLECTION What is a Form 1099-C Leveraging Speech Analytics to Boost Compliance and Contact Center Performance Scott Kendrick COLLECTION S T ECH Steve Balmer Four Tips to Create a Strategic Collections Process 5 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M ABOUT US THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS PUBLISHING TEAM Tim O Hara Editor & Publisher tim Patti Manzone Designer Ashok Kumar Associate Publisher ashok UP FRONT Tim O Hara CU TRAINING Kenneth C. Bator DATA ANALYTICS Brewster Knowlton BRANCH STRATEGIES Meredith Deen MORTGAGE LENDING Robin Grimes CFO CURRENCY Alec Hollis DEBT COLLECTION Scott Kendrick IN BRANCH PRODUCT SALES Nick Brown CU COLLECTIONS Mike Hales COLLECTIONS TECH Steve Balmer SUBSCRIPTIONS Credit Union BUSINESS is published monthly (12 issues per year) by CU Business Magazine Inc. A one-year Digital membership is 75 yr An online membership form is available at register. TEAMBUILDER https the-teambuilder SALES AND ADVERTISING Tim O Hara Publisher tim or 561-282-6015 1 CONTACT INFORMATION Credit Union BUSINESS Magazine P.O. Box 2223 Palm Beach FL 33480 (561) 282-6015 (561) 588-7711 (fax) tim 6 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M UP FRONT BY Tim O Hara I Building CU Teams to Create Dreams am very proud to present to you another excellent issue of CU BUSINESS magazine It contains a new collection of very well written articles designed to help our credit union executive readers in their work. Over the past 12 years of publishing CUB we ve been very fortunate to attract dozens of top-tier credit union experts to share their expertise with you to help you in your work of successfully running your CU. And we ve benefited by adding thousands of CU professional readers as paid subscribers to our magazine and to our growing website which features hundreds of proven strategies that have worked for thousands of credit unions. These days our most popular subscription is The Team Builder whereby each member of the executive Team is targeted to receive a steady stream of articles that pertain directly to his or her job title. It sefficientandveryaffordable atonly 500peryear to cover every member on the C-Level. Here s a rundown on our subscription offerings WEBSITE ONLY CU BUSINESS MAGAZINE SUBSCRIPTION TEAM BUILDER GROUP SUBSCRIPTION BRANCH BUSINESS SPECIAL OFFER 50 per year for individual membership. 75 per year for individual membership. 500 per year for executive coverage. 75 per year for each branch. Please sign up for a Credit Union BUSINESS or Branch BUSINESS subscription today and grow your CU and make dreams come true for your members Thanks for reading Tim 7 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M IN - BRA NC H PRODU C T S A L E S BY NICK BROWN 7 Steps to a Complete Sales Process Your Credit Union is a retail sales establishment meaning you sell products and services direct to consumers. As a retail sales establishment this means your credit union has a sales culture and a sales philosophy whether they were strategically designed or not. few months ago I wrote more on this topic in an article titled Leading Your Sales Culture from Reactive to Proactive . In the article I described these two cultures in detail from the perspective of a credit union undergoing a culture change. There are some amazing tips on how to identify what culture is guiding your employees in each member interaction and how to improve it. One of the tips which I d like to elaborate on is the importance of a credit union sales process. When I first discuss sales processes with some credit union leaders they will often say Yes we train all of our employees on our sales processes. When doing a loan we teach the employee to start the application gather the loan information get supporting documents send it to underwriting and so forth... We have that down. I have to chuckle and cringe a little each time I hear this. Why It s because this is not the sales process at all but rather the steps to processing an application. Certainly processing is part of the sales process but it only occurs after the employee has discovered and discussed what need the member truly trying to solve. And this misconception is actually what contributes to much of the Sales frustration for credit unions. Let me explain. Processing and selling are actually two completely different functions and quite frankly they require two completely different employee skillsets. If we see for example the steps to processing a loan as selling we 8 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M A generally hire employees that are great at processing. As a result we end up with a sales staff which produces tidy accounts and loans with clean audits but doesn t effectively upsell ancillary products or cross sell additional core products. Don t get me wrong you need employees with a processor skillset but they are most effective in a sales support role rather than a sales lead role. A sales process encompasses the entire member interaction. It should outline each step your employee takes a member through from needs assessment to closing and onboarding. All employees should be trained on the sales process and receive consistent coaching to ensure they are executing it at a high level. So what are the steps of an effective sales process and in which order should they be taken This is a question TURN ON YOUR TRAINERS 4 CU withTEAMBUILDER. TRAINING teambuilder buy 250 000 Credit Union Employees 92 Million Members 100 Million Miracles Since 1996 Credit Unions for Kids has raised more than 100 million for Children s Miracle Network Hospitals giving hope and healing to kids in your local community. YOUR FUNDRAISING DOLLARS IN ACTION MILLION 10 2 1 iMRI machine and surgical suite 1 Cardiac X-ray machine 1 Ultrasound machine 1 Bone marrow transplant 1 Fully-equipped Giraffe OmiBed incubator MILLION THOUSAND 270 THOUSAND 250 THOUSAND 100 IN BRANCH PRODUCT SALES that comes up often with my credit union clients and to help them I have created the SURPASS Sales Process which I would like to share with you. The SURPASS Sales Process is of course an acronym with each letter representing a separate step. The steps are in order and act as a guide for employees to sell in any member interaction. It stands for Itgoeswithoutsaying thevalueofafirstimpressionis priceless. Likely the most important step in any sales process is the greeting. Greetings happen in person over the phone and online. The greeting should be warm invitingandinstillconfidencetrust.Trustinthe employee and in the credit union. A greeting is part of your credit unions brand. You can probably think of a businesses which has a consistent greeting regardless which location you go to. Impressive right Why not brand your greetings and create a standard for employees to live up to in your credit unions sales process Smile and Greet Taking time to truly understand what goals the member is trying to accomplish is extremely important. It will mean the difference between establishing a single service relationship with your members or a primary relationship. The main skill your employees must understand and religiously practice is the member interview. Often though the member interview consists of one question So what brought you in today My clients know that even this question is not effective and likely carries a negative connotative meaning. The member interview should consist of a series TheSURPASSSalesProcessisspecificallydesigned of questions to understand the member s true needs to be used for any member interaction whether it be what they want to accomplish and how it helps them attheloanofficerdesk tellerwindow overthephone get closer to their financial dreams. It dives into the or online. It can also be applied and followed in any situation where the member has reached out such as to open a new product or service deposit a check or during a routine call to the service center for a balance inquiry. It works in each of these scenarios because it doesn t aim to create a rigid script for each member interaction but rather guild an employee through a natural process to obtain a consistent outcome. Let s take a closer look at each step and training your employees might need to execute them. 10 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M Understand Needs Wants and Dreams IN BRANCH PRODUCT SALES member s motivation the events that caused them to act now their concerns and their expectations. In the member interview the employee should learn the critical bits of information to align the right product or service for the member and position them to sell additional products and services the member may need but doesn t know to ask for. ability to provide what feels like a customized solution for your member. Your member should be the one making the decision on the solutions which best meets their needs but only after they have been properly educated. This doesn t mean that the member is the expert or has all of the answers. Your member chose your credit union because you are the expert and they have partnered withyoutobetheirfinancialadvocate.Thisstepinthe sales processes is where your employees reinforce that this is a partnership and illustrate the immense value membership at your credit union provides them. In this step employees take the information they ve gathered in the interview and put it to work aligning theproductsandserviceswhichfitthemembersunique needs best. They take the time to discuss which features the member would benefit from and discussing how it might give them an advantage over another option andevenoveranotherfinancialinstitution.However employees cannot do this unless they have the proper training on the credit unions products and delivery systems. Many credit unions provide product knowledge training but most employees are not being trained on Product Sales Knowledge. To help sales employees successfully execute this step in the sales process they needtoknowthequalifyingfactors features benefits and advantages of those products or services they are expected