SOUTH JORDAN, Utah-Unsecured loans to pay for elective medical procedures or big-ticket retail items such as Jacuzzis and central air conditioning at the point of purchase could become the next great opportunity for credit unions following in the footsteps of indirect auto loans, some industry experts say.
Just as is the case in other types of lending, Lifestyle Lending Solutions CEO/Founder Kirk Harris sees huge upside for credit unions in the lifestyle lending arena as firms like CapitalOne, GEMoney and Wells Fargo dial back on their books of business.
"This time of the economy has boosted our business," he said. "Credit unions are the anchor in this crazy economy."
Indeed, Harris said Lifestyle Lending Solutions, a company that provides turnkey software allowing for online applications at medical offices and retail providers, has seen loan applications skyrocket by 246%, funded loans have increased by 280% and the number of providers has jumped by 161% since June. Lifestyle Lending Solutions's average loan is about $4,800.
Instead of paying exorbitant interest rates that could jump as high as 30% retroactively, credit unions charge between 10% and 12% for A+ credit members, ranging up to 17.99%. Doctors also benefit, as they do not have to pay between 6% and 12% of the cost of a procedure to CUs as they do other lenders.
Pat Simmons, lifestyle lending manager at Mountain America Credit Union, a Lifestyle Lending Solutions partner, said the $2-billion credit union has seen volume spike by 170% in the last three months.
"I don't think that trend will continue but if it stays anywhere near half of that, that will provide an extremely viable program for the credit union," he added. "I can't see anything but an upside to it. The most beneficial thing is that you have an opportunity to reach out and touch people that you had no opportunity to get to before. Ninety percent of all of the loans we have made are new members, which gives us an opportunity to cross sell products and create new relationships."
The market is also constantly evolving, he noted, pointing to the partnerships Lifestyle Lending Solutions, its credit unions and retail providers have made. Though the firm now boasts hot tub and big appliance retailers, the idea of working with retailers in general came from an Ariz. credit union working with a central air provider.
"In Arizona, (air conditioning) is more of a necessity," Harris said. "Timing is of the essence, and if your air conditioning broke down, it was $2,000 that (members) needed right away."
In practice, the loans have not hurt Mountain America's risk management one bit. "We critically analyze every loan that comes in, and with a year's worth of loans on the books to date we have not had single a delinquent loan," Simmons said, noting the credit union has hundreds of such loans on its balance sheet.
Harris sees the credit crunch as the perfect time for credit unions to increase their share in lifestyle lending and tear away at the existing culture in this market.
"In the short term we will see a boost in providers on the system and using the system, he said. "We have a window of 12 to 18 months to really sprint, and use the advantages of credit unions versus (the banks). By the time we start the recovery, (providers) will have now learned a new system, and those providers will be 'converted' to the credit union system."
