CHICAGO—Credit unions can do a better job of helping members prepare for unforeseen expenses, asserts IWS, which says there’s a reason CUs are underperforming in an area where they could help both the member and the CU itself.
The provider of vehicle service agreements, GAP protection and other protection products through credit unions, insists that too many loan officers shy away from selling members these products that can protect members’ savings.
Michael Leon, SVP of sales at IWS, told CUToday.info that many members who live paycheck to paycheck are in need of vehicle protection products. He pointed to data from Callahan’s and USA Today that found:
- 47% of American’s would struggle to come up with $400 in case of an emergency.
- 76% of American’s live paycheck to paycheck.
- Seven out 10 American’s have less than $1,000 in savings.
“Our average claim in 2016 was $815,” said Leon. “If the average claim is $815, how is a member going to manage an expense like this when 76% are living paycheck to paycheck?”
Leon emphasized that what’s at issue is protecting the second-largest investment members’ will make in their lives—their cars.
“For some, if they never buy a home, it’s their largest expense,” said Leon.
During the recession, reports revealed that many consumers walked away from their home loan before they stopped paying on their cars because they needed transportation to keep their jobs.
“If people don’t have a way to plan for unforeseen expenses, an $800 car repair can be devastating to them,” he said.
But the hurdle in the way of many members obtaining products to protect their cars is loan officers being uncomfortable with presenting offers like vehicle service agreements, Leon said.
“These are not simple products for a loan officer to present to members,” said Leon. “These products are very technical, so many of the questions a loan officer will be asked can be difficult for them to answer. Such as, ‘Is the car’s intake gasket covered with this program?’ Loan officers are good at doing loans, and they don’t typically know the ins and outs of selling these additional programs. But they need to have that knowledge to effectively do so.”
What typically happens, said Leon, is loan officers will simply stop offering the services because they are uncomfortable selling them.
“No one likes to be asked questions for which they don’t know the answers,” noted Leon.
Some credit unions do a very good job of selling these additional vehicle protection products, explained Leon, who said those doing well will sell the services on about 10% of their car loans. He said the typical CU sells the services on 4% to 8% of their loans.
But with the IWS program, credit unions typically take that percentage up to 30%, helping many more members, said Leon. The reason he said is IWS has a Product Information Center so the loan officer can reach out when closing the loan with a member.
“The loan officer brings us into the conversation, and we make the introduction of the products,” said Leon.
Leon reiterated the importance of members learning about vehicle protection products before they close their loans, citing the standard costs for repairs:
- Transmissions can cost up to $3,600
- Engine replacement can average over $5,600
- Alternator and starters average around $560
“I like to say that we help credit unions help make their members’ lives a little bit easier and protect them from unforeseen expenses,” said Leon. “I know that revenue, profits and non-interest income are very important today for credit unions, as a number of non-interest income sources have come under fire from regulations. But I don’t like to focus on that. I believe if we focus on the member and take care of the member first, then the rest—the benefits to the credit union—will come.”