ORLANDO, Fla. - Credit unions seeking to boost lending and significantly increase ROA would be wise to do something counterintuitive - significantly slash lending staff, according to one analyst who is reporting robust numbers in credit unions that have done just that.
Brett Christensen, who heads Euless, Texas-based CU Lending Advice LLC and who previously headed up lending at Clark County Credit Union in Las Vegas, said credit unions serious about improving lending need to "take charge" of the process and rethink their approach to policies and personnel. In particular, Christensen urges credit unions to centralize and shrink their lending function and to staff the department with natural sales people motivated by performance pay, to separate the sales and service departments, and expand into more D and E quality loans.
"Some of your people are better than others at this selling thing, and some of them aren't very good at it," Christensen told the CUNA Lending Council's annual meeting. "It doesn't matter what credit union you're at, the biggest number you should be looking at is your employee productivity. No matter what size credit union or what state you're in, when I ask front-line staff about their day all will say, 'We're so busy.' And I ask, 'Busy doing what?'"
Not Good At Division
Christensen said that at many credit unions when he divides monthly loan volume by the number of people involved to determine a daily average, the numbers are "depressing." At most CUs, he said the average is $2,000. As he made clear, that figure should and substantially higher.
"Most good lenders get $100,000 to $300,000 a month, per employee; that's about $5,000 to $10,000 a day," he said. Christensen said he is aware of one lender at a credit union who has been doing $3 million in disbursed loans per month from a centralized call center; the same young man also sold 71 GAAP policies in a month. "I've been in credit unions where 40 people didn't make $3 million in loans in a month," he said.
As noted, Christensen, who said he has visited more than 500 credit unions, strongly advocates lending be centralized at a call center because it's easier to be "110% with one's voice" and "from a management perspective, I can get my employees even busier."
"Some of you are hating life because of your ROA right now," he observed. "You need to either grow revenues, cut expenses or both. What most of you need to debate in senior management is, are you overstaffed, or grossly overstaffed?"
Christensen said he personally opposes expanding via branches, saying branches only lead to ballooning costs and the only things a member can't do by phone or electronically that can be done in a branch is buy stamps, get notary services or use a bathroom. "You can get all of your lending done with one-third of the employees you have now," he said. "A lot of your troubles get easier if you get fewer people involved."
Overly Conservative At Underwriting
Another pitfall for credit unions that might have gotten everything else right, according to Christensen: overly conservative underwriters. "I know this is a tough conversation to have in a lending meltdown, but if you plan to chase just A and B paper, well, bless your hearts. They want everything for free and you won't make a dime on their loans. There are plenty of people with bad credit who need a car to get to work every day and there are plenty of people who have bad credit who will pay you.
"Some of you are afraid to charge 14%, 15%, 16% if you need to," he continued. "There is no job that touches the bottom line more than a good, central underwriter. If they take on loans appropriately that can be a huge, huge financial benefit in additional interest income."
Christensen, who called turning over training to the HR department a "fatal mistake," acknowledged his "biggest fear" is credit unions that take on more risk and then do so poorly.
He cautioned many CUs have gotten gun-shy over D and E paper due to indirect auto loans gone bad. "Too many overreact and pull out completely," said Christensen. "The problem is indirect D and E, not direct D and E."
