Many traditional collection strategies like phone calls and physical mail can undermine the hard-earned member trust that credit unions value. However, there are ways for credit unions to make their debt collection strategies more effective. Join us in exploring three tips that emphasize honoring relationships while improving collection performance. 

1. Move to a Digital-First Debt Collection Strategy 

More consumers (especially younger generations like Gen Z and Millenials) find phone calls and physical mail to be intrusive. It’s part of the reason why spam filters and call screening software have risen in popularity. Plus, these forms of manual outreach are expensive, often leading to credit union staff members being unable to process it all on their own. 

The answer to this problem is taking a digital-first approach to credit union debt collection. Here are the key pillars of what this looks like: 

• Omnichannel Presence: A core principle of digital debt collection is meeting members where they are. This means using digital communication channels like email, text messages and voicemails drops that align with different member preferences. 

• AI-Powered Message Delivery: Debt collection software like Retain using AI to determine the right channel, time and message for each member to help optimize engagement. 

• Lower OpEx: By using debt collection software that automates sending messages through digital channels, credit unions’ staff have more time to focus on helping members with the most complex cases. It also allows the business to scale up accounts being serviced without increasing headcount.

2. Offer a Self-Service Portal to Enhance the Member Experience

When someone falls behind on payments, it’s not uncommon for that person to feel ashamed or embarrassed about it. Add in the personal relationship credit unions foster with their members, and it only adds to the resistance members might have about discussing their debt with staff. Self-service portals add a judgement-free space to debt collection strategies that empowers members to manage their debt. 

According to TrueML research, roughly 59% of consumers in debt want more flexible payment options. In fact, McKinsey research found that consumers digitally self-serve their debts at higher rates, are more likely to pay in full and have higher levels of customer satisfaction. Self service gives members access to their debt 24 hours a day without the “shame factor” mentioned above. 

Every time a credit union empowers a member to “self-cure” a debt through a portal, it saves on operating costs. Self-service payment portals can also be set up to give every member the same disclosures to minimize the risk of human error with compliance. 

3. Leverage Digital Debt Collection That Leads with Empathy

Many credit unions approach debt collection strategy through the lens of “saving the member”. The ultimate goal is to find a way to get every delinquent member back into the community. One of the best debt collection strategies to do this is to lead with empathy. Being empathetic to a member’s situation leads to higher recovery rates and strong brand loyalty. 

Debt collection software like Retain acts as an extension of your team to offer empathy to members. A digital-first collection approach archives this by: 

• Honoring member communication preferences. The majority of consumers prefer being contacted by digital channels from businesses. 

• Leveraging AI to personalize outreach. It helps members feel valued by their credit union by providing a customized experience they deserve. 

• Empowering members to view and manage the details of their debt when it’s most convenient for them. This frees up staff to assist members who need the most one-on-one attention. 

Members don’t want a one-size-fits-all approach to any aspect of the credit union experience. Digital debt collection that’s powered by AI makes it possible for your business to be more flexible and empathetic. Every member is being communicated with as an individual, in a way that’s relevant to their preferences and needs. 

Get Better Recovery Results and Better Member Retention with Retain

Retain by TrueML Products is white-label debt collection software designed to help credit unions collect more while spending less. Improve the management of your early-stage delinquencies by automating digital communications. Personalize outreach based on engagement from your members and millions of consumer touchpoints. Ready to improve repayment performance without increasing operational costs? Get in touch with the Retain team today to learn more.

At the heart of these challenges is a sharp increase in delinquency rates, which are exceeding even the worst levels seen during the global financial crisis of 2008. With rising inflation, high interest rates, and financial strain on borrowers, credit unions are facing a daunting task of managing these risks while continuing to serve their members.

The good news is that there are SaaS solutions for credit unions to help mitigate the impacts of rising delinquencies and improve recovery efforts. These AI-driven digital communication tools may hold the key to streamlining collections, enhancing member experiences, and reducing risk exposure.

Let’s first take a closer look at the delinquency and debt collection challenges credit unions must navigate in 2025.

Debt Collection Challenges for Credit Unions in 2025

As mentioned above, the credit union industry is grappling with increasing delinquency rates and charge-offs. This is reflected especially by the struggles of many younger members who face rising living costs and student debt. According to the NCUA’s 2025 Supervisory Priorities, loan delinquencies have surged by over 10% year-over-year. At the same time, net charge-offs are at their highest levels since 2012. Notably, credit card loan delinquencies have outpaced all other loan types, with a delinquency rate of 91 basis points (bps) in Q3 2024, the highest seen in a decade.

For credit unions, these trends are most visible in areas such as:

• Auto Loans: Delinquencies for auto loans have steadily increased since mid-2022, a trend exacerbated by high inflation and rising interest rates. As of 2024, 30+ days past due (DPD) delinquencies are at their highest levels for both small and large credit unions, signaling growing financial stress among borrowers
• Unsecured Credit Cards: Credit card delinquencies have also climbed, with rates for 30+ DPD and 90-120+ DPD loans rising during the second half of 2024.
• Unsecured Personal Loans: Delinquencies have risen across the board for unsecured personal loans, but 30+ DPD delinquencies among smaller credit unions remained lower than those of fintech lenders, and larger credit unions managed to level off in 2024 after a sharp uptick in early 2023. Yet, even though they may be lower than some of their fintech counterparts, delinquencies are still on the rise.

Given these financial pressures, credit unions must adapt quickly to manage risk while continuing to provide value to members. This challenge is one of the reasons why SaaS solutions for credit unions have seen a surge in use.

Managing Delinquencies and Recovery Efforts with AI-Guided Automation

To address these challenges, credit unions must modernize their communication strategies in order to effectively engage members, especially for those either already in delinquency or on the verge of slipping. It’s no secret that consumers’ communication preferences have been shifting overwhelmingly to digital channels. But achieving better member engagement and liquidation rates is not as simple as sending one-size-fits-all mass blast email campaigns.    

