DETROIT-Members began lining up at 3 a.m. for a special loan promotion at Detroit Metropolitan Credit Union.
DMCU has offered its "No Credit Check Easy Loan" since 2007, but sought to "raise the ante" this year when it more than doubled the amount of funds available as part of the specidl program.
Kathie Trembath, CEO at the $455-million, 22,000-member credit union, said Detroit Metropolitan made $1.2 million in "No Credit Check" loans available, up from $500,000 one year ago. In addition, it doubled the amount available for the loans to $1,000 and extended terms to nine months from six.
"It's been very successful for us," said Trembath. "Our delinquencies are low, our charge-offs are low on it and most of our members that file bankruptcy either pay this off or reaffirm on this loan so that they can get another one."
The No Credit Check Easy Loan carries a 20% interest rate, and members must have been with the credit union for at least six months, have five years on their job and have ACH set up with the credit union prior to the loan in order to qualify.
"A lot of people moaned and groaned that [the rate] was 20%, but on a $1,000 loan, it comes out to less than $90 in interest, which barely covers our costs since its such a short-term loan," said Trembath. Before Detroit Metro doubled the loan amount the rate was 18%. She added that the product is also priced as it is because no credit check is involved, and "by the time I pay all the staff and the overtime that's involved in processing all of these applications, there isn't a lot of money to be made on it. And then take out our losses...."
Calling Months In Advance
DMCU took applications for the loans over the course of three days, issuing the funds into members' savings accounts the following week. Because Detroit Metropolitan has offered the program for several years, Trembath said that members were calling a few months in advance to ask if it would be repeated for 2011. The credit union also promoted the loan through newsletters, its website and ads in local newspapers. Trembath said that about 90% of members use the loan to pay for holiday gifts.
"This year, I'm sure because it was for $1,000, we had people waiting in line for more than five hours," said Trembath, adding that some members lined up as early as 3:00 a.m. "I was floored. ... When I came to work that morning, [the line] reminded me of young kids buying concert tickets."
When Trembath arrived at the office at 7 a.m., the line already stretched from the front door down two city blocks. The total the first day, she said, was about 700 applicants.
Ultimately the credit unions issued 1,200 loans to members for some $1.2 million. The credit union did decline some applications, including for situations such as negative balances, delinquent accounts or insufficient time on the job.
Trembath said that as long as the credit union continues to make money on the loan-or at least not lose too much-it will continue to offer it on an annual basis.
"We don't do this to make money, because we don't make hardly any on it. ... What we dispersed this time is twice as much as we usually disperse," Trembath said.