to sell. They also need to understand common concerns a member may have about a product and how to anticipate and address them before they become an objection. With this knowledge they will have the 11 C R E D I T U N I O N B U S I N E S S Review Options and Solutions At this stage in the SURPASS Sales Process the member has been educated on the options available to them and has decided on the direction they d like to go. It s time for the employee to move forward and begin helping the member with their transaction resolving a problem or starting the application for a new account or loan. For employees who are eager sales people it s easy at this point to start looking at other sales opportunities but doing that will inevitably lead to member objections. The member s goal is to solve their current need. This step reminds the employee that it is best to help the member get a solution to their need before venturing into cross sell discussions. That being said this doesn t mean the employee isn t selling in this step. Actually it s quite the opposite. During the Proceed to Help step employees should focus their sales efforts on the associated ancillary products and services. In fact this is where employees should upsell products like online services direct deposit overdraft protection debt protection extended warranty and so forth. Proceed to Help O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M IN BRANCH PRODUCT SALES Assess Other Opportunities Once the employee has helped the member with their needs the discussion can then be opened to other opportunities they have noticed. This would be the cross selling step in the sales process. Cross selling of course is the process of discussing other core products the member doesn t currently have with the credit but whichwillbenefitthem. Employees would look to cross sell deposit accounts checking accounts credit cards and especially loan recapture and balance transfers. Ideally earlier in the conversation the employee would have suggested to the member that they noticed something the credit union may be able to help them with and mentioned theywouldlookatittogetheroncetheywerefinished with their need. This is now the perfect time to bring up those other opportunities. understand the next steps and gives them a level of accountability. A proper commitment creates the motivation for a member to follow through because it ties the next step to the benefit and advantage the member will receive. However one thing not to forget in this step of the sales process is that commitments are two way. Employees who get great commitments from the members are also willing to make commitments. They are willing to over promise and over deliver for their member. Secure Commitments Great sales people are great because they know how to get commitments. Often the reason sales fall through is because the employee did not get a clear commitment from the member. Unless the member is driven by their own motivating factors to close they will feel no obligation to follow through on sales conversation. Securing commitments from the member is an essential step in the sales process. It helps the member The last step in the SURPASS Sales Process isn t actually the end but rather the beginning of the next sales discussion. Follow-up is essential for the success of any sales process. In a way follow-up is a sub step to commitments as one of the commitments that will be made is to follow-up. Follow-up will need to happen during any step in the sales process. For example when a member doesn t have time to finish a discussion when they don t have everything needed to close with them or when a step is going to take a few hours or even a few days to complete. When situations like this occur the employee must schedule follow-up to avoid the sale falling through. Follow-up doesn t just need to happen to get a sale closed. After a sales is closed employees should schedule follow-up to onboarding new products and services. Yep that s right I said schedule onboarding. Onboarding is follow-up and as I said before without follow-up sales fall through. Onboarding is essential to ensure the member is utilizing the products and services set up for them. Imagine all of the members out there who don t have an activated debit card because they never received it or they were confused about the activation steps. Think of the frustration this would cause and this is just one example. This is why onboarding is essential in any sales process. Schedule Follow-up 12 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M IN BRANCH PRODUCT SALES The most engaged and loyal members are those which feel connected to their credit union. Connection occurs through contact and support. Always schedule followup with your members. In closing the SURPASS Sales Process can work in virtually any member interaction. But think about your typical member interaction at the teller line or in the call center Are your members being led through a similar process to identify their true needs and discuss other opportunities How about when your member applies online for a new account or loan Are they being engaged by employees and receiving a customized solution to their needs How about through your online branch and mobile banking app Are your members being upsold or cross sold products andserviceswhichwouldbenefitthem If your credit union does not have a formalized salesprocessIencourageyoutofindonethatfitsyour brand and which has the sales training your employees needtoexecuteiteffectively.Youwillfindthatitwill not only improve your results on the front line but in other areas of the organization as well. It will give your training team the framework to build training which covers both operations and sales. It will empower your sales managers to coach and mentor their employees to a higher level and build accountability. It will give senior leadership a tangible vision to build upon and vet opportunities against. And most importantly it will develop the kind of relationship your members want to have with their credit union. Nick Brown Consulting established and founded by Nick Brown in 2015 is a credit union specific sales training group dedicated to bringing a proactive sales approach to every credit union. Nick Brown Consulting accomplishes this aim by providing sales consulting and training to enhance branch sales outbound sales and lending center sales. With an emphasis on lending and cross-sales Nick s goal is empowering credit unions to add value in the life of every member in every interaction. Engage Nick Brown directly at 801-8605807 or nick Ask about his credit union specific workshops and online sales training featured at 13 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M BRA NC H ST RATEG I ES BY MEREDITH DEEN Bridge the Digital Branch Divide Deploy technology to enhance personal service and create a competitive edge N There s a tendency to assume that new ways of doing business will supplant what s already in place but people continually demonstrate a strong preference to supplement rather than replace. owhere is this inclination clearer than in financial services. Digital advances in the form of remote check deposits and e-signatures have all but closed the loop on full-service automated delivery The technology is now available so that consumers can open access and manage their accounts without ever stepping foot inside a credit union or bank. And yet many continue to do so. Some accountholders conduct all their financial business in person while many others choose to stop by a branch occasionally. Even those who rely exclusively on online access appreciate knowing that experienced professionals are available at the nearest branch whenever they d like to consult onhowbesttoachievetheirfinancialgoals. For the foreseeable future the branch--and the personal service delivered there--is here to stay. According to the 2017 FMSI Teller Line Study average monthly transaction volume per branch increased10percentoverthelastfiveyears reversing what had been a steady 20-year decline. Despite some right-sizing in branch networks over the past eight years U.S. financial institutions still maintain more than91 000offices. For most of your accountholders it s not about branch or remote access. They want the best possible service via whatever channel they choose. To deliver on those expectations seek out and deploy the most 14 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M effective tools to maximize customer relationships across channels. Instead of focusing on digital over branch delivery consider these five technology solutionstoimprovefrontlineserviceandefficiency. 1. Appointment scheduling software To acknowledge that their time is a valuable commodity give accountholders a convenient means to schedule an appointment to open an account apply for a loan or seek guidance on financial matters. With advance notice through an appointment app branch managers can adjust scheduling if necessary to ensure that a financialprofessionaltrainedtohandletherequestwill be ready and prepared for the interaction. In addition appointment software offers useful data on the types THEY SAY... GOOD THING. We make it great. Cummins Allison self-service coin counters can transform the way your branch manages coin. Customers enjoy a quiet convenient and easy-to-use coin-redemption experience while you see tangible bottom-line benefits. With multiple machine choices and hands-free coin-management programs your staff can spend more time interacting with customers. Increase branch traffic enhance customer loyalty and improve teller line efficiencies. It s a small change that can make a big difference. Simple yet effective branch automation technologies from Cummins Allison build branch traffic and allow your staff to focus on what matters most more meaningful engagement with customers. CHANGE is a MAKE A CHANGE AT traffic BRANCH STRATEGIES and patterns of service requests at each branch to support staff scheduling and training. 