Payday Lending Focus Group

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Payday Lending Focus Group

• New Lego Blocks to Build Credit Products for
  Todays Members
• October 4, 2007

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Questions for the Day

• Will your credit union make a strategic decision
  about Payday Lending offerings in 2008?
• What kind of program do you think you would like
  to start, and do you have a template to get your
  program up and running quickly?
• What kind of software or technology changes do
  you think you will need to be successful in
  servicing your members with these kinds of
  transactions?

Today is not about a slick presentation of
something already built and in the can...it is
about declaring our intent to learn, build, and
find a solution for our members
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Todays Agenda

• 1000 - 1200 - Payday Lending Program
• See an award-winning program
• Review changes to CUBASE support tools for
  servicing payday lending
• Find out how easy it is to start a program
• 1200 - 100 - Luncheon
• 100 - 200 - Open Discussion
• Brainstorm to drive out issues in preparing for
  future meetings, announcements and an expanding
  focus in the future

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Putting the Stake in the Ground

• Declaring a Direction at the 2007 Leadership
  Conference
• June 2007

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The Next Generation of What?

• Whats in a reflection?
• Its not just how you look...but thats important
• Its not just how you act...but thats important
• Its not just how you think...but thats
  important
• Its not just where you are...but thats
  important
• A reflection is when the member looks at you and
  says, its me!
• When your organization gets it, youve jumped
  across the aisle and now plan from the
  perspective of your member, not the
  organization...you are now a machine for an
  evolving future

When business planners start with let the
customer define our model, they have the Its
Me focus
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The Its Me FocusConsider How CUs Respond to How
Members Act

• No matter the issue, when credit unions react to
  a new consumer trend by denying it, demonizing
  it, or telling the members, we know whats good
  for you, our industry loses
• Granted, it takes a while for us to understand
  the new wave of member transactions or figure out
  how the member sees them as valuable
• But are we trailing this curve at too great a
  distance?
• How do we predict when something is about to
  become acceptable, commonplace, or even the next
  best practice in the eyes of consumer?

Duh, wed all be billionaires if we could predict
the future! Granted, but could we respond to the
present with a little more enthusiasm and a
better angle of approach?
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The Its Me FocusConsider How CUs Respond to How
Members Act

• Three possible tests for when its time to go
  active on a current member trend that seems a
  little non-credit-union-y
• Good returns are available and the pricing is
  something you can improve on
• Consumers want the products and will be able to
  discern the pricing difference
• There is a social passion you can drive into
  these products there is an opportunity to show
  the credit union difference

Look for an article in an upcoming issue of the
Callahan Report A Flight to Quality . . . and
Credit Unions?
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Consider How CUs Respond to How Members ActSPSD
Credit Transactions

• New tools for when payday lending becomes
  commonplace
• In 2008, CUAnswers will change CUBASE to adjust
  to a growing trend of new credit transactions
• We will call these SPSD credit transactions
• Single Pay Short Duration credit transactions

SPSD?!? Thats as goofy as when CUAnswers
called Courtesy Pay ANR!
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Consider How CUs Respond to How Members ActSPSD
Credit Transactions

• New features on the drawing board
• Online interaction with payday lending
  underwriting databases
• Pulling payday lending reports just like you pull
  credit bureau reports
• Reporting to the payday lending credit database
• Decision modeling for payday lending
• Next payment date calculations for the StretchPay
  program
• Applications for SPSD transactions through
  CUBASE and online
• Tying in SPSD transactions to the lending
  dashboard
• ...and much more!

The potential for SPSD credit transactions
(payday lending) to be the next Retailer Direct
outlet-building option for CUAnswers credit
unions
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www.goodmoneystore.com A New LenderVP / Xtend
Partnership
www.myprospera.com
Partnering with a long-time, award-winning
CUAnswers client Prospera CU
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www.goodmoneystore.com A New LenderVP / Xtend
Partnership
Learn more on October 4 with Ken and Randy!
A new Retailer Direct partnership for both
CUAnswers and non-CUAnswers clients, building
lending outlets for credit unions Visit this
website for more information
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Bringing All The Ingredients To The Table
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Ingredients
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Ingredients
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Lets take a look at aBusiness Program
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Lets take a look at Data Files and Decisioning

• Much like the credit reports we use for
  traditional lending, a network of information has
  developed regarding the history of consumers who
  take payday loans
• One of the leading companiesin this area is CL
  Verify
• CUAnswers is developing anonline link to CL
  Verify to bring this information to CUs

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Lets take a look at Data Files and Decisioning

• What we get from CL Verify
• Payday Advance inquiry and performance records
• Payday Advance MICR indexed fraud file
• MICR/Name/Address and SSN/Name/Address
  verification
• DDA Fraud Closure File
• Bank account-opening activity
• Deposit account collections history
• Check order history
• Retail NSF check-writing history

• OFAC
• High-risk address
• Drivers license validation and verification
• A modeled decision for a no or a go

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Lets take a look at Data Files and Decisioning

• In exchange, we notify CL Verify whenever
• A new loan is given to a consumer
• The consumer pays off the loan
• An open loan goes past due (or in default)
• A loan is marked for collections
• A loan is charged-off
• A discharge notice is received by the courts on a
  loan or trade line
• The loan principle balance changes (interest and
  fees excluded)
• A rollover or renewal is given causing the
  maturity date to change
• A loan is to be voided (certain restrictions
  apply)
• The origination date or origination amount were
  previously reported incorrectly

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Lets take a look at aCOS by Retailer Direct

• Lets take a quick look atwhat LenderVP has on
  thedrawing board...

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Lets take a look at Core Integration Concepts

• What tools will a CU need to service one of these
  transactions?
• The CUBASE team is gathering information and
  envisioning lots of changes
• Should it be a loan or a savings account?
• Fixed of extensions?
• How will it work with ACH?
• Calculating next payment date
• Collecting fees
• How will collections work?
• What else?

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Lets take a look at Self Service

• Once we can master SPSD credit transactions via
  an agent, whether that be a partner or an
  employee, we will need to move to the web for a
  self-service channel
• Online banking
• Direct via the Online Banking Community
• Direct via the CU website

Can you think of any businesses in your area
where youd like to link to their web sites?
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Project Timeline
Watch for more information in the CUAnswers
Kitchen!
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Conclusion

• In the end, its as simple as this
• Can you afford to make small loans to members for
  short periods of time?
• Can you do so with low origination cost, but
  still make enough money to pay for the service?
• Can you do so in a way that the member sees the
  benefit?
• Can you do so in a way that the risk doesnt
  outweigh the return?
• A lot of questions...Sounds like wed better get
  to work and find a solution!

We hope you will be part of our learning
experience over the coming months