NEEDHAM, Mass. (5/2/08)--Credit unions whose bread and butter loans are auto loans may face increasing delinquency rates, but maintaining the status quo in current collections practices is no longer an option for auto lenders, according to new research. Like other types of consumer lending in the nation, auto loans' delinquency rates are increasing, with the 60 days past due category rising 25% between the second and fourth quarters of 2007, said TowerGroup. Change will be mandatory to help lenders survive current market conditions that are creating a sharp increase in collections volume, said the Needham, Mass.-based financial services research and consulting firm. Lenders do not want to repossess cars, and auto owners want to keep their cars. Unlike real estate investors, auto buyers don't speculate on auto purchases hoping for appreciation in value, and they don't try to "flip" the car to make fast money, said TowerGroup. Because auto loans involve a fixed interest rate and a fixed monthly payment, a delinquent payment is a sign of trouble auto lenders can't ignore. Instead, they should dive right in to address delinquency problems on a number of fronts, the firm said. TowerGroup identified best practices in collections and delinquency management, which fall into three categories: people, process and technology. The "people" category encompasses initiatives ranging from managing the staff already in place as collectors, to capacity planning, to properly training and supporting collections staff and offering the right staff incentives at the right time. The "process" category covers areas from member/customer segmentation strategies and approaches, to rewriting loan terms if necessary, to changing front-end processes and benchmarking performance. The "technology" applications exist to help lenders combat growing delinquency rates and mitigate losses. Lenders should think beyond the existing collection practices to appropriately leverage IT resources, said TowerGroup. The report, "Stay in Your Car Ma'am: Best Practices in Automotive Finance Collections," is authored by Bobbie Britting, a senior analyst in the consumer lending practice at TowerGroup.