Coffin: CUSOs a Way for CUs of All Sizes to Offer Members Financial Service Choices

SEATTLE – Whether it be mortgages, investment services or alternative payday loan products, Tristram Coffin says CUSOs are a vehicle for credit unions to deliver financial service options to consumers they might otherwise not have. The 39-year old Coffin who was selected in September by the Puget Sound Business Journal as one of its “40 Under 40″ leaders, has been president of WSECU Service Company LLC, the wholly-owned CUSO of Washington State Employees CU, since July 2001. Prior to moving to the Pacific coast, the New York native was CEO for five years of CUSERVE Inc., the wholly-owned CUSO of Hudson Valley FCU, Poughkeepsie, N.Y. Before coming to credit union-land, Coffin worked with the investment program of Chase Manhattan Bank. By his own admission, Coffin says prior to working at WSECU Service Company, “I never lived west of Syracuse. Coming to WSECU Service was an opportunity for me to work with great people and with an organization that has a great vision on what a CUSO can be.” The 71-employee, WSECU Service Company does business under three separate trade names – Washington Capitol Mortgage Group, Washington Capitol Investment Group, and Q-Cash – that pertain to the CUSO’s three main lines of business. Under Washington Capitol Mortgage Group, the CUSO provides mortgage services for WSECU members as well as members of 14 credit unions throughout Washington State and Idaho. “We’ve been able to leverage what has always been a strength of the CUSO, namely mortgage lending, and show other credit unions what we’ve been able to develop because of the strength of our infrastructure to benefit credit unions throughout the state and others as well,” says Coffin. To be able to provide mortgage services to credit unions of varying sizes, Coffin says Washington Capitol Mortgage Group offers customized services. In some instances, he explains, the CUSO sends one of its loan officer originaters to a CU’s branch to take the loan, originate and fund the transaction. In the cases of larger CUs, says Coffin, the partnering CU may hire their own loan officer so Washington Capitol Mortgage Group just handles the back end of the mortgage transaction, sells it on the secondary market to Fannie Mae, and then services the loan. Still in other instances, a partnering credit union may decide to buy back certain loans for income and carries it as an asset. For investments, Capitol Investment Group uses Financial Network Investment Corp. as its broker-dealer. Since it is a regional office of Financial Network, all program management functions are performed at the CUSO. Capitol Investment Group has seven full-time financial consultants who work in WSECU branches and assist members with wealth management and financial concerns. Coffin says the most popular investment product among the CU’s members are mutual funds and fixed and variable annuities. The CUSO has also licensed about a dozen WSECU branch employees as service officers to offer fixed annuities. The variable annuities are only offered through financial consultants who are CUSO employees. Coffin said the CUSO wants to be able to license some branch employees to also be able to handle mutual funds business and assist the CUSO’s financial consultants. The CUSO is currently piloting this with one WSECU employee, and it hopes to expand the plan in the future. The CUSO also wants to develop an in-house program that would permit branch employees to further support the financial consultants by allowing them to answer members’ questions about the CUSO’s investment offerings and schedule appointments with financial consultants. Coffin says WSECU is “studying its options” on whether to bring the CUSO’s investment services in-house, in light of the SEC’s ruling. He says the CUSO is currently providing investment services for one other credit union, and “our goal is to add many more, so that means we have to look at the SEC question in a different light,” he says, adding that there are a variety of options WSECU can consider from transferring the program into the credit union to becoming a full-blown broker/dealer, to a variety of hybrid combinations. `We haven’t set a deadline when we’ll make a decision by,” says Coffin. WSECU Service Company’s third line of business – Q-Cash- is an alternative payday lending product. Coffin says payday lending has “grown dramatically” over the past few years – there are currently approximately 15,000 payday locations throughout Washington. What’s more, Coffin says research WSECU has conducted among its members show many of them use these services. “Unfortunately the profile of the payday user matches the profile of a large portion of our membership,” Coffin says. “Forty-two percent of them own their own home and 100% have a steady income.” To compete with the payday lenders, WSECU realized it had to create its own program `that redefined and reinvented the payday loan to make it more dignified so it didn’t have a stigma attached to it.” In January, WSECU Service Company piloted Q-Cash in five of the credit union’s branches and expanded it to all of its branches in April. It plans to offer it to members of other CUs as well. Coffin says the CUSO is making over $1,000 Q-Cash loans a month, and the average amount is just under $400. Terms of the loans are a maximum of 45 days and the minimum loan amount is $50. Interest charged on a loan is $10 for every $100 borrowed. Repayments can be made in two installments or paid-in-full within 45 days. There are no prepayment penalties. To help members become more financially responsible, Q-Cash refers them to the BALANCE Financial Fitness Program for financial management counseling. “Credit unions need to understand that the payday loan businesses are a direct threat to their members,” says Coffin. “We’re offering this alternative payday loan product through out CUSO to allow us to be a service provider to other credit unions. “We’ve invested a lot in to developing home grown technology for these types of loans,” says Coffin. “Instead of every credit union reinventing the wheel, credit unions can work together to offer a value proposition that competes with the payday lenders.” -