Integrating advanced technologies like artificial intelligence (AI) and machine learning is one of the keys to member engagement and digital communication in 2025. The number of tools and services popping up with the “AI” label can make it tricky for credit unions of any size to know what solution is right for their use case.

How does AI and machine learning help in member communication and collections?

AI is a broad field that refers to the use of technologies to build machines and computers that have the ability to mimic cognitive functions associated with human intelligence. Machine learning is a subset of AI that automatically enables a machine or system to learn and improve from experience. Instead of explicit programming, machine learning uses algorithms to analyze large amounts of data, learn from the insights, and then make informed decisions.

For credit unions looking to engage past-due members and secure repayment, AI can be used in many different ways, from propensity-to-pay analytics to recommending communication channels. Many SaaS solutions for credit unions use automation guided by AI and machine learning to help reduce the operational strain associated with collections. By automating routine tasks, credit unions can focus their resources on high-touch member interactions while improving efficiency in their debt recovery efforts. This efficiency and prioritization of full-time employee (FTE) time will be critical as the year and its rising delinquencies continue.

While AI presents exciting opportunities, many credit unions are still hesitant to adopt these technologies due to a lack of clear strategies or resistance to replacing human interactions. However, when implemented thoughtfully, AI can enhance FTE efficiency and enable operations to scale without adding more headcount.  

By partnering with trusted service providers with proven track records of harnessing AI and machine learning in digital communication and collections, credit unions can navigate this complex landscape and select the right tools to support their unique needs and member base.

Retain by TrueML Products Delivers Success Through Patented Machine-Learning Engine

Our ready-to-use, white-labeled AI-driven SaaS solution for credit unions—Retain by TrueML Products—provides your business best-in-class digital engagement methods to manage your own in-house delinquency communications and reap the benefits of positive member experiences and pre-charge off repayment. 

Retain offers a digital communication platform that businesses across industries use to better engage customers in early stages of delinquency and recover more, sooner. Retain’s machine learning engine is informed by millions of customer interactions to optimize the content, channel and time for past-due communications, and can quickly scale to any portfolio volume. 

Retain’s machine learning engine is also informed by a highly experienced compliance team with more than 50 years of industry expertise. When regulations or case law evolves, and it impacts systems that rely on them, your programs require tweaking to stay in compliance. Monitoring changing regulations at the federal level is one thing, but ensuring you’re complying with various state and local regulations across geographies takes a lot more effort. By using code-based compliance functionality informed by legal expertise, you can take the human error element out of the equation and easily refine the system’s guardrails as needed.

While rising delinquencies and charge-offs present a significant challenge for credit unions in 2025, AI-driven solutions like Retain offer a powerful and cost-effective way to address these issues while improving the overall member experience. As credit unions navigate this complex landscape, leveraging AI and machine learning will be critical in managing risk and fostering sustainable growth in the years ahead. With the right solution and partner, AI can not only improve collections processes but also strengthen the bond between credit unions and their members during challenging times.

Meet rising delinquencies and the challenges credit unions face in 2025 head-on with an AI-driven SaaS solution that enhances the efforts of your FTEs and overall collections operations. Start with a consultation today!

Sources:

• Federal Reserve Bank of New York
• National Credit Union Administration
• Utah Credit Union Association
• CNBC

But with that growth comes the flipside: Total loans outstanding $1.59 trillion, and for the third quarter of 2023 the delinquency rate was 72 basis points, up 19 basis points from one year earlier.

Engaging with members, both before they miss a payment and after they slip into delinquency, must be a priority for all organizations—especially for credit unions with dedication to supporting their members’ financial health.

It’s no secret that consumers’ preferences have been shifting overwhelmingly to digital channels. With right-party-contact rates declining and consumers increasingly gravitating towards email and SMS, traditional calling models are facing historic headwinds.

But there’s a better way for credit unions to continue expanding financial access through lending, while empowering members with the tools they need to repay their loans. There is a win-win solution for credit unions and members.

Enter digital-first engagement through an optimized delivery platform designed with credit unions’ dedication to member experience in mind.

The concept of digital outreach isn’t new—email and SMS have been around for decades—but a digital engagement strategy involves more than just reaching members on digital channels. It involves using digital technology to support members throughout the entire repayment journey. This requires a provider to be able to:

• Reach members with the right messages and on the right channels at the right time 
• Tailor and optimize outreach over time to drive engagement, commitment, and follow-through
• Empower members to self-serve by providing information accessible whenever is convenient for them
• Scale operations to any volume, even in a remote-first environment, while maintaining full regulatory compliance 

For all of these reasons, digital engagement has quickly become the most effective path forward for the industry. Some of these credit unions, particularly the largest enterprises, will try to build parts of a digital operation in-house—but they’re likely to encounter numerous hurdles along the way.

Given the immense complexity involved—and the benefits of working with a provider that has performance data and expertise across many companies—the majority of credit unions seek out a partner to help them accelerate their digital delivery and engagement capabilities to reach delinquent members.

Unfortunately, it can often be difficult to evaluate the differences between one digital engagement solution and the next. Many providers use similar terms or make claims that are hard to assess critically. And the reality is not all of these solutions are created equal.

In our new eBook, The Credit Unions’ Guide to Digital Engagement for Past-Due Members, we take a deep dive into the key trends in members’ communication preferences, detailed look at the common hurdles implementing and optimizing a digital engagement strategy, and a full list of critical questions to ask when evaluating potential partners and their solutions.

Download the eBook for free here»»

Sources:

• Ibis World
• Statista 
• National Credit Union Administration