By Brett Christensen
A great definition of insanity is doing the same thing over and over again and expecting different results. It certainly applies to the current state of credit union lending. If returns are low, losses are high and growth is slow, it’s clearly time to try something new, particularly in the areas of underwriting and sales.
Underwriting
Here are a few thought-starters to encourage you to examine old-school underwriting policies that may be holding you back:
- Do you only make “yes” or “no” decisions on each loan request? Instead of a “no,” what about a counteroffer that makes you comfortable?
- Do you just approve the specific member request, or do you offer additional lending products the borrower qualifies for, like a credit card or overdraft line of credit?
- Are you incurring the time and cost of securing collateral that is worth very little when a borrower actually qualifies for unsecured credit?
- Do you automatically decline all requests from members whose credit score is less than 600? You may need to dig deep to find compensating factors, but that’s better than turning a member away when you could make it work.
The approach I advocate is aggressive, yet prudent. Lenders who move to a new-school style of underwriting and get comfortable taking on risk will be able to grow their portfolios, even in highly competitive environments.
Sales
Credit unions don’t have a history of sales as a core competency, and unfortunately, no magic pill exists to immediately transform you into a sales powerhouse. Ramping up sales will take a dedicated effort over several years and require you to examine some tough issues, such as personnel. Consider: do you have employees in place who have a natural orientation toward sales? If not, you need to replace your order takers in sales positions with actual sales people.
The good news—you don’t need to makeover every existing employee into a sales person, just those who field new account and loan requests. Reassign these valued employees into service areas and recruit new staff with sales skills. Trying to make a service employee into a sales guru puts unrealistic expectations and pressures on them; they will probably welcome the relief of a new, better matched position.
Changing methods and philosophies deeply imbedded in your organization’s culture won’t be easy—but it’ll be worth it.
Brett Christensen is the owner of CU Lending Advice, LLC. As such, he works directly with credit unions in the U.S and Canada, teaching and consulting on various lending topics.
Benefit from Christensen’s in-depth lending knowledge and enjoy his personal and entertaining style when you attend both CUES School of Consumer Lending, July 15-16; and CUES Advanced School of Consumer Lending, July 17-18, in Cambridge, Mass.
