Filson Urges CUs to Make Greater Use of Third Party Loan Vehicles

SCOTTSDALE, Ariz. – The tech-savvy consumer who can just as easily shop for loans on the Web is presenting striking new challenges to credit unions seeking to build consumer loan volume, according to Chip Filson, president of Washington-based Callahan & Associates. Addressing the California Credit Union League’s 20/20 Conference meeting here, Filson maintained CUs need to prepare their shops for members turning away from branches and call centers to third party vehicles, like Internet auctions and indirect sources. “Third party origination is inevitable,” forecast Filson who said as the pressure builds to generate loan volume, CUs need to respond more quickly to this emerging trend of consumers using “the public network” like “lendingtree.com,” as well as brokered vehicles. As this trend continues, Filson urged his California audience to consider making use of Centrix Financial Inc., a Denver subprime vendor, which provides a guarantee on loans it funnels into the secondary market. One top California CU executive agreeing with Filson on the need for “finding new lending sources and moving up the supply chain” was Darren Williams, president/CEO of Wescom CU of Pasadena, who maintained the industry is responding to changes in consumer habits though it should move more quickly. “We could see member erosion,” in the future, he forecast as the typical member finds “he doesn’t need to make an appointment to come into the credit union on a Sunday when he can make an application online and get five lenders to bid on his request.” Not only on car loans but also on real estate, Williams said credit unions “need to think long term” and “become involved in the supply chain” so that CUs are in the direct delivery channel for loans rather than maintaining a conventional passive role of waiting for loans to come through the front door. Also echoing Filson and Williams about CUs being “closer to the start of the supply chain,” Gene Roberts, president/CEO of Financial 21 Community CU of San Diego, said CUs “down the road will have to really become more creative and innovative on how they generate loans.” But apart from lending, Roberts told a League conference session entitled, “Can Credit Unions Still Make a Difference?” that one of his biggest worries is the “continued banker attacks because they can inflict damage.” “Credit unions are doing the right thing,” he said, in trying to combat the attacks, but the American Bankers Association’s strategy of going after states one by one “is definitely a challenge” with a fear that “dominoes would start falling.” Perhaps, he said, CUs need to consider a “preemptive” challenge to thwart any moves in Congress so that “lawmakers can reaffirm the tax exemption,” he said. He did not spell out what kind of preemptive challenge he had in mind. Regardless, said Roberts, “a serious educational process with consumers” on the tax exemption needs to be undertaken. In his formal remarks to the League session, Filson also touched on the banker attacks and pointed to programs of the Alabama Credit Union League on effective internal political action programs done within CUs to educate staff and members on CU structure and purpose. The Alabama “Advocacy” program, noted Filson, “engages the member to defend credit unions” at the ballot box and through a series of ads pushes credit union “pride.” He said the Alabama League’s program which emphasizes dollar savings for members in using a CU is highly effective as a promotional vehicle because it demonstrates “real member value” in doing business with a CU. -