2. Lobby tracker software Business runs on data these days and lobby tracker software provides a wealth of information when its electronic queue management system records the services accountholders want as soon as they walk through the door. Managers can use this data to manage service levels in real time by monitoring wait time and responding promptly to direct employees to the frontlines as lines begin to form. Lobby tracker software also measures average assist time by employees by branch and across the organization so managers can assess whether further training is needed and what impact changes in the approach to service may have on staffing needs. For example encouraging member service staff to spend more time chatting with accountholders to identify their needs for additional products and services may increase sales but also require additional staffing during busy periods if customer interactions are taking longer. Other useful data that can be gathered through these systems includes rate of product vs. service 16 C R E D I T U N I O N B U S I N E S S interactions top products sold by branch number of accountholders served and timing of visits and cross-sells by employee and branch. With this data in hand managers can more accurately determine the performance level of each branch to support the view of the branch network as a sales center. In addition detailed information facilitates infrastructure planning to downsize or expand the branch network. 3. Member service feedback software While lobby tracker software captures information before and during service interactions other automated systems invite members to rate the service they received as they head out the door. Friendly kiosks with simple engaging rating systems can capture service performance data instantly providing more immediate evaluations of customer service in greater volume than mailed or online surveys. Faster feedback means managers can act more quickly to correct service lapses. 4. HR software The use of technology to help optimize human capital is on the rise from prehire through leadership development.Atmanyfinancialinstitutions turnover O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M BRANCH STRATEGIES TAB is highest among frontline employees. Losing staff especiallyquickturnoverwithinthefirstfewmonths is costly in terms of hiring and training expenses--and in lower levels of productivity and member service as new employees learn on the job. The best way to reduce turnover is to hire the best candidates. Predictive analytic software can pinpoint characteristics of top performers and help identify applicants with those traits. As noted previously lobby tracker software can help monitor and manage employee productivity and identify training needs. Automated surveys measure employee engagement especially shorter pulse surveys that offer staff regular opportunities to share their views on the work environment. Talent management systems are designed to facilitate development of career tracks to enhance employee satisfaction and retention to optimize performance management and to identify and help groom tomorrow s leaders. 5. Forecasted scheduling and workforce optimization software Amazon dominates online retail expect to see more physical storefronts bearing its logo to sell goods shoppers prefer to buy in person. As Ron Miller notes in a recent TechCrunch article [https techcrunch. com 2017 01 15 technology-cant-replace-thehuman-touch ] self-driving cars and restaurants with automated systems to take orders and deliver meals will serve a purpose but won t replace people s desire to get behind the wheel or choose a more traditional dining experience. Technology marches relentlessly forward and it would be foolish to argue otherwise but some things remain fundamental and people-to-people communication will continue to be one of them Miller contends. By setting aside an either-or view of delivery channels in favor of deploying digital systems to work to improve branch service your organization can keep pace with accountholders expectations for best-in-class service across the board. Meredith Deen is Director Products and Services for FMSI A. Kronos Company which provide financial institutions with business intelligence and performance management systems for efficient branch staff scheduling and lobby management. She can be reached at meredithdeen Staff scheduling software automates the most costeffective alignment of staff to branch traffic and activity patterns based on data from core processing systems and platform systems such as lobby tracker software. Working together these systems facilitate efficientschedulingoffull-andpart-timestafftohold the line on operating costs while improving service by more accurately scheduling the right staff to be in the right place at the right time. In addition automated scheduling provides for time-blocking frontline staff schedules for secondary duties such as sales training and outbound sales calls. Innovations such as these systems will continue to up the ante on consumers views of what constitutes high-quality service. Many accountholders will continue to appreciate a full range of options for interacting with their primary financial institution. This embrace of choices is evident elsewhere Even as C R E D I T U N I O N B U S I N E S S 17 2 0 1 7 C U B U S I N E S S . C O M O C T O B E R CFO C U RRENCY BY ALEC HOLLIS Risk Management The Key to Profitability Financial professionals at times may have a check the box attitude toward risk management. Sometimes viewed as a necessary evil risk management activities may have a perception of detracting from institutional profitability. While it is certainly possible to overregulate proper risk management remains a timeless element to long-run profitability. And when risk becomes increasingly elevated effective communication is key. Today an effective risk management process requires an important investment in technology. Data delivery for use in strategy and risk management must be done seamlesslyandefficiently soastoallowmanagement the time and credibility to make important business decisions. Especially for smaller credit unions this can often be a tough hurdle to overcome. Smaller credit unions in some cases have had a harder time keeping up with the evolving demands for financial services particularly with innovations in product capabilities and member experience. P articularly in relation to interest-rate risk some credit unions have more tolerance than others begging the question does assuming more interest-rate risk lead to higher returns While on the one hand risk avoidance can certainly lead to falling short of profitability goals (the quote don t manage your interest-rate risk using your members comes to mind) excessive interest-rate risk can also put a credit union into a squeeze should the market move unfavorably. Predicting interest rates is a generally tough game many experts don t get it right. The job of the asset liability management (ALM) function is to protect the viability of the credit union s business model by reducingtheinherentrisksoffinancialintermediation allowing for scalability and growth in a safe and sound manner. The goal isn t to minimize risk rather the focus should be on quantifying risk such that it can be managed. Ultimately this helps ensure the institution generates adequate reward per unit of risk irrespective of interest rates or competition. High-performing institutions often integrate the risk management and strategic planning functions as they continue to develop new and existing products services and processes. TURN ON YOUR CFO and CEO 4 CFO withTEAMBUILDER. CURRENCY teambuilder buy 18 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M CFO CURRENCY Nevertheless despite all the hype about FinTech firms replacing traditional bank services and Bitcoin becoming a safer more accepted exchange for goods and services at the heart of the depository business model is financial intermediation namely offering loan and deposit products that customers want. Important to the long-term success of this operation is superior expertise in measuring and managing credit risk and ensuring rates are set according to the risk associated with each product. Risk-adjusted analysis is an important function to ensure a credit union maintains an adequate risk reward relationship. Keeping track of all the risk-adjusted analysis acronyms may be harder than understanding the techniques themselves. With techniques such as RAROC RORAC RARORAC and others it can get confusing. However despite the potential confusion the ultimate goal is to get to a risk-adjusted return on allocated capital to facilitate the credit union s capital allocation decisionmaking process. In general capital ought to be allocated to its most efficient use. Efficiency is an idea discussed widely in modern portfolio theory and it applies in this case of building a balance sheet. The general rule is that for any two investments (capital allocation decisions) with the same level of risk choose the option with the higher expected return. And conversely given the same expected return the investment with lower risk should be chosen. Additionally the investment s riskadjusted expected return adjusted for the associated marginal operating and credit costs should exceed the marginalfinancingcostsoftheinstitution. 