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“We decided we couldn’t wait for members to ask for help; we had to go find them,” says Stan Moeckli, president/CEO of $146 million asset Electro Savings Credit Union in St. Louis.
When the recession took hold and the housing market crumbled, Moeckli noticed that people who once had sterling credit ratings were either losing their homes outright or walking away from underwater mortgages.
Moeckli knew these people eventually would need credit rebuilding services, but he also knew it would be difficult to get them into the credit union for workshops and other educational programs.
A credit union staffmember came up with an idea that eventually grew into a formal partnership with rental communities within a five-mile radius of the credit union’s branches. Through the partnership, the credit union’s trained staffoffered financial services and educational information to people in those communities.
The credit union now provides free financial literacy seminars for rental communities, which typically have 50% turnover rates and a tenant population that struggles to make rent payments on time. Participating rental communities place credit union information in welcome packets, including ATM and branch locations and hours.
“Working with the rental properties was similar to working with a SEG, and we pitched the credit union as a no-cost benefit for residents,” says Lisa Farnen, vice president of marketing. “Employers want financially stable employees because they’re going to be more productive, and the apartment complexes want financially stable residents because they’re going to pay their rent on time.”
The approach has worked. Electro Savings started with 147 members who already lived in the rental communities. Aft er one year, that number had grown to 276.
The credit union has continued to add new communities and new members. Last year, its member growth rate was 18% within the apartment complexes and 10% overall.
Electro Savings invested in mapping soft ware to track membership growth back to their outreach efforts. “It’s not just about doing good deeds,” Farnen says. “We want to make sure the time and money is well-spent and productive.”
It’s important to track your results because it can justify your outreach efforts and educational programs, Lynch says. “Getting your credit union management team and board to agree to offer counseling and educational programs could be difficult because they might see it only as a cost,” he says. “They want to know what they’ll get in return, and what they get is membership growth and an improved bottom line.”
Farnen is quick to point out that the credit union is not in the business of offering charity. While Electro Savings does offer services that other financial institutions might not, it doesn’t compromise lending standards or underwriting policies.
“Our loan growth in the rental communities is about 25%, and we’re making good loans,” she says. The credit union’s overall delinquency rate for these loans is about 1%.
What sets Electro Savings apart from other financial institutions, Farnen notes, is that it considers more than just the credit score when making credit determinations.
“We look deep into the person’s application,” she says, “but we’re not lending money to people we think won’t pay us back.”
Pricing is important, and that sometimes means charging distressed members a bit more than others. That’s not only reasonable; it’s imperative, Farnen says.
“You don’t need to give your services away. Charge a fair interest rate or fee that compensates your credit union for the risk. Then, as members’ credit improves, they’ll qualify for lower rates.”
Community involvement is essential, Lynch and other credit union leaders stress, because it allows credit unions to tailor solutions to their members.
Aside from being the right thing to do, helping members during difficult times builds loyalty—and loyalty builds strong credit unions.