Return to Sender: How the Most Basic of Info Can Help Retain Members — Or Drive Them Away

Addresses are often an undervalued and overlooked area of credit union operations. This critical piece of information is used for member identification and to send time-sensitive documents and marketing materials.

Many credit unions think their member addresses are being verified through credit checks and identity verification solutions; however, these tools are using the address as an element to check credit or identity. They only make minor address corrections under high levels of certainty. A member's address is only one small piece of what credit unions' review for identity.

After all, how many address mistakes can really be made? The USPS estimates that about 5% of all mail is undeliverable as addressed and closer to 15% is delayed as a result of address errors. So, if your address quality is only average, you are probably experiencing inefficiency due to bad addresses. Think about everything for which your credit union uses addresses: Fair and Accurate Credit Transactions Act (FACTA) compliance, new member setup, monthly statements, annual reports, marketing offers-the list goes on.

With addresses being involved in so many strategic processes, what do bad addresses mean for your credit union? Your credit union could be spending more than it needs to on these processes or worse, losing business from members.

But not to worry; there is a simple way to handle bad addresses: verify their accuracy as they are entered the first time. With the delayed FACTA enforcement deadline having gone into effect on Aug. 1, credit unions should have finalized procedures to prevent and handle red flags to comply with the new regulations.

The Key Areas of Focus

While the act was issued on Jan. 1, 2008, many financial organizations are having difficulty interpreting guidelines and identifying appropriate conditions. Key areas creditors and financial institutions will need to focus on for red flags are account openings, business on existing accounts, and new activity on an account after it has been inactive for an extended period. These are the same areas that credit unions focus on when it comes to satisfying their members.

However, maintaining a high level of member service in all of these activities while taking a risk-based approach to comply with regulations can be difficult. Section 114 says that financial institutions must establish reasonable procedures that assist in identifying identity theft and other provisions require the review of address discrepancies. He provided address does not match what is recorded on a consumer report. While an address seems like such a simple component in verifying an identity, it is easy for staff (or members) to input this information incorrectly through a misspelled street name, missing information or a keyboard mistake.

There are five examination steps to determining if an address discrepancy does exist, including making sure that the credit union did indeed furnish the correct address for the consumer to the credit reporting agency. Verifying addresses up front, the first time members provide them, can help prevent this and other errors. While it will not solve all your red flag compliance needs, using address verification during the initial capture of member information can drive better results from your other compliance tools and processes.

Addresses play a large role in the member on-boarding process. Without an accurate address you cannot send members their welcome packet, debit card, checks and other crucial documents. By making address verification a part of your PATRIOT Act Customer Identification Processes (CIP) you can rest assured that members will receive their documents.  While a CIP requires credit unions to establish an address for all account holders, it does not require that you establish the address.  It is up to you to decide if your members are worth more than the bare minimum.

Take, for example, a member who lives in an apartment building or duplex. When opening their account they could have provided the address, "428 Oak St." but without the unit number, it's not an accurate address.  If you were to mail their confidential and time sensitive documents such as checks, bank cards or PIN numbers they may end up in the building lobby, free for anyone in the building to grab as they enter. Not only are you doing a poor job of ensuring member confidentiality, you are risking the loss of a member because they had a bad experience in the first 60 days.

Another critical part of an address that is frequently overlooked is the plus-four element of a Zip Code. While it is not required for mail delivery, it identifies to the USPS a geographic segment within a five-digit zip code, such as an office building or a city block. It enables the USPS to mail more efficiently and accurately, decreasing the potential for human error or misrouting. Many Americans are not familiar with this small, but important code in their address so they do not provide it when asked for their address. 

However, including the plus-four element on your mailings will increase the speed and accuracy of delivery. It is critical that credit unions collect accurate and complete information for new members up front in order to prevent mistakes from happening. All it takes is one minor address mistake to breach the trust between the member and their credit union.

Many members join a credit union for the personal experience that you cannot get with a large national bank, so do not give them a simple reason such an address error to leave.

Joel Curry is COO with Experian QAS. For info: www.experian.com.

Credit Union Journal encourages reader feedback. Letters to the Editor can be sent to Managing Editor Lisa Freeman at lfreeman@cujournal.com. Letters can also be faxed to 561-832-2939.