19 C R E D I T U N I O N B U S I N E S S The graphic below shows a return on capital comparison of three potential investments two loans and a securitized product. Despite the disparity between the three assets all potential investments should be boiled down to their marginal impact on return on allocated capital to allow for cross-comparison. While an asset may have a lower gross yield it may demonstrate a higher return on allocated capital after accounting for its risk-adjusted expected return its marginal costs and its leverage resulting from the required capital charge. Such is the case in the hypothetical example below the CMO product has the lowest expected credit cost operational expense and risk weighting. Just as one shouldn t judge a book by its cover don t judge an asset by its yield. O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M CFO CURRENCY Risk management is important for many reasons and shouldn t be reduced to a check the box task or seen as solely playing defense. To the contrary proper risk management can provide CFOs and management the confidence needed to support a robust offensive strategy. Furthermore as history has shown crises come and go risk management should serve as an early warning signal to protect the credit union from large downside. Lastly risk-adjusted product profitability analysis is paramount. At ALM First we employ our risk-adjusted return on allocated capital techniques to aid our clients in becoming better capital allocators. Alec Hollis is Director for the ALM Strategy Group Mr. Hollis performs asset liability management strategy research for financial institutions. He also implements firm-wide ALM modeling procedures and assists in the execution of client balance sheet hedging programs. Mr. Hollis holds a bachelor s degree in finance from the University of Notre Dame as well as the Chartered Financial Analyst (CFA) designation. 20 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M DEBT C O LLEC T I ON BY SCOTT KENDRICK Leveraging Speech Analytics to Boost Compliance and Contact Center Performance T Data from 2016 shows the average U.S. household carrying debt of more than 132 000 and with more than 16 000 of credit card debt on average. Student loan debt is also exceedingly high. All of these debts unfortunately mean some borrowers have difficulty keeping up and that s where debt collection centers must be involved. TCPA which is governed by the FCC and covers the approveduseofautomaticdialingsystems artificialor prerecorded voice messages SMS text messages and fax machines. Debt collection is highly regulated and there s increasingly a focus on fair consumer treatment. For collection agencies to succeed they must find a balance as they stick to the compliance rules and treat consumers equitably and also use best practices to legally collect the maximum amount of consumer debt. Doingthiswellrequiresafirmwithahigh-performing group of agents and a keen understanding about who to target with calls and when are the ideal times to reach various groups. his consistent rise in debt has driven a corresponding increase in debt collection calls which places pressure on centers to maintain compliance. There are state regulations to manage as well as federal licensing laws under the Fair Credit Reporting Act (FCRA) the Fair Debt Collection Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA). There are thousands of Fair Debt Collection Practices Act (FDCPA) lawsuits filed every year and consistent year-over-year increases in Fair Credit Reporting Act (FCRA) violations. FDCPA violations are enforced by the Consumer Financial Protection Bureau (CFPB) a national consumer protection agency and are levied against debt collectors that use abusive unfair or deceptive practices in the course of business. FCRA offers consumers protection against the misuse or misreporting of credit information which can cause a lowered credit score higher interest rates and denials. Common FCRA violations can include instances of failing to report debts that were discharged in bankruptcy reporting an account as active when it was closed by the consumer and reporting old debts as new. Other types of violations are those laid out by the 21 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M DEBT TAB COLLECTION Speech analytics allows collections centers to audit 100% of the agent-customer interactions so they can quickly spot non-compliance. This contrasts sharply to the traditional approach of performing compliance monitoring through random call sampling. Random chance means a compliance audit could have picked 20 non-compliant calls out of thousands of properlyconducted calls or found the converse situation. In either case the sample size is typically so small that it cannot be trusted. Analytics platforms can be used to identify the proper Mini Miranda language Right Party Contact language and potential FDCPA violations by spotting the right or wrong phrasing from the agent. Fundamentally the platforms can mark things you should say and things you shouldn t say. It provides metrics about the agent s ability to stay within the approved language guidelines and the most advanced systems can determine empathy and other similar metrics that are gleaned from the context of the conversation. Such platforms can also immediately identify any abusive language from either side of the party. With such an advanced tool managers can see which agents are engaging in potentially noncompliant behavior. They can then determine (based on other agent metrics) if the agent needs retraining or if the action calls for immediate termination. The key benefitofsuchanalyticsisitcanproactivelyprevent large regulatory fines. Such platforms can also track DNC instances wrong numbers and other similar situations. Violations of FDCPA FCRA or TCPA regulations are time-consuming and costly. The manual sampling of calls does very little to mitigate non-compliant behavior and stop litigation. Using speech analytics helps identify non-compliant behaviors and diagnose whether they are specific to an agent or a pervasive problem. Speech analytics also makes it easy to make dynamic adjustments to policies as compliance 22 C R E D I T U N I O N B U S I N E S S Staying in Compliance regulations change. Managers can also use speech analytics data in positive ways to showcase agents that adhere to compliance policies. They can then use those agents conversations as training models to provide context to the trainings. An additional tactic is to introduce a compliance leaderboard where top performers are recognized and compensated for their adherence. Real-time analytics provides supervisors and agents with a tool for immediate feedback. Instead of sampling calls and then scheduling time to talk with Agent Smith the supervisor can simply see non-compliant behavior occurring immediately and intervene when needed to guide Smith on the right action. So for example if a new regulation is introduced it can be added to scripting and speech analytics so that it can be tagged in a call transcript and returned in search results and supervisors can immediately see if this new direction is being followed. Real-time analytics also provides agents with next best action guidance so that they can self-correct while on a call. They can be prompted with proper disclosure and right-party ID language as well as language for treating customers fairly. Maximizing Performance and Payments Analysis of every agent interaction including chat transcripts email social media and the phone can provide management with new insights to boost performance. They can identify agent s phrasing and actions that result in either successful or unsuccessful collections and then utilize this information as a learning tool for the group. Enabling such analysis are advanced speech analytics solutions that turn conversations (unstructured data) into searchable text (structured data). Such solutions provide a complete picture of agent and customer interactions. In a typical contact center supervisors might listen in to one to three percent of every agent s calls take manual notes and then sit 2 0 1 7 C U B U S I N E S S . C O M O C T O B E R DEBT COLLECTION down with each individual agent to discuss the results. This entire procedure is not only time consuming but it s also very unreliable as the small sampling might not bereflectiveoftheagent strueperformance.Perhaps the samples were taken when the agent had a bad day or conversely they could be taking samples from the one day in the month where the agent exhibited quality performance. In either instance the unreliability of the data means managers cannot uncover meaningful insightsintohowtheagent sperformanceandspecific language and behavior directly influences debt settlement results. Analytics allow the real-time scoring and monitoring of agents so their actual behaviors can be coached and corrected. Armed with this information supervisors can provide agents with feedback on how they can navigate customer objections and turn unsuccessful calls into successful interactions that do not upset the customer. For example advanced speech analytics can monitor calls to identify situations where an agent is using empathetic language. Certain phrases or words closely tie to empathy and agents that consistently use such language at appropriate times are typically better at connecting with clients on a more personal level. The analytics can also be used to judge the consumer s willingness and ability to pay so management can establish if the consumer will likely provide payment during a future interaction or if there s little or no chance of such an occurrence. Such detailed scoring gives managers context to build ranked call lists. So for example they could direct the toughest consumers to the best-performing agents in order to increase the collection rates and give the more willing consumers to the newer less experienced agents. Such data is not only useful on an agent-byagent basis but is vitally important when viewed in aggregate. Supervisors and managers can see how phrasing and empathy relate to other metrics such as first-call-resolution and data on how often agents 23 C R E D I T U N I O N B U S I N E S S were able to secure full payments. These positive-ROI agent behaviors can then be integrated into new agent onboarding materials and training methods to boost the metrics of the entire team. Real-time speech analytics provides performance monitoring directly to agents while they are on a call. If an agent forgets to use compliance-approved language they can receive prompts reminding them what to say so they remain compliant. Supervisors would still get involved for the more serious or repeat offenses but by empowering agents with prompts that keep them on track