Originally published www.creditunions.com
by Marc Rapport
Pen Air Recaptures Its Way To Auto Loan Growth
The Florida cooperative uses direct mail and digital techniques, plus a guarantee of 2 percentage points less than the member is paying now.
Pen Air Federal Credit Union ($1.5B, Pensacola, FL) has captured the loyalty of thousands of members in the three years since it rolled out an auto finance recapture program that knocks up to 2 percentage points off loans brought in from another lender.
The program began in mid-2016 and is highlighted twice a year with marketing campaigns that use internal data to identify loans held elsewhere that might be attracted instead to the Panhandle cooperative.
The inspiration for the strategy arose from the realization that a lot of A paper was already coming in from indirect lending, and that something was missing. “When we started looking at who our members really are, for the most part, we decided to reach out to members in that B and C paper group,” says Pam Hatt, Pen Air’s vice president of marketing.
The eligibility requirements are simple: a record of six months of continuous payments on the current loan means Pen Air, with no credit check, will guarantee its recapture loan will lower the interest rate by as much as 2 percentage points, or at least $25 a month. The current lowest rate works as the floor for the offer.
“The floor is the lowest we’ll go,” Hatt explains. “So when rates were 2.99% we would reduce the rate 2%, but not lower than 2.99%. So now with new loan rates being as low as 3.49%, that is the lowest your loan rate could be.”
The offer stands all year, but twice a year ― in May to capture the summer crowd and in November before the holidays ― the direct mail campaign is conducted, offering targeted members an additional incentive: 90 days without payments.
Since the program began in mid-2016 through April 2019, Pen Air has originated $96.2 million in those recapture loans, saving members about $4.4 million in interest payments. Delinquencies have not been an issue, either. The credit union’s overall auto portfolio of $488.7 million had a delinquency rate of 0.32% in the first quarter of 2019, compared with 0.46% on average for the 302 credit unions in the $1 billion to $10 billion asset class in the Callahan database and 0.53% for all U.S. credit unions.
“Any time you can save people money, help them get financially fit and stay there, reduce their stress and enhance their lives, it’s good for everybody,” Hatt says. “It’s good for business and it’s the right thing to do for us as a credit union.”
Pen Air uses the services of digital marketing specialists Ser Tech to identify potential recapture borrowers in the Florida credit union’s database and then market to them. Typically about 2,000 direct mails are sent in a month.
Google Ads and SEO techniques also are part of the digital marketing repertoire, and recapture also occurs within the existing loan portfolio, as predictive analytics are used to target members who may be looking to soon make another vehicle purchase.
“If they have a car loan on the book that’s about 18 months to 24 months old, that’s a good time to send them an offer for their next car purchase,” Hatt says. “We also will use any digital method we can think of to reach out.”