Affinity Plus Restructures Indirect Lending Program, Existing Members Get Rate Preference

ST. PAUL, Minn. – Non-members of Affinity Plus FCU who join the credit union through its indirect lending program will no longer receive the same rate as current APFCU members, regardless of their credit rating. Affinity Plus restructured its indirect auto lending program so the service “serves as a benefit for existing members of the credit union, rather than as a low-cost financial program for any individual desiring to purchase a new or used vehicle,” the credit union said. Before the restructuring, any person purchasing a new or used vehicle from any one of the more than 100 CU-Save dealers in Affinity Plus’ indirect lending program, would qualify for the best rate available based on their credit score and becoming a member of the credit union on the spot, if they weren’t already a member. CU-Save, based in Minneapolis, manages the dealer relations for Affinity Plus’ program through a third-party arrangement with CD. Under the restructured program, the lowest rates are being reserved for existing Affinity Plus members. New members who join Affinity Plus through the indirect lending program will pay a 2% premium.. APFCU has $450 million in its auto loan portfolio, and about $240 million of that is derived from indirect lending. APFCU President/CEO Kyle Markland said the credit union “is looking for members who want a lifetime relationship with us. Our strategy, philosophy and mission are about building relationships based on trust, not just on financing vehicles.” But in fact that’s not what’s happened at Affinity Plus for the members that have come through the credit union’s indirect lending program. Markland said these new members see the credit union “strictly as a finance company for their vehicle rather than a full-service financial institution. They tend to be transactional based where the car loan is the transaction, they’re not looking for a long term relationship with us. This is contrary to our corporate-wide strategic goal of building long-tem relationships with our members.” Markland doesn’t dispute that the indirect lending program has helped Affinity Plus’ membership increase. When the credit union began its indirect lending program seven years ago, the strategy was for the product to bring in 20% of new member growth to the credit union. In fact, new member growth derived from indirect lending has been 80%. In May alone, 29% of Affinity Plus’ new members came through the indirect lending program. The $850-million Affinity Plus has more than 116,000 members, and members who joined through the indirect lending program account for less than 10%. The credit union said in 2002, membership increased over 11%. Interestingly, the issue of turning new members who join a credit union through an indirect lending program in to participating members who use more of a CU’s products and services, was the topic of a session at Credit Union Direct Lending’s Auto Lending Symposium in Las Vegas last month (CU Times, July 2). In her presentation, Laurie Keller, vice president, marketing, LBS Financial Credit Union told attendees that these new members can not be marketed to the same way as existing members. Among her suggestions, Keller advised credit unions to make personal contact with these new members within 30 days of funding their loan and communicate the CU’s brand to the member, including providing them with information about the credit union’s other products and familiarizing them with the CU’s delivery channels. “They bought the car, not the credit union, and credit unions shouldn’t assume that they care about or know anything about the credit union other than the loan they got,” Keller told conferees. Credit unions, she said, can’t afford to do nothing with these members. Markland said Affinity Plus did everything CUDL recommends – the credit union is not a CUDL member. It had an outbound calling program to the new members and also did direct mail campaigns targeted to them to make the new members aware of Affinity Plus’ products. He estimated 10-15% of the new members were interested in having a relationship with the credit union. “We found we were putting a lot of resources in to these members who really only wanted a car loan with us. When we evaluated our membership and assessed our strategy, these members stood out as the ones who weren’t in sync,” he said. Markland said the credit union determined it could do more to be more successful with its current members and do more for them if it transferred the resources it was putting in to the new members who joined through the indirect lending program, in to Affinity Plus’ current members. He estimated Affinity Plus’ current members use an average of 3.5 services per member, while indirect lending members use 1.6-1.7 services per member. “It comes down to what’s best for our members,” he said. “We have a mature program that’s successfully managed. We wanted to be sure it was in line with our corporate strategy.” Markland added that, “We think indirect lending is a valuable tool, but there are things we can learn. There’s a place for it. With our restructured program, even if the new members we get through the program don’t want a relationship with us, they still get a good rate.” -