they are able to self-correct. Real-time analytics also provides next-best-action guidance on other desired behaviors such as showing proper empathy when a customer exhibits frustration or offering products and services promotions when a customer talks about a competitor. Speech analytics can help upper management understand the specific language most likely to drive payments and revenue. It can provide insight into questions such as if the agent s method of asking for payment could be categorized as direct or passive How quickly was a settlement of the debt broached This type of insight can shift the content of call scripts procedural actions taken by agents and other aspects of the business. Analyticsdirectlyincreasestheefficiencyofcalls so agents can make more calls per hour that are targeted to the right consumers. Speed is also gained through the O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M DEBT COLLECTION feedback where the agents receive instant guidance and then correct their behavior faster which creates a circular loop of improvement and efficiency. This efficiency pays off on the bottom line both through a higher amount of debt collected per agent annually and an increase in the amount of business the agency can win from creditors. Analytics can also uncover certain call behaviors or tactics that could be hiding in plain sight. Most contact centers will have some agents that are higher performers than others when it comes to the time it takes to resolve debts (recovery times) and their recovery rates. Without speech analytics data these high performers might still receive congratulations and perhaps monetary bonuses but the management team would not have much insight into why the agents are successful. With text transcripts of all phone calls and advanced analytics managers can see conversational trends among the top performers. Perhaps they are using certain phrasing while keeping the average call length under a certain timeframe. The analytics could uncover hidden characteristics that could then be duplicated with the other agents on the team through training. settlement resolutions. It also can encourage empathy and compassion while tracking how often agents used compliance-approved language. The results are contact centers that are less likely to receive fines and can attract more financial services clients due to their improved collection metrics. And while the customer conversation on such debt collection calls may continue to be difficult analytics can at least lead to improvements in the customer experience whichhasadditionalbenefitsofincreasingcollection rates and reducing agent attrition due to increased job satisfaction scoring. By improving their business processes based on speech analytics data on all calls (instead of a random sampling of 1 to 2% of calls) contact centers can confidently change their processes promote top performers and increase revenue. Scott has 20 years experience in software product management design and marketing for everything from shrink-wrap consumer applications to enterprise cloud solutions. He introduced the tag-line Listen to your customers Improve your business which is both something he passionately embraces in marketing and production management and how he articulates the benefit CallMiner Eureka brings to market. Prior to CallMiner Scott was Sr. Director of Global Product Management at MIVA (an internet search marketing company) and Director of Product Management and Marketing for the New Ventures division at Corel Corporation (makers of personal and business software CorelDraw and WordPerfect ). Scott holds a BScE in Civil Engineering from Queen s University (Ontario Canada) and is certified in Pragmatic Marketing and SCRUM. Moving Forward Speech analytics that categorizes conversations into searchable text provide contact centers with a tool to properly balance both compliance and performance. It can spot agents who have overly long calls and need training on redirecting the calls to expedite payment or 24 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M COLL EC TIO NS T E C H BY STEVE BALMER Four Tips to Create a Strategic Collections Process It is safe to say that most of the general population wants to pay its bills on time. However as anyone in the payments industry knows this does not always happen as planned. Having a system in place that makes it easy for consumers to do the right thing will benefit all parties in the long term. An intentional and efficient strategic collections system can be a tremendous benefit to your credit union. A s technology continues to advance the task of collections becomes more complex. The Telephone Consumer Protection Act (TCPA) restricts the making of telemarketing calls and use of automatic telephone dialing systems and artificial or prerecorded voice and text messages. Compliance with collections legislation is key and the technology used to perform collections is crucial. Third-party data systemsallowcollectorstofilterthedialingstructure become more efficient with query capabilities and ultimately impact delinquency rates by changing up the messaging. With the increased use of cell phones and decreased use of landlines reaching consumers of certain demographics is more difficult and more expensive than ever before. When formulating your credit union s collections strategy keep the following tips in mind Limit the use of an automated voice messaging system. Members tend to be surprised when they answer the phone and hear a live person on the other end since most collections calls are automated. Having a live representative makes members feel more comfortable asking questions and it is easier to find solutions for outstanding payments when you can work 25 C R E D I T U N I O N B U S I N E S S together as a team. Find ways to make the member comfortable. Once you get the member on the phone one way to do this is through authentication. Asking security questions will assure them you are calling from a legitimate source ultimately making them feel better about disclosing personal information. A call from a collections agent can be stressful but making sure the member knows your true intentions will yield better results. Identify yourself as the credit union and not a collections agency. Introduce yourself as a representative of their credit union. This approach will make them more comfortable and 2 0 1 7 C U B U S I N E S S . C O M O C T O B E R COLLECTIONS TECH less defensive when answering questions about their delinquencies. Incorporate advanced technology. Making your collections process easy for the member to understand goes hand in hand with the type of technology your credit union chooses to utilize. For example increasing the connect rate with members can be done with changes to the caller ID system. PSCU is beginning to move towards having the credit union s name show up on the caller ID so members recognize the name and are more inclined to answer the phone. Measuring results is equally as important to the success (or failure) of your collections strategy as having a robust collections process. Credit unions should measure traditional metrics including Penetration Measure how many times a single representative is calling a delinquent member. It is recommended that a member be called anywhere from 10 to 15 times per month. Right Party Connect Rate This number refers to how many times the representative is able to get the right party or decision maker on the phone. Representatives should be strategic with the time of day they are calling depending on the demographic of the member they are trying to reach in order to optimize connect rates. Conversion A conversion can have multiple outcomes including a member making an appointment to discuss the delinquent charges or actually collecting the debt owed. When creating your collections strategy outlining clear objectives will help the data analysis process run smoothly so that results can truly be measured. PSCU has excelled in the collections space by shattering the traditional notion of a telemarketer or collections agent. Having a streamlined and efficient collections process allows PSCU to significantly reduce its Member-Owner delinquency rates. Each dollar collected has an impact on the bottom line of the credit union. Rehabilitating delinquent members debts early in the collection process allows members tocontinueingoodstandingandremainprofitablefor the credit union. Creating a strategic collections plan and diligently measuring the results will provide your credit union with the tools needed to improve delinquency rates and create a more enjoyable member experience. Steve Balmer has been with PSCU since 2007. He provides management and leadership support to the Fraud Recovery Dispute and Collections Operations departments. Steve utilizes outbound technologies third-party vendors and manual efforts to handle collections for over 40 clients. 26 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M DATA A NA LYT I C S BY BREWSTER KNOWLTON Aligning Business Strategy with Data Strategy W As I travel around the country working with financial institutions that are ready to implement a data analytics program I realize a common denominator throughout them. Many have yet to align their data analytics strategy with their overall corporate business strategy. hen the business objectives and analytics strategy do not operate from the same playbook it creates competing priorities putting the various departments within a financial institution at cross-purposes. Even worse when these strategies do not blend the credit union will struggle to see a return on the data analytics investment If you re ready to put your strategy into action here are seven steps to keep in mind as you implement your data analytics initiatives The first step is to attain a thorough understanding of the credit union s strategic business initiatives and ascertain how data analytics will help achieve those objectives. Knowing your business goals today and in the coming 2 5 and even 10 years will help the credit union devise a strategic plan and roadmap that ultimately aligns analytics with key business imperatives. During the strategic planning and goal setting phase make sure key objectives for the data analytics program are documented and communicated throughout the organization. 