FT. LAUDERDALE, Fla. -
Take the $266-million City County Credit Union here, where the signature loan still has a special place.
"We have a large number of members who are credit-impaired," explained Chief Lending Officer Lloyd Gill, who is also vice chair of the CUNA Lending Council. "About 34% of our members have a credit score under 600. And what we have found is that the old-style signature loan works well for them. It's a better way than a credit card for them to manage their money, and a better way for us to manage the relationship."
City County originates an average of about 200 signature loans each month. "Looking at May, we had 164 signature loans totaling $611,000. The top two reasons listed for the loans were debt consolidation and paying property taxes or homeowners insurance," he reported, noting that issues with property taxes and homeowners insurance are big issues in hurricane-prone Florida.
Though CCCU sees its signature loan as a year-round product, Gill said that like many other credit unions, the big promotions of the program center around holiday loans and summer vacation loans.
"The holiday loan is very popular. We did 693 of these signature loans for $1.468 million during November, December and January," he said. "The loan is for up to $3,000 for 12 months at 12.99%. That is not risk-based, and there's also a $24 fee. These loans perform well overall, and loss are really minimal."
While CCCU certainly offers some of the loans that have tended to eclipse the signature loan, such as credit cards and home equity loans, Gill said the signature loan is a great way to reach out to members with less-than-perfect credit.
"Members who don't own a home or don't have that equity to tap into; members who haven't established good credit-that's typically your subprime category," he said. "And they really need us."
State Employees CU, Raleigh, N.C., is another credit union that has stayed on top of its signature loan program.
"We have always had a signature loan. We have never abandoned it; it is part of the foundation of the credit union," said SECU vice president of personal lending Bobby Gardner. "Of course, we're a little different from most credit unions. We still don't do risk-based lending."
The $14.6-billion credit union offers both an open- and closed-end signature loan and currently has 37,814 closed signature loans totaling $149 million and about 157,400 open signature loans also totaling about $149 million (though the number of open signature loans could be skewed as some of them likely are inactive, he explained).
"Our delinquencies for these loans is not out of line with our other loans. As of last month it was at .43%," Gardner noted. "We don't actively promote them, but we've been doing these loan for so long that they've just come to expect that we have them, and we never try to steer members away from a signature loan, with the possible exception being if a home equity loan really makes more sense for the member."
And even without significant promotion, the signature loan is still considered an integral program. "It is still a widely used product," he said, adding that signature loans don't appear to be wanted or needed only by lower-income members. "We see it being used across the board. I can see how some credit unions have replaced the signature loan with credit cards or line of credit products, but we have never strayed from them. It has always been that if you had a share account, you can get a signature loan. And that's the way it still is."
READER RESOURCES
* www.cunalendingcouncil.org
* www.citycountycu.org
* www.pfcu.com
* www.iqcu.com
* www.becu.org
