Lending

A Tale of Opportunities

"It was the best of times, it was the worst of times..."

August 30, 2010
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In the opening sentence of “A Tale of Two Cities,” Charles Dickens writes, “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.”

The subject was the French Revolution, a time unlike anything seen in France in hundreds of years. Many have written recently that this country today faces conditions unlike anything any of us have seen. But let’s look closer at that Dickens message.

The worst of times

It’s easy to focus only on the difficulties credit unions face right now. Reasons for gloom include:

  • Unemployment hovers near 10%;
  • Consumer confidence continues to lag;
  • Assessments continue to pull down profitability; and
  • Loan growth in credit unions is a negative 0.4% over the last year.

The best of times

The good news is we’re neither in the Great Depression nor the monstrous recession into which I began my professional life in 1982. While unemployment is high, it isn’t at the level of either 1930 or 1982. Inflation is low. We’re seeing signs of economic recovery.

We’ll make it though this tough time. Plus, credit unions have some advantages:

  • Capital, industry-wide, is at a relatively healthy 9.8%. While credit unions don’t have money to burn, they have money to invest.
  • Loan-to-share ratio industry-wide is at 73.6%. Your credit union probably has a good base to build its loan portfolio.
  • Member loyalty is high. Your credit union is positioned for repeat business.
  • Member trust is high. Keep that trust by doing the right things for your members.
  • Member ownership means local control and focus. Members want to know the people with whom they entrust their financial future.
  • Community-based focus. Members instinctively understand the needs of the community and how your credit union gives back to the community.

The age of foolishness

Where does your credit union spend time and its members’ treasure? Your credit union may feel it can respond only to immediate problems. In lending, for example, this shows up in many ways:

  • Severely tightened lending processes, such as requiring verification of employment or residence no matter the strength of a borrower’s credit profile;
  • New policies that require members to meet your credit union’s needs rather than the credit union looking out for theirs—for example, requiring members to come into branches to close loan transactions, instead of looking for ways to serve members remotely; or
  • Tightened lending programs through subtle changes—for example, no longer allowing check advances on home equity lines of credit.

These are all reactions to short-term problems. They don’t take advantage of the incredible opportunities to position your credit union for long-term success.

The age of wisdom

These are unique times, and your credit union has a once-in-a-lifetime chance to make itself indispensable to members by:

  • Focusing on young borrowers. Spend some money to understand their communication styles and financial needs. Spend even more money to make sure you meet those needs. Tell them what you can provide to them. Tell them again.
  • Continuing to earn members’ trust. For example, if you have to charge fees, tell them why. Recently, my credit union started charging advance fees on my line of credit. They told me why they did. They didn’t hide it. I respect their honesty. It makes me trust them.
  • Trusting the members. If you make them jump through hoops now, when times get better they’ll remember you didn’t trust them. They’ll go elsewhere.
  • Reveling in your credit union’s community involvement. If members know your credit union is involved in the community, they’ll be more willing to do business with you.

This once-in-a-lifetime opportunity to grow and increase service to members will never come again. Will your credit union take advantage of it?

BILL KLEWIN is associate general counsel at CUNA Mutual Group, Madison, Wis. Contact him at 608-231-7009 or at bill.klewin@cunamutual.com.

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