1. Start with a Roadmap 2. Understand Line-of-Business Needs Take the time to understand each line-of-business needs regarding what information is required from 27 C R E D I T U N I O N B U S I N E S S the data and how to act on insights. Establish what systemsandprocessesareneededtodrivetheflowof data throughout the credit union. Each line-of-business will require different data outputs to hit their set goals. By providing easy access to the data and a streamlined process to put the data into action alignment of the overall business initiatives becomes routine. 3. Establish Metrics to Track Performance Measure Progress & ROI Tracking and measuring the ROI of an analytic programs allows the credit union to re-prioritize goals and take corrective action steps along the way. By measuring the action taken from the data s prescriptive recommendations the credit union can focus efforts on the most promising opportunities resulting in an 2 0 1 7 C U B U S I N E S S . C O M O C T O B E R DATA ANALYTICS immediate boost to revenue and member resources. Oncekeydatasegmentsareidentified effortsshould be focused on the campaigns that delivered the greatest ROI and devise a set of recurring best practices for future campaigns. 4. Understand the Data & Application Environment The credit union s application environment contains a massive collection of resources that hosts applications including the core consumer LOS a CRM system commercial and mortgage loan origination systems phone systems bill pay and many other disparate systems. Understanding where and how data resides in each system along with how data flows through these applications is crucial in prioritizing data integrations into an analytics platform accomplishing strategic business intelligence goals and allowing the credit union to become data-driven. Some data resides on-premise while other data sets reside in hosted applications by the credit union s vendors. It is imperative that this due diligence is performed in advance of any development or software acquisition endeavors. 5. Create an Analytics Committee When the analytics strategy is shared by the entire team it is easier to navigate the near-term tasks of planning goal-setting and performance management. Consider establishing a leadership committee responsible for defining and driving the analytics program for maximum value. The committee will set teams up for success by demonstrating how to effectively use the system to extract insight and drive action. Once the staff has a better understanding of how to use the data analytics program they can then focus their efforts on addressing key business objectives. 6. Allow Open Communication Data analytics isn t just for your IT folks. From C-level to member-facing staff -- all should be able to access share and see data to monitor performance challenges or emerging opportunities. Open transparent 28 C R E D I T U N I O N B U S I N E S S communication about the strategy and long-term goals leads to a more aligned team and prevents information silos. In turn workplace culture is improved and a collaborative environment is created. 7. HireaChiefDataOfficer AnalyticsOfficer By enlisting the help of an experienced CDO CAO the credit union is better equipped to reach their business objectives. Whether hiring a full-time executive or outsourced consultant view them as a trusted advisor and strategic partner. A CDO CAO will work with your data analytics teams to analyze the data and train your staff to uncover and act on new opportunities that lead to your end goals. These experts can advise your decision-makers to act on immediate opportunities monitor progress track success establish best practices and improve your institution s overall competitive advantage. Has your credit union hit success with an aligned business and analytics strategy If you need support with these key steps The Knowlton Group can help. Let us create a data analytics strategy and implementation roadmap to ensure your business goals are met and that your analytics investment pays-off. Brewster Knowlton is the Owner and Principal Consultant of The Knowlton Group a data and analytics consultancy with a focus on the financial industry. He can be contacted at brewster O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M CU TRA INING BY KENNETH C. BATOR Our Brand is... T Like most people I hate going to the dentist. Regardless I go every six months because I don t like the alternative and the consequences that come with it. candidate is a loser. After acquiescing that she will probably be going back home just days after arriving she sees something in the brand of the candidate they can use after he punches a heckler in the mouth. She realizes that he is a hard arrogant and unrelenting man that in no way they could convince the voting public that he is this nice caring individual they have been trying to portray him as. So as a brand expert Bullock s character quickly moves to playing up the reality that Bolivia is in crisis and that her candidate is the only person that can save them. They successfully build his image as the guy you may not like but the exact tough and strong-willed individual to pull the country out of calamity. Spoiler alert Bullock s candidate wins the election. So what in the heck does this mean for credit unions and what can we learn from a somewhat obscure two-year old film First much like in the movie credit union management teams tend to brand their institutions as what they think members want it to his year has been particularly challenging from a dental perspective as I have made a number of visits to an oral surgeon to correct an issue that was the result of an injury over a decade ago. I ll save you all the details with the exception of the afternoon following my last visit. Sitting down on my favorite chair in pain and discomfort I decided to forgo work and lick my wounds pun not intended. I found myself blinding clicking through the channels until I stumbled upon a movie I had seen before titled Our Brand is Crisis. Released in 2015 it stars my favorite actress Sandra Bullock. And yes my wife already knows she is my favoriteactress.Ihadseenthefilmoriginallybecause I see just about everything Sandra Bullock stars in. I found it entertaining the first time but nothing I intended to go out of my way to watch again. This time I found myself watching it with a learning purpose possibly because I secretly felt guilty for watching TV on a Monday afternoon and not working on one of the many tasks listed on my to-do list despite my oral discomfort. For those who haven t seen the movie Bullock plays a brilliant political strategist who is brought in to save a Bolivian presidential candidate s drastically failing campaign. Immediately upon the scene she tells her colleagues that dragged her into this mess that their 29 C R E D I T U N I O N B U S I N E S S TURN ON YOUR TRAINERS 4 CU withTEAMBUILDER. TRAINING C U B U S I N E S S . C O M teambuilder buy 2 0 1 7 O C T O B E R TAB TRAINING CU be or what they think it should be rather than what it actually is. Yes we need to give members what they want but we can t be something we are not. Case in point a while back I saw a TV commercial done by a credit union CEO. One of the primary messages was almost verbatim that we have many of the same products and services youcanfindatmostof thebigbanks.Thefirst thing that popped into my mind was Then why don t we just go to or stay with one of the big banks if you re just a me-too business As I mentioned in a CU Business Magazine article earlier this year one of the reasons this may be the best time for credit unions in the history of the movement is that most consumers have a healthy dislike for the big banks. Just see Wells Fargo where apparently you can open one account and wind up with fivewithoutevenknowingit.Abrandassociationwith the big banks is not a positive one today. I will give that CEO credit for being in the commercial though. People do business with people. If I remember it correctly when I started in the credit union industry in 1993 the first thing mentors relayed to me was the whole People Helping People philosophy. That message has even more value today given the zeitgeist of our country especially for 30 C R E D I T U N I O N B U S I N E S S Generations Y and Z. But that philosophy can t just be used as a generic industry tagline. In order to be effective the message needs to be This is Why and How Our People Help the People in Our Community. And by Our People I mean not just the CEO but also the MSRs the managers the VPs etc. In today s world of social media email marketing landing pages and the like establishing an Our Brand is People message doesn t have to be expensive. It does have to be consistent. This takes other resources such as time discipline and diligence more so than money. However if you leverage a brand message thatisadirectreflectionofwhoyouareasabusiness building that brand becomes less of a burden and more of an enjoyable endeavor. Second much like in the film we need to fully understand the unique problems within the community or FOM we serve and how what we do best can solve those issues. For example many times I see credit unionsdiveheadfirstintothetechnologypoolsimply because they think they have to swim in those waters. Whilethatbelly-flopsplashmaybenecessary Iurge my clients to do so for the right reasons and with the correct mindset. Some institutions that already have an image akin to Our Brand is People feel they need to change to something like Our Brand is Technology. In those situations we discuss that the question we need to ask ourselves may not be an either or question i.e. a people focus versus a technology focus. Instead the real question may be How do we provide an Our Brand