Lending

CUs Growing Green

Financing eco-friendly vehicles and home improvements can enhance your brand and loan portfolio.

July 01, 2012
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Good stewards

Voted the most walkable city in the Pacific Northwest by The Daily Green, it’s no surprise that green auto loans are an important part of Seattle Metropolitan Credit Union’s green loan portfolio.

Although the $569 million asset credit union also offers green home equity loans and first mortgages, its $5 million green auto loan portfolio is the largest segment of its eco-friendly loan offerings.

To qualify for a 0.25% loan rate discount, borrowers must purchase a hybrid electric vehicle or one that averages at least 25 miles per gallon in the city. The average size of its green car loans is $13,500.

To gain access to auto buyers who value energy savings, Seattle Metropolitan partnered with a local energy company and an electric car dealership. Both companies refer their customers to the credit union for financing.

The credit union also installed an electric vehicle charging station at its main branch in downtown Seattle that members can use for free. Seattle Metropolitan uses in-branch signage, its member newsletter, and its website to spread the word about its green loans.

Credit quality on these loans has been excellent. “The average FICO score for our overall auto portfolio is about 705, while our green loans are at 750,” says Lee Pierce, the credit union’s assistant vice president of consumer lending.

“We believe it’s our obligation to give back to the community where we do business,” Pierce says, “and we felt this program would encourage our members to be good stewards of the environment.” 

Best practices

Pierce says it’s important to specify what types of improvements or purchases qualify as “green” so loan officers don’t have to do that on a case-by-case basis.

Other best practices green lenders and Filene suggest:

► Find a partner. Although only one-third of Filene’s survey respondents say they work with a partner, doing so helps spread the word about the credit union’s green offerings, Hall says.

Just be careful to “align yourself with high-quality partners,” he advises.

► Determine the best way to label your program. “ ‘Green’ has become a highly polarized word,” Hall cautions. “Understand whether your members are more likely to value energy savings as a way to protect the environment or to save money, and promote your program accordingly.”

 Piggyback when possible. Government-sponsored programs typically support interest-rate buy-downs or tax incentives.

An uptick in these programs tends to drive consumer interest in green loans.

Resources

AssureSign
CRIF Lending Solutions
Docusign
Echosign
 Filene Research Institute
Hall Associates Consulting
MeridianLink

► Account for program cycles. Consumer interest can ebb and flow based on the availability of government incentives and the state of the economy.

Be ready to ramp up and down accordingly. Also recognize that it can take months for consumers to learn about and respond to green lending offers.

► Ensure multilevel compliance. If your program is linked to a government subsidy, you’ll need to ensure compliance with both the program and regulations covering credit unions.

This could include the language you’re allowed to use in marketing materials, ensuring that contractors understand which products allow their customers to reap program benefits, and the verification of installation (which often is handled by a program partner).

► Focus on education. You’ll need to educate members, your partners, and the general public about program elements and benefits.

Also, involve staff in your credit union’s green  initiatives.

“I’d love all of our employees to have energy assessments of their homes,” Cardwell says. “Once you understand the value of energy-efficient choices, you’re our best advocate.”

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