Offer To Pay Out Cash Serves To Bring The Loans In At Virginia CU

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CU: Virginia Beach Schools

Category: Special Loans

Cash is always a good lure.

But officials at Virginia Beach Schools Federal Credit Union didn't really know just how good until it ran a three-month promotion promising $100 if it couldn't beat members' current vehicle loan rates by 2%.

"We were blown away," said VP-Marketing Amy Wisilosky. "We thought we would get some people in, but we had no idea the amount of loan volume it would generate."

During July, August and September of 2004, the promotion aimed at its underserved segment, pumped up its vehicle loan portfolio to $3.9 million, $1.3 million over the previous year.

While 39 members received the $100 payout, 10 still received refinanced their vehicles with the $56-million VBSFCU, taking the total number of vehicle loans generated during the three months to 248.

"We reached an all- time loan portfolio high," Wisilosky said, adding that she had to tone down the post promotion marketing efforts in October and November because loan officers couldn't keep up with the demand.

Their loan portfolio jumped from $27.4 million in July, to $30.59 million in November, a $3.19 million increase in loans.

This was a $9-million dollar increase from their previous November's loan portfolio of $21.5 million.

"We had lemon trees throughout our lobbies advertising the promotion," she said. The entire membership was also notified of the promotion via statement inserts. In addition, low-income families were targeted through direct mail.

Equally important to a credit union trying to break away from only serving "A" and "B" members, she said, the $56-million VBSFCU coupled the promotion with financial education about credit reports.

"During the loan process, we tied in credit education and looked for opportunities to refinance loans and credit cards from other financial institutions," she said.

A typical conversation would go something like this: "I see you are close to your maximum available balance with your ABC bank credit card," the CU employees says to the member applying for a vehicle loan. "What kind of rate are you paying? Wow, that is high."

She said it provided a great segue for loan officers to explain credit scoring.

"We would take at least a half-hour to an hour talking about how credit reports work," Wisilosky said. "We made sure they understood everything."

She said the employees felt good about their role in helping people who truly wanted to improve their financial situations but didn't have the proper tools.

And the members were absolutely thrilled, she said.

We're Not Joking

"People thought we were joking when we said we could refinance and show them how to pay us less," she said, adding that those members who came to the realization that it was possible now have become "raving fans."

Those who followed a plan to improve their scores were invited to return in three to six months for review and possible refinancing for an even better rate, she said.

"Score enhancement led us to increase our overall loan portfolio due to the cross selling opportunity during the car loan application review process," Wisilosky said. "It also educated hundreds of members and helped many get out of financial difficulty."

While the $100 lure is gone, Wisilosky said, the credit union continues to offer free credit scoring, promoting it in newsletters and on the website.

Employees are even offer incentives to help educate members.

Wisilosky said she was very pleased with the promotion, but said she was bothered that more "A" and "B" members took the lure.

"If I were to do it again, I probably would have been a little more cautious with the payouts," she said. "We had more A and B members in than we wanted."

But, even some of them who collected their $100 still refinanced, she said.

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