is People experience through technology 2 0 1 7 C U B U S I N E S S . C O M O C T O B E R CU TRAINING The problem among most consumers isn t a lack of accesstofinancialservices.Ipersonallyhaveatleast 100choiceswithinafive-mileradiusofmyhouseto open a checking account or line of credit. I certainly can do so without leaving my home. And yes technology is great when it works but more often than we would like to admit it doesn t. At the time of writing this article I am having three different problems with three separate organizations with online transactions all of which are going to necessitate me speaking to a human being. Technology is just a tool. People still want to make a human connection. Sometimes that is an actual faceto-face or phone conversation. Other times it s just simply knowing that there is another person on the other side of that technology that will insure an Our Brand is People experience. Two of my clients offer perfect examples of understanding the unique problems within their FOMs and genuinely offering their brands as solutions. One is a small community credit union surrounded big multiple financialinstitution options all of which are sizably larger. In spite of that they continue to grow by making it clear that what they do bestishavingfunwithfinanceandworkingwiththose that need some help without any judgement. The other client serves law enforcement and that credit union grows by communicating the number one thing they offer is humanity and levity during a time when policeofficersneedthatmorethanever. Both of these institutions offer multiple ways to transact business via technology without ever speaking to one of their employees. However that isn t what differentiates them from their competition. What does is clearly communicating why they are the experts to 31 C R E D I T U N I O N B U S I N E S S solve their members unique problems. Those solutions have less to do with actual financial tools and much more to do with the experience their members crave. What my latest viewing of Our Brand is Crisis and the thoughts it elicited reminded me of is a firm personal belief. That belief is those credit unions that thrive over the next decade will be those that build a truly differentiating and engaging brand. Doing so has a lot more to do with honestly understanding who your business is at its core than the technology you employ or even the asset-size you report. It also reminded me that I should probably schedule my next visit to my oral surgeon on a Saturday so that I may be a bit more productive the following Monday. Ken Bator is the author of The Formula for Business Success B C S and the founder of Bator Training & Consulting Inc. (BTC) Ken helps credit unions create environments where employees actually want to come to work and members want to keep coming back. BTC accomplishes this through a combination of Branding Culture building and Strategic planning. This is the unique B C S Formula created by Bator and featured in his latest book. To have BTC assist your credit union in creating a differentiating and engaging brand contact Ken directly at 714-681-2821 or kbator Learn more about BTC s training and strategic planning sessions at or www. profile kenbator . O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M MO RTG A G E L ENDING BY ROBIN GRIMES How a Comprehensive Real Estate Program Transformed Our Business Today s home buyers are nothing like their earlier counterparts. In years gone by if you wanted to get information on a home listed for sale you had to contact a real estate agent. Agents controlled access to homes and information and they also influenced the selection of lenders. buyers start their home search online without an agent and they can access mortgage applications from the same real estate portal. The internet changed all that. Now most home The mortgage and real estate industries have evolved. SPIRE Credit Union needed to evolve as well. Founded in 1934 SPIRE Credit Union has been offering mortgage loans to our members for decades. The strategy was pretty simple advertise competitive interest rates wait for members to call write and close the loan and then--as is common--sell off the loan. But times have changed. Home sales were up but our purchase mortgage volume numbers were stagnant. Obviously we were missing opportunities. As an organization we have set a goal to implement a full-service real estate solution beginning in 2018. We felt strongly that making real estate services a top priority would pay off with a lift in member loyalty and peace of mind. The new program will focus on two critical innovations that are important to our members in-house loan servicing and a turnkey real estate program which will be implemented in phases. Over the years we found that our members were disappointed when they learned that their loan was being sold off. This is because they really want to do business with SPIRE and they want to keep that 32 C R E D I T U N I O N B U S I N E S S business at SPIRE. Member loyalty like that deserves a reciprocal measure of allegiance from us so it was an easy decision to add in-house loan servicing to our larger long-term plan. Because home buyers now start their search on the internet we knew we needed a turnkey real estate program that could provide our members with online tools to search for homes set up property alerts and connectwithqualified localrealestateagents.Some CUs opt to build their own system in-house. With my experience at other credit unions I knew that creating 2 0 1 7 C U B U S I N E S S . C O M O C T O B E R MORTGAGE LENDING this kind of turnkey program in-house would be too difficult. Instead we were thrilled to find all that we wanted and more in HomeAdvantage a turnkey real estate program from CU Realty Services. Because we implemented HomeAdvantage before we executed any other new tactics it is the foundational component of SPIRE s new comprehensive real estate program. The features of HomeAdvantage were attractive on their own but the program comes with a benefit that makes it even more appealing members who buy or sell their home using an approved real estate agent qualify to earn HomeAdvantage Cash Rewards HomeAdvantage. A growing family was the catalyst at closing. One of our core missions is to improve our behind this couple s search for a three-bedroom members financial well-being and this helps us do single-family home. that. We had been renting a townhome that we thought would be large enough. But after our baby arrived Here s What Happened According to the my husband and I realized it was just too small. We Numbers couldn t really even walk around and rock her to The success we have seen so far has been remarkable sleep. Part of that is due to launching HomeAdvantage at the Big life changes--marriage an empty nest start of our process instead of waiting until the end. retirement or the arrival of a new baby like the The program automatically monitors and tracks our Ostvigs--often spark decisions to buy a home. For progress which makes it easy to measure our success. thoseofuswhoworkinthefinancialindustry it seasy Within just six months of starting the program to focus on the business of promoting interest rates HomeAdvantage helped SPIRE and closing loans. But it s important to remember that Identify more than 910 members who are our members are not shopping for mortgages they are considering buying or selling shopping for a home. Engage with 460 prospective buyers not yet pre- Wewantedtofindahomethatwecouldstayin qualifiedforaloan(216describethemselvesas for years. A home for our entire family. buyers purchasing in 6 months or less) Last year when the Ostvigs began considering the Finance 20 new homes for our members purchase of a new home they also began searching for a Give back 34 854 to members at closing via financialpartnerthatcouldhelpthemnavigatethrough Cash Rewards the entire process. The HomeAdvantage program is the reason they joined the SPIRE family. We found Here s What Happened According to Our that SPIRE had a great reputation and we liked that Members the credit union was smaller than other options. We Beyond the numbers we ve received positive feedback felt we would get better service and better rates. The from members like See and Van Ostvig. See shared HomeAdvantage program meant that SPIRE could their experience with our new real estate program and provide everything we needed for our home search. 33 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M TAB MORTGAGE LENDING Plus the Cash Rewards was very attractive The combination of all of these things is why we opted to become members and get our mortgage from SPIRE. Credit union members want to know that their CU can help make the (often emotional) journey to homeownership easier. HomeAdvantage allows us to provide enhanced member services and answer that need. It accomplishes this by helping our mortgage team identify and support those members who are considering a home purchase but have not yet fully committed to the process. SPIRE did a really nice job of helping us. This wasourfirsthome sowedidn treallyknowwhatwe were doing. They explained everything to us let us know what we needed to do what needed to be signed and when it needed to be done. SPIRE was also able to work directly with our real estate agent and copied us on their email interaction so we were always in the loop with that relationship too. For members HomeAdvantage provides all the toolstheyneedtofindtheirperfecthome.Theyaccess HomeAdvantage from our SPIRE website and from there they can search for homes set up MLS property alerts and connect with qualified local real estate agents. We used HomeAdvantage exclusively for our home search. My husband set up searches so listings were automatically emailed to us. We were able to pinpointlocations determinedistancefromhisoffice look at schools ... all the things we needed. We also found our real estate agent through HomeAdvantage. It was very important to us that our agent was familiar with where we wanted to live. We were able to find