Booster Shots For Lending
Looking to boost lending?
Most credit unions are, and consultant Rory Rowland addressed just that issue to a room full of credit unions during the CUNA Marketing and Business Development Council meeting here.
Below are some of the tips shared and points made by Rowland during his fast-paced remarks:
* 0% financing is simply a bait-and-switch strategy and "consumers are confused there," said Rowland. "When you see the promotions you see a great big zero. But the big print selleth and the little print taketh away."
Rowland asked his audience, "What percentage of members qualify for and then take the 0% financing," he asked. The answer, he said, typically is around 2%. "That means that 98% aren't getting the special financing, so what do they get? Taken advantage of."
Rowland noted the dealership has no interest in what type of deal the customer gets.
* CUs have the opportunity to recapture loans. "If you don't look at the paid-off car loan report, you should. If you have a member who is an A or B file with a strong file, tell your loan officers that member automatically qualifies for the Visa."
He recommended credit unions continue using sertech.com, which has a relationship with CUNA, and which looks for members who have financed elsewhere and provides a report to the credit union. "The credit unions that do this best call the member up in addition to sending a letter. You let them know, 'we know you got a loan elsewhere, we can help you pay less.'"
He pointed to campaigns by Heritage Family CU and Sunmark FCU that said, "Earn $5 in five minutes." The credit unions said they would review the member's credit report and if they couldn't save the member money on a loan they would pay the member $5. (Another used the theme, "300 seconds to Savings. Ask us how."
* The most successful lenders have a mantra of "We make loans," according to Rowland. "You must ask for referrals. If an MSR sees a new car sticker, the teller has to turn the account number and a name over to a loan officer. One CU I know got eight new car loans in a week just by asking. Members must know we are in the lending business. We have credit in our name."
Credit unions, noted Rowland, have annual and monthly goals, but should also have weekly and even daily lending activities. "There is a strong correleation between training of employees and success in lending," he said. "I'm seeing a correlation in bringing employees in an hour earlier and keeping them an hour later and emphasizing the importance of lending. When you set goals, I'm convinced it works."
He suggested many credit unions suffer from the "reticular activation" system-we see what we're looking for. "Staff needs to be trained to see opportunities they haven't seen before," Rowland said.
* Every CU should use an MCIF to segment its membership, Rowland stressed. "Segment your members and make sure you don't lose your most profitable members. Know who is best in your credit union at working with members. You want to create a ninja team to attack and keep those members." One strategy on member retention is paramount: "Do no let your members close the account at the teller window.
* Credit unions that are successful lenders have flexible policies, "Because they know they are making the loan to a member, not the car." He said there is no need for a downpayment on used cars, which have already depreciated, versus a new car, which shows sharp depreciation.
* Time, according to Rowland, is absolutely relative and he recommended making loans fast, simple and easy. He also called for risk-based loan applications. "You have a very short application in your credit union. What do you need to run a credit bureau? Name, Social Security Number and date of birth. You might also want to ask how much do you want and what do you want it for. This might be difficult to do, but for A and B borrowers, you don't need anything more to make a good business decision. At Pacific Service CU in California, 80% of members who have a car have their car loan with the CU. They preapprove their members and they are told at every third contact they are pre-approved for a car loan.
* Regulators can recommend, but they can't demand. "If you have a good capital rating and a good charge-off rating and you are running a safe and sound institution, then you can get rid of debt ratios," he said. "I find that in Credit Union Land we are all calculating debt ratios, but the top 100 bank lenders do not."
* Make mortgages part of your business. "There are two simple ways to do this: automatically qualify members for a home equity line of credit when they get a mortgage.
* On the website, get a "one-click" loan application. "You've got to make it easy to find the loan application online."
"Studies have shown that if you have an application online and it's 20 lines or longer you'll have a 50% drop-off rate," said Rowland. "If you are not measuring your drop off rate, you are doing your credit union a disservice."