Superior Consumer Lenders
During the Great Recession
by Ben Rogers
Research Director
Why Are We Here?
2
Today’s Environmental Factors
Auto Lending
• In 2006, new auto loans were 18.1% of CU loan
originations. In 2010: 10.7%
• CUNA Mutual forecast: 2% vehicle loan growth in
next two years.
• Captives are back.
Bottom line:
Focus on recapturing loans; deepen relationships
with dealers
Sources: Federal Reserve; CUNA Mutual; Interviews3
Today’s Environmental Factors
Credit Card Lending
• Revolving credit fluctuated through summer 2011
but trending up. Credit unions capturing share.
• Credit card direct mail solicitations doubled in 2010
from 2009 levels.
• Credit unions win on rate, but rewards are the most
compelling driver for new accounts
Bottom line:
Focus on no-fee balance transfers; promote cards as
next product to indirect members.
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Sources: Federal Reserve; Acxiom; Bankrate; MSNBC
7 Habits of Highly Effective Lenders
Sales Culture
Consistent Underwriting
Refinancing
Market Power
Symbiotic products
Direct Lending
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Successful Consumer Lending
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Successful Consumer Lending
Methodology
• Isolated CUs >$50M
• 5% consumer loan growth in
2008, 2009, 2010 (used/new auto
and credit cards)
• 24 credit unions qualified with just auto
• 11 credit unions qualified with all three
• 3 CUs showed volatile ROA
• 11 agreed to be interviewed. All case studies
appear in the full report
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Successful Consumer Lending?
8
Successful Consumer Lending.
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7 Habits of Highly Effective Lenders
Sales Culture
Consistent Underwriting
Refinancing
Market Power
Symbiotic products
Direct Lending
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1. Sales Culture
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2. Consistent Underwriting
12
3. Refinancing
13
4. Market Power
14
5. Symbiotic Product Lines
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6. Direct Lending
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7. Indirect Lending
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3 Case Studies
Hutchinson Credit Union
$170M - Kansas
Baton Rouge Telco Credit Union
$194M - Louisiana
Acadia Federal Credit Union
$95M - Maine
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Hutchinson Credit Union
$170M - Kansas
Sales Culture
Consistent Underwriting
Symbiotic products
Direct Lending
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Hutchinson Credit Union
$170M - Kansas
• “Sales conversations” -- Across the desk or on
the phone; avoids direct mail
• Detailed product sheets with FAQs for each
employee (cross selling factors, relationship
suggestions, what to listen for, etc.)
• Cash incentives for mortgages, “stealing” loans,
fourth-product sale, GAP, etc.
• “No-no’s” policy
• Superior rates for Tier 2 borrowers
• Emphasis on mortgage
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• <10% indirect
Baton Rouge Telco Credit Union
$194M - Louisiana
Sales Culture
Refinancing
Indirect Lending
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Baton Rouge Telco Credit Union
$194M - Louisiana
• New loan manager in 2008 with Wells Fargo
sales experience.
• Indirect through a local six-credit union CUSO;
Baton Rouge Telco buys deeper than others.
• Anything indirect loan less than 650 FICO is an
exception; past auto loan key driver of exceptions
• A-paper indirect borrowers get pre-approved
credit card offer with welcome letter: 6.9% with no
balance transfer fee.
• Active data mining on outgoing payments.
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Baton Rouge Telco Credit Union
$194M - Louisiana
• Employees pull soft credit report with new
checking “Needs-based” selling
• “Pinching the tail” contests offer employees
social rather than monetary rewards.
• Cash rewards for GAP and credit life/disability
(“only” $20 to fend off hard sells to members)
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Acadia Federal Credit Union
$95M - Maine
Sales Culture
Refinancing
Market Power
Direct Lending
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Acadia Federal Credit Union
$95M - Maine
• Small town means loan officers know lenders and
vice versa.
•Teaching loan officers how to ask, then asking
why they didn’t ask.
•Only 10% of auto loans are indirect.
• Cross selling earns tokens redeemable for
corporate wear.
• GAP and warranty sales earn cash.
• Occasional targeted promotions.
• Interest rebates to drive loyalty. Word of mouth is
more effective than traditional advertising. 25
Thank You!
benr@filene.org