someone who actually lives there. Once we began working with the agent he helped us customize our search criteria so the listings from HomeAdvantage wereanevenbetterfit.Itwasveryeasytouse. Additionally the program provides savings to members at closing through HomeAdvantage Cash Rewards. This is a feature our members have been 34 C R E D I T U N I O N B U S I N E S S thrilled with. When they use a real estate agent in the HomeAdvantage network they qualify to earn a cash-back benefit equal to 20 percent of the agent s commission for each transaction. The average savings is 1 500 per transaction so members who use a qualifiedagenttosellandthenbuyapropertyearn We put our Cash Rewards toward closing costs which was a very nice way to save cash. With what we saved we were able to buy new furniture for our new home. This was great because we didn t have any furniture especially for the family room where we needed a couch. Now six months into our new program I believe our two-phase approach has been smart. Launching the HomeAdvantage program first--a step that is attracting more business into our mortgage pipeline-- provides time for SPIRE s mortgage team to adjust to higher volumes before taking on the servicing aspects. The full program will be operating by mid-2018. Once that happens we expect that SPIRE s membersatisfactionmetricswillconfirmthatthiswastheright move. And we expect that our purchase mortgage volume will increase over time as we begin to really build our lead pipeline and use the marketing tools available through HomeAdvantage. Cash Rewards twice TURN ON YOUR LENDING DEPARTMENT withTEAMBUILDER. 4 LENDING SOLUTIONS C U B U S I N E S S . C O M teambuilder buy 2 0 1 7 O C T O B E R MORTGAGE LENDING TAB About SPIRE Credit Union A full-service financial institution proudly serving Minnesota and Wisconsin residents since 1934. SPIRE is committed to providing smart products great rates and excellent service with agoaltoimprovethefinanciallivesforbothpersonal and business members. SPIRE has 17 branches across the metro and throughout northern Minnesota. About CU Realty Services LLC CU Realty Services provides real estate services to credit unions across the nation helping them increase their purchase mortgage business. Launched in 2001 the CUSO has worked with more than 100 credit unions and mortgage CUSOs nationwide to offer its turnkey real estate program HomeAdvantage. Through the program credit union members can search for homes research neighborhoods calculate costs of homeownership connect to experienced real estate agents and earn HomeAdvantage Cash Rewards. By offering this program to members credit unions are able to attract identify and engage more home buyers and consequently close more loans. To learn more visit 35 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M CU C O LLEC TION S BY MIKE HALES T What is a Form 1099-C 8. The expiration of non-payment testing period. The event occurs when the creditor has not received a payment on the debt during the testing period. The testing period is a 36-month period ending on December 31 plus any time when the creditor was precluded from collection activity by a stay in bankruptcy or similar bar under the state or local law. Enter H in box 6 to report this identifiable event...The creditor can rebut the occurrence of this identifiable event if (a) a creditor (or third party collection agency on behalf of the creditor) has engaged in significant bona fide collection activity during the 12-month period ending on December 31 or (b) facts and circumstances that exist on January 31 following the end of the 36-month period indicate that the debt was not cancelled. Significant bona fide collection activity does not include nominal or ministerial collection action such as an automated mailing. Facts and circumstances indicating that debt was not cancelled include the existence of a lien relating to the debt (up to the value of the security) or the sale or packaging for sale of the debt by the creditor. he issuance of IRS Form 1099-C Cancellation of Debt by credit unions has been the subject of controversy for several years. In December 1996 the TreasuryDepartmentandIRSissuedfinal regulations requiring the issuance of a Form 1099-C upon the occurrence of an identifiable event and listed eight identifiable events that would trigger the obligation (1) a discharge of indebtedness under the Bankruptcy Code (2) a cancellation or extinguishment of an indebtedness that renders the debt unenforceable in a receivership foreclosure or similar proceeding in a federal or state court... (3) a cancellation or extinguishment of an indebtedness upon the expiration of the statute of limitations for collection... (4) a cancellation or extinguishment of an indebtedness pursuant to an election of foreclosure remedies by a creditor that statutorily extinguishes or bars the creditor s right to pursue collection of the indebtedness (5) a cancellation or extinguishment of an indebtedness that renders a debt unenforceable pursuant to a probate or similar proceeding (6) a discharge of indebtedness pursuant to an agreement between an applicable entity and a debtor to discharge indebtedness at less than full consideration (7) a discharge of indebtedness pursuant to a decision by the creditor or the application of a definedpolicyofthecreditor todiscontinuecollection activity and discharge debt and (8) the expiration of a 36-month non-payment testing period. Historically many credit unions have filed a Form 1099-C under the impression that the passage of 36 months without payment renders the debt uncollectable. The IRS instructions have at best been vague and ambiguous PUT THESE TOOLS TO WORK FOR YOUR CREDIT UNION Abandoned Capital Restoration Prior-Prime Member Recovery Predictive Analytics based on 1 million borrowers and 4 billion in assets under management since 1997 Tracking and Monitoring Intelligence No-obligation free portfolio valuation CU Revest LLC 404 Camino del Rio South Fourth Floor San Diego CA 92108 858.467.7251 949.291.6363 mhales 36 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M TAB In an effort to clarify the issue In October 2005 the IRSOfficeofChiefCounselissuedthefollowing You state that although your organization does not actively pursue collection on all of the debts it purchases it intends to pursue collection in the future. You state that if your organization is required to file Forms 1099C Cancellation of Debt its ability to collect will be significantly impaired because (1) courts may view the filing of a Form 1099-C as a written admission on the part of your organization that the debtor no longer owes the debt and (2) a debtor may be less willing to make payments if he or she receives a copy of the Form 1099-C. To briefly address your concerns about whether courts may view the filing of a Form 1099C as a written admission that the creditor discharged the debt and that debtors would be less willing to pay after your organization files a Form 1099-C you should note the following. The Internal Revenue Service does not view a Form 1099-C as an admission by the creditor that it has discharged the debt and can no longer pursue collection. Does a 1099-C cancel a debt obligation If a credit union issues a 1099-C is it barred from future collection efforts Even in the face of this position by IRS courts have been divided about whether the issuance of a Form 1099-C by a creditor actually cancels the debt. While somecourtshaveupheldtheviewthatthefilingofa Mr. Hales is Executive Vice Form 1099-C is for informational purposes only that President and Director of the debt has not been cancelled and that IRS does not Strategic Relationships with CU have the authority to cancel debt others have viewed Revest LLC a multiple credit the issuance of a 1099-C as evidence of the creditor s union owned Asset Management intent that the debt is extinguished. This has left credit CUSO which has restored millions unions between a rock and a hard place the federal requirement to issue a 1099-C vs. the right to pursue inabandoned capital and recovered thousands of priorprime members for their credit union clients. collection of a debt lawfully owed. After the issuance of proposed rulemaking in 2014 the IRS reviewed several comments and agreed that because reporting under the 36 month rule may not reflect a discharge of indebtedness a debtor may conclude that the debtor has taxable income even though the creditor has not discharged the debt and continues to pursue collection. Issuing a Form 1099C before a debt has been discharged may also cause the IRS to initiate compliance actions even though a discharge has not occurred. (81 FR 78910). As published in the Federal Register on Thursday November 10 2016 the 36 month rule has been removedfromthelistofidentifiableevents.Absentthe existenceofsomeotheridentifiableevent thereisno longer a requirement to issue a Form 1099-C because the borrower has gone 36 months without payment or simply because the balance has been charged off. The section The expiration of non-payment testing period (theprioridentifiableevent 8 expirationof non-payment testing period provision under which creditors would issue a 1099-C with H entered in box 6 ) in the 2016 IRS Instructions for Forms 1099A and 1099-C has been completely removed from the 2017 Instructions. In other words credit unions should no longer issue a Form 1099-C simply because a borrower has not made a payment during the preceding 36 months. Resolving the dilemma. Finally. 37 C R E D I T U N I O N B U S I N E S S O C T O B E R 2 0 1 7 C U B U S I N E S S . C O M A cold-pressed dilemma. A hot date for dinner. Every transaction has a story. Sometimes small decisions have the biggest impact. That s why PSCU offers a robust suite of card programs that address your members needs at every step of their day. As the nation s leading CUSO we provide feature-rich Visa and Mastercard programs that attract members and help you earn their loyalty. Life doesn t stop. Neither do we. That s our story of service. credit 844.367.7728