For most Americans, the economic picture isn’t very pretty these days, yet forward-looking credit unions are finding innovative ways not only to remain competitive in a sagging economy, but even increase their market share. These insightful innovations are boosting membership, too, attracting new members seeking the best deal.
With the near-meltdown of the mortgage industry continuing to dominate the media, the trickle-down effect is hitting many industries hard, including the auto industry, with no let up in sight. Fortunately, a number of credit unions are taking a proactive response to the auto industry’s downturn and finding that their concerted efforts are paying off.
To Amy Ogden, Consumer Loan Manager of Deseret First Credit Union in Salt Lake City, the key is to stick to the basics – and do them better than anyone else. “We’ve tried not to have a knee-jerk reaction to the downturn in the economy, though we do see that people aren’t spending as much,” she says. “We’re looking to maintain consistency in our underwriting by focusing on our borrowers as people, and doing our best to meet their individual needs.”
For Ogden, a healthy dose of common sense is always helpful when trying to cope successfully with a weakening economic climate. “I think people are cautiously optimistic that the economy may not be as bad as it seems to be from all the media coverage,” she continues. “After all, with prices down, it’s a great time to buy, and many people who realize this are taking advantage of it.”
Meanwhile, Raleigh, North Carolina’s Coastal Federal Credit Union has grown their loan base by taking steps to further guarantee stability. “We’ve started to employ credit insurance on most auto loans as a way to ensure our financial stability. That definitely represents an additional cost to us, but we feel that if you want to do the best for your membership, it’s worth it,” says Indirect Lending Manager Pete VanGraafeiland. “As a result, we’ve been able to broaden the range of customers who can qualify for loans. We’ve never dealt with sub-prime lending, for a number of reasons, but we’ve still been able to broaden our loans in order to carry near-prime loans.” The cost of the credit insurance is graduated, according to the borrower’s credit score, with Coastal Federal paying the cost up front by foregoing percentage points for a couple of months.
Northeast Credit Union, Portsmouth, New Hampshire, is on a growth curve despite the economic downturn, according to Senior Vice President Mike Chisholm. A key factor in Northeast’s growth has been a concerted effort to focus on soliciting and maintaining new relationships with area dealerships. “We’re in a relationship business, so we hired a fulltime rep to hit the road, visit area dealers and solicit new relationships,” adds Chisholm.
CoastHills Federal Credit Union, serving California’s central coast, is taking a more aggressive approach, according to Dal Widick, Chief Operations Officer. “We believe it’s time for credit unions to be aggressive in finding ways to turn their loan volumes up. We must be creative both in our loans and in the way we price our products,” he says. “Recently we decided to put our money where our mouth is and lower our rates,” continues Widick. “We began by offering super competitive vehicle loan rates to those members with risk-free credit profiles.”
To Widick, CoastHills’ strategy has made a measurable difference in the region. “Our dealers are very happy because they’ve increased their sales by anywhere from 17 to 20%,” he says. “We’re now doing enough business that it’s acting as a stimulus to the local economy – we’ve made a huge difference in our members’ lives and in our dealers’ lives. Why, we got 400 new members last month alone – people who had heard about our products, walked in and simply asked, ‘How do I join?’”
By taking a proactive approach to the current economic downturn, credit unions are finding that success, even market growth, in the auto lending arena can be achieved.
-- excerpted from CUDL’s Merge Magazine Summer, 2008