Fifty First Loans

by Michael Cochrum
Fifty First Loans

Well, February is considered the month of love, and on February 14th you most likely took the opportunity to tell that someone special in your life what you should have told them, repeatedly, over the last 365 days.  There used to be an old marriage joke that maybe worked in the mid-twentieth century, but probably doesn’t play well in modern relationships.  The joke starts out with the woman asking her husband, “Why don’t you love me anymore?”  The husband would reply apoplectically, “What are you talking about?”  The wife would explain that he never says “I Love You” anymore.  The husband, a bit more relaxed that she has simply over-reacted, responds, “I told you I love you when I married you.  If anything changes, I’ll let you know.”  This, of course, makes me think of the relationship that credit unions have with their members.

How do we show our love to our members every day? At first, we certainly pursued them with tenacity, making contact with them through the mail and repeatedly asking them how we could earn their love.  Then the day came when we became an “item.”  Sitting in the branch, we treat our members like royalty as they open their new accounts or sign their loan papers.  It’s a special day.  But, what happens after that?  The next time they contact the credit union, we act as if we’ve never met them before.  It reminds me of the romantic comedy, 50 First Dates, where the lead character, played by Drew Barrymore, has amnesia and the man who wants to date her, played by Adam Sandler, has to go through the motions of starting the relationship all over again, every day.  It is a very funny movie, but starting a relationship over with your preferred financial institution is not a very pleasing member experience.

Of course, I know that there are security protocols that must be in place to protect your members; some things we make our members go through are a real inconvenience. Take the credit application process, for example.  Let’s say I just got a new loan with my credit union and during the process I was offered other products, which I declined.  After several months, I come back in after I’ve made a number of payments on my loan and I have to complete a new loan application to now take advantage of one of the products I qualified for just a few months earlier.  Why do I have to do that?  Doesn’t my credit union they love me like they used too?  Now the obvious answer to that question is that things might have changed, so a new loan application allows the lender to re-evaluate the member’s credit-worthiness.  But, what if, like our old married couple above, nothing has changed?  Should I still have to go through the application process again?

I’d like to introduce you to a concept that I refer to as “persistent approval,” rather than the typical pre-approval. This concept is, basically, the attitude expressed in the joke above.  “We loved you when we met you, and we still do.”  This is a pro-active, rather than reactive, approach to lending and member service.  Today, a credit union must time their offers precisely to get the greatest lift.  But, what if timing wasn’t necessary anymore?

Here is how persistent approval works. A lender approves a member for a car loan, the member accepts the offer, and all of the information is stored in an analytics system, such as our Lending Insights portfolio management platform.  The credit union tracks the member’s product performance on a monthly basis and every month, or quarter, the credit union gets a new credit score from the credit bureau.  If the member is making payments and the credit score doesn’t change within a significant number of points, the member is still approved.  Then, if they come in to take advantage of a new product, or they decide to trade their vehicle in on another vehicle, their persistent approval is still in the lending system.  If the lender is concerned that the member’s personal information may have changed, then all that needs to happen is that the member will sign a confirmation at closing, stating that the information is still correct.

I wouldn’t recommend that a credit union pursue persistent approvals without an adequate analytics platform to automate the process of monitoring member performance. The analytics are available today, and so is the opportunity for credit unions to exceed member expectations.  Don’t make your members go through Fifty First Loans.

Discover how Lending Insights can help your credit union can take a proactive approach to lending and member service.

About the Author

Michael Cochrum
Michael Cochrum is the Executive Lending Advisor for CU Direct.