ATLANTIC CITY, N.J. -- Credit unions need to buck up and take responsibility for their financial issues, according to Brett Christensen, owner of CU Lending Advice, LLC.
Credit unions should change their thinking that the economy is causing all their headaches and look inside their own shops for the causes of their problems, he said. According to Christensen, credit unions are overly addicted to courtesy pay fee income. A better way of making money off members is relationship pricing based on member product usage.
Additionally, credit unions have high operating expenses. To help eliminate those, Christensen recommended the branch to asset ratio should be one per $100 million in assets and one employee per $6 million in assets. "The only people who need your branches are the ones dying every day!" he shouted.
Christensen was also not a fan of indirect lending, noting that it has brought