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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%
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Superior Consumer LendersDuring the Great Recessionby Ben RogersResearch Director
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; Interviews 3
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. Sources: Federal Reserve; Acxiom; Bankrate; MSNBC 4
7 Habits of Highly Effective Lenders Sales Culture Consistent Underwriting Refinancing Market Power Symbiotic products Direct Lending Indirect Lending 5
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 7
7 Habits of Highly Effective Lenders Sales Culture Consistent Underwriting Refinancing Market Power Symbiotic products Direct Lending Indirect Lending 10
3 Case Studies Hutchinson Credit Union $170M - Kansas Baton Rouge Telco Credit Union $194M - Louisiana Acadia Federal Credit Union $95M - Maine 18
Hutchinson Credit Union $170M - Kansas Sales Culture Consistent Underwriting Symbiotic products Direct Lending 19
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 • <10% indirect 20
Baton Rouge Telco Credit Union $194M - Louisiana Sales Culture Refinancing Indirect Lending 21
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. 22
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) 23
Acadia Federal Credit Union $95M - Maine Sales Culture Refinancing Market Power Direct Lending 24
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