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October 31, 2012
in Strategy
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October 31, 2012
in Strategy
Connect with me
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Helping neighbours out during hard times is part of what it means to be a local credit union

October 2008. It’s still pretty fresh in everyone’s memory, largely because the effects of the market meltdown fuelled by massive high-risk sub-prime lending practices of major financial institutions continue to be felt, especially in the United States and Europe. Though Canada was not hit nearly as hard, many Canadians found themselves unemployed or saw their businesses slow to a snail’s pace.

Though there were reports of early signs of economic recovery, it soon became obvious that road would be a long one. And First West’s credit recovery team discovered the road was feeling awfully long for members whose finances were adversely affected by the downturn. Branches across First West reported an increase in members seeking advice to help deal with financial hardship brought on by the market fallout.

So early on in “the Great Recession,” First West sharpened its focus—but not its teeth—on members at risk of insolvency. The result was a program driven proactively from the branch level to assist members in financial hardship, rather than a head office-directed, last-resort debt reclamation activity.

“The market downturn presented us with a new opportunity,” says Paul von Saarn, senior vice-president of enterprise risk management and chief credit officer at First West. “Members affected by the slump were actively seeking help at the branch before their situations got really out of control. We realized we could enhance the credit union’s local focus by partnering more closely with our branches.”

The outcome was an approach that puts the first steps of assistance in a common-sense place, where members are most comfortable and are known best: in the branch, with their banking professional.

“Traditionally, members at risk of insolvency dealt mainly with our credit recovery team at head office to work out their situation,” Paul says. “Now, we’re able to be even more responsive by having our branch team members—those who know the member best—lead the conversations with the member and walk through the assistance process. The credit team still provides any support our branches need, but the assistance process has become a locally initiated decision.”

Beyond helping with the financial wellbeing of members, the assistance program also has significant operational implications for the credit union. When considering that each instance of member hardship has the potential to become a worst-case scenario—in which legal action is required to address insolvency—the program shines. Since the 2008 market disruption, the credit union has stood beside 324 members to help them get back on track in the face of financial hardship. If each of those cases had moved to litigation instead, the credit union could have been facing losses in the tens of millions of dollars. Factor in potential unsecured debt write-offs—also in the millions—and the value of helping members right their financial ship couldn’t be clearer. It’s a win-win situation, with Valley First and Envision Financial branches reaching out a helping hand to members in hard times, while operationally, the credit union avoids scenarios that impact the bottom line.

“First West wants to make a real difference in the financial lives of our members,” says Paul. “The assistance program aligns with that—we believe in treating people fairly, valuing everyone. If all we’re focused on is foreclosing to get our money back and cutting our losses at any cost, we’re not being true to who we say we are.”

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