Innovative CUs Draw Up New Lending Approaches

Successful lenders are proactive and creative—and they don’t think ‘risk’ is a four-letter word.

December 27, 2012
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You can sit back and wait for lending opportunities to knock on your door, or you can throw open that door and create your own opportunities.

Lending innovators have a knack for spotting and acting on opportunities to make loans and boost the bottom line. This requires new products, new relationships—and new ways of looking at lending.


Input for innovation

Coastal Federal Credit Union in Raleigh, N.C., employed a “cross-functional” approach to develop new credit card products aimed at two distinctly different audiences: young adults heading to college and big-ticket buyers tempted by 0% financing offers.

“We get a lot of input from our business units,” says Willard Ross, senior vice president/chief retail officer for the $2.2 billion asset credit union. “Marketing really hatched these two ideas. Then we talked to lending, front-line staff, and other folks throughout the credit union to come up with our final product.”

Coastal Federal—a select employee group-based credit union that serves more than 1,000 organizations—also worked with the vendor FIS to customize software to accommodate the new products.

Each card has unique features that appeal to potential cardholders:

The Big Ticket Card lets cardholders make a transaction of $600 or more at any merchant—for one large item or multiple small items, so long as the charges appear on the statement as a single transaction—and pay 0% interest on the balance for six months.

When the six-month period ends, the interest rate reverts to a higher rate, currently set at 18%, which also applies to purchases of less than $600. Cardholders can make multiple qualifying transactions. Launched in July, the card requires applicants to have credit scores of 660 or better, and has attracted 300 cardholders as of Nov. 1.

The Student [CU] Card helps young adults eventually qualify for a $2,500 credit limit, either on their own or with a co-signer. The card’s spending limit is $500 for the first two years, and it gradually increases to $2,500 if cardholders keep payments current.

Launched in September, the card attracted 40 cardholders in its first month.

Both cards are aimed at preserving important relationships. With the Big Ticket Card, Coastal Federal hopes to persuade members to carry a second credit card with features that counter retailers’ 0% offers, while using another lower-rate Coastal Federal card for routine transactions.

The credit union uses the student card to build relationships with the next generation of members—and their parents—with a product that builds a credit history and prevents cardholders from running up high levels of debt.

“We think we’ve got winners with both of these products,” Ross says.

Coastal Federal also strives to reach targeted markets while limiting the credit union’s risk exposure. A three-year-old program for foreign graduate students at Duke University and the University of North Carolina, for example, offers student loans that are guaranteed by the universities.

And a new product offers 100% loan-to-value home equity loans, made possible when the credit union found an insurer willing to cover the higher risk.

Only a handful of homeowners have used the 100% option thus far. Most opt for the lower-rate, 85% loan-to-value option when they realize they have more equity than expected.

But the product is still valuable, Ross says, because it creates an opening with homeowners.

“That has been the greatest thing. We’re having way more conversations now because we have something that stands out in the marketplace.”

NEXT: Rehab mortgages

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Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

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