Paging Dr. Signature
CU: Pinellas FCU
Category: Special Loan Promo
Two loan products created to keep "credit-challenged" members at the $65-million Pinellas FCU from being lured to predatory lenders have come with added benefits.
Among them, financial counseling, credit repair and increased loan access for a broader segment of PFCU's FOM.
"Our field of membership consists of honest, hardworking members, some of which have limited disposable income and need help paying for an unexpected expense because they don't have significant savings," said Frank Sienkiewicz, EVP at PFCU. "There are others who don't understand the 'do's and don'ts' of credit management or have had their credit damaged due to life circumstances such as...unemployment or illness."
Sienkiewicz said a member of its credit union ambassador group-SEG employees that act as spokespeople for their company's financial needs-came up with the "Debt Recovery" and "Rainy Day" loans after seeing similar products at another credit union.
"To be honest, I was really hesitant at first," Sienkiewicz said. "Taking someone at their word and not looking at their credit report came with some obvious risk."
Upon doing his own research, he said, his fears were calmed. "It's been an incredible product from the members and institutional standpoint," he said. "It truly builds member loyalty."
Both products were targeted for members without good credit as well as those with decent credit but inconsistent cash flow to repay a traditional unsecured signature loan.
The Debt Recovery Loan offered a $500 unsecured loan without a credit check. Eligibility requirements included credit union membership for at least six months, job stability for at least a year, no excessive NSF activity, payroll deduction/direct deposit, and no past losses to the CU.
Sienkiewicz said it was marketed as a second chance loan for members interested in developing good loan paying habits and improving damaged credit. Members who participated also received credit and financial counseling to help them make better financial decisions in the future.
"The members who received the DR Loan appreciated the second chance and developed a true loyalty to their credit union for helping them when no one else would," Sienkiewicz said.
Proof of its success, he said: "There have been 260 DR Loans to date with only one delinquency. Sienkiewicz said the loan was so successful, that CU officials decided to continue to offer it indefinitely without making any changes.
"We have had no problems with it," he said. "We segregated this loan so we can really keep a close eye on the delinquencies."
The Rainy Day Loan was created for members with unexpected expenses such as car repairs, medical bills and storm damage repairs, but without the cash to make standard signature loan payments.
"The member determines what bi-weekly or monthly payment they can afford while still paying down on the principal and that's their loan payment," Sienkiewicz said. "Some of the PFCU members live paycheck to paycheck and this loan gets them the money that they truly need for emergencies and a payment amount their budget can handle."
Sienkiewicz said the loan products were just part of the effort to aid members.
The product was discontinued after its promotional period because "the demand wasn't that great," he said, adding that it will be reintroduced sometime after the new year in exactly the same format. "We think it's a wonderful concept for some of our membership living paycheck to paycheck," Sienkiewicz said.
The final element of this special loan promotion that pulled everything together was the creation of a formal loan review process.
"PFCU practices centralized loan approval and the loan underwriter, while bright, experienced and member-oriented, is extremely conservative- especially in unsecured lending," he said, adding that CU officials thought this "tight-fisted" approach was hindering some members from getting the financial assistance they needed.
"The answer was a formal loan review process that ensured each and every denied loan was forwarded to the next level of management for consideration," he said. For example, a loan denied by the underwriter would be referred to the loan operations manager. If he or she still denies it, it gets forwarded to the EVP.
"If the EVP also denies the loan, it is forward to the president/CEO for the final review and lending decision," Sienkiewicz explained, adding that since its inception, nearly 60% of all referred loans have been approved.
The good news, he said, "This increase in referred approvals has had absolutely no impact on delinquency or charge-offs."
Sienkiewicz called the simplistic yet comprehensive process a "win-win" for the entire membership. "Increased unsecured loans and the higher rates they bring have boosted Pinellas' blended interest rate," he said. "This higher blended yield allows the credit union to better serve our membership and give back to all our members."