CINCINNATI-Despite all the concern over Reg. E, one consultant claims there are ways to make the overdraft controversy irrelevant.
Rory Rowland, president of the Independence, Mo.-based Rowland Consulting, pointed to steps CUs must take to get members to opt-in to overdraft protection, methods to offset lost revenue, and mistakes to avoid as the July 1 deadline approaches. Rowland shared his advice, based on analysis of those credit unions generating the greatest amount of fee income, during a breakout session at the Ohio Credit Union League's annual meeting at Cincinnati's Duke Energy Center.
Common mistakes CUs are making, according to Rowland:
• Waiting to see what happens: "This is not a healthy strategy. Get a plan of action. Place an (opt-in) banner message on your website to encourage people to opt in. When members overdraw, send them and e-mail and tell them about the new regulation and that they need to opt in. If they are in the top 29% of your abusers, call them."
• Lack of monitoring: "You need to know how much income you are making from courtesy checking-20% to 29% of your members give you 90% of your NSF income. Target those top 29% and get them to opt in before July 1."
• Front-line staff have no idea what they are doing: "Do you have talking points written for front-line staff to tell members how to opt in?"
Rowland's suggestions to drive fee income:
• Employee heroes: "You need heroes (sales staff) to tell their stories about how they are having success cross-selling products. They need to demonstrate their success so that others follow."
• Drive the member-to-services ratio: "There is high correlation between fee income and the member-to-services ratio. Most credit unions have a member-to-services ratio of 2.4. The top credit unions in fee income have four or more products per member. The more accounts you have, the more opportunities for fee income."
• Create a service-selling culture: "Get the right product to the right member at the right time for the right reason."
• Get a master loan agreement: "Use Loanliner Plus from CUNA Mutual. It allows you to sign members right away and they can get a personal loan or car loan over the phone."
• Run a credit bureau report when members join: "Turn those members into borrowers immediately. And have an all-in-one application. Have a line at the bottom of the membership application that gives you the authority to run a credit bureau. Next time they call you for a loan, you're ready to go and don't have to go through a full-blown application."
• Make relationship pricing simple: "The biggest mistake credit unions make with relationship pricing is they make it too complicated and members do not understand it."
• Make relationship pricing profitable: "Don't give away the farm. Once you install a relationship pricing strategy, use ProfitStars or Raddon to determine if the strategy is cost effective."
• Give every new member a checking account: "That is both wonderful and frightening, but we have to do that."
• Sell ancillary products: "Credit unions in the top end of fee income have high penetration levels in credit life, credit disability, and gap insurance."