Why should credit unions sell their debt?
Credit Unions are unique financial institutions in the American landscape. Member-based and localized, many often are able to provide better and more personal service to their members than larger banks. However, credit unions often do not sell their charged-off loans – a practice which is natural to the large banks. Often Credit Unions just have not considered the benefits of selling their delinquent receivables. Below are several reasons why they should.
First and foremost is revenue. Debt sales provide instant cash which can be put to use, rather than bad debt sitting on the books hurting ratios. Usually, charged-off loans at smaller financial institutions become an afterthought and can sit for far too long, and become completely uncollectible. If they are sold, space and time are gained as well as a burst in cash flow.
Second is a relief for employees. Often at smaller financial institutions, loan officers perform several different duties, but their primary duty is making loans and managing customers, not collecting charged-off receivables. Selling the receivables allows loan officers to continue to provide customers with the service they need, rather than distracting loan officers from the more productive activities.
Third is member responsibility. Credit unions are far more customer-based than the large banks and have a closer responsibility to their members to maintain good business practices. Selling delinquent receivables allows a credit union to take an active role in handling all aspects of member services.
Credit Unions have an excellent opportunity in the current market, as prices of delinquent debt are relatively high. For a quick cash boost, relief from loan officer overload, and complete member service selling off charged-off debts could be a good strategy to consider.