CUNA Mutual's CEO Sees Growing Role For Company In Helping Increase Lending

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As the bread and butter of credit unions' existence, making loans has always been a top priority. And that's exactly why CUNA Mutual Group (CMG) is looking for more ways to help credit unions grow their loan portfolios.

With a new call center owned in partnership with state leagues, as well as Loanliner.com and the Loan Link Center, CMG is offering itself as an outsourcer for a variety of lending-related activity, or even just as a backup resource to credit unions, according to CUNA Mutual CEO Mike Kitchen.

"The new call center is running 25,000 loans per month," he told The Credit Union Journal. "When you tie that together with Loanliner.com and the Loan Link Center, it allows credit unions to offer multi-channel delivery of loans. Our major initiative right now is how to help credit unions grow their lending practices."

And that's not necessarily easy in today's environment. "Circuit City gets about 100% of its profit from the financing. Sears gets about 50% from financing. Wal-Mart is talking about getting into lending, too," Kitchen observed. "We want to ensure credit unions have the ability to compete, and to do that they have to have 24-by-7 service."

For CUNA Mutual, of course, increased lending at credit unions also means increased sales of the company's credit life products. Among its other lending- related endeavors is a new twist on an old idea. The old idea is pre-approvals. The new twist: proactive lending.

"The idea is to put credit into the hands of your members before they even need it," he explained. "The intent is to get people to understand they have credit before they actually need it, and to show them how different kinds of credit have certain advantages."

For example, the "best" loan for a consumer is a mortgage loan because of the tax advantage, Kitchen suggested. Second to the mortgage is a home equity loan or home equity line of credit, again because the tax advantage is still there.

Additionally, these loans typically have better interest rates than credit cards, allowing credit unions to position the products as options for more than consolidating debt or making home improvements.

CMG is working with CUNA Credit Union, just across the street in Madison, Wis., on a pilot of the proactive lending approach. "This allows us to make sure our staff has the credit they deserve, and then if it works here, it could serve as a model for others," Kitchen noted. "Now, when you go out to buy a car or do work on the house or make a major purchase, you already have credit available to you. We've opened about 60 lines of credit so far. I've had some calls and letters from people thanking me for this, saying 'I just saved $200 a month or $300 a month by doing this.' You do that for your members, and they will love you forever."

The program is set up so that borrowers can pay off or pay down any time they want. "If you get a bonus of $3,000 next month, you can go ahead and pay your line of credit down so you have credit available for other things in the future, for example," he said.

But it isn't just external issues, such as assisting credit unions in boosting their loan portfolios, that has taken CUNA Mutual's-and Kitchen's-time. The decline in credit union lending and the sluggish economy has meant CUNA Mutual was forced to layoff a small portion of its staff and freeze salaries late last year. But unlike many companies, CUNA Mutual's entire staff had at least some say in these decisions.

"We've worked very hard on communication, making sure our staff knows the financial situation of the company is," Kitchen said. That's no mean feat for a company that employs some 6,000 people worldwide. While Kitchen wasn't happy about having to let anyone go at all, he did point out that the staff cuts amounted to less than 2% of its staff-and the firm did end up hiring some of them back.

"Most in our industry had to layoff a lot of people," he related. "The world has changed, with Sept. 11 and other disasters, and with health care costs skyrocketing. We asked our staff to give up salary increases, and the staff really got engaged in that. Increases are usually processed on April 1, so when April 1 came along I wondered if we would hear some complaints, but there wasn't a peep. And let me be clear, no one got increases-not me or anyone else, no one. We had a lot of discussion about it. They were very energized about this because we weren't doing what everyone else was doing. Instead of being unhappy they didn't get raises, they were happy that we worked through it together. I think we can be very proud of what we did here."

But how does a company the size of CUNA Mutual hold a staff meeting?

On a quarterly basis, Kitchen gets every staff member "in the room" using virtual conferencing to reach out to the employees who don't work on the Madison campus.

"I know it's clich? to say that people are our most important assets, but I really believe that," Kitchen offered. "Instead of having things always come from senior management from on high, we let people take care of themselves and be part of the whole. It's the power of one, and I know not everyone buys into it, but a lot do. One of the reasons people didn't gripe about not getting any salary increases was that they could feel like they had each made a major contribution to the success of this company."

Meanwhile, the company continues to look to new markets, including outside the U.S. The growing cooperative network in China is an example. Kitchen said he hopes to forge a partnership with China's credit unions, but the SARS situation has slowed things down some.

"We do want to encourage cooperative development anywhere in the world, but we're not in a position to actually start (credit unions)," Kitchen advised. "But that's why we support The World Council of Credit Unions. Our hope is that there will be more cooperatives in more countries ven in the U.S., there are people, especially in the lower levels of society, that really don't have access to financial services. Credit unions are doing what they can to reach out to these people, and we want to help them do that."

Other areas of opportunity include member business lending, an area that CMG hasn't gotten very involved with to date, but look for that to change in the future. "We've seen a lot of interest in that," Kitchen said, noting that a business lending vendor that had started expanding into the credit union market recently called it quits. "They were making significant inroads into credit unions, but then they essentially shut down their operations, so credit unions that had been working with them have been coming to us, asking us how we can help."

And that's exactly the way it should work, Kitchen said, "credit unions come to us, and we're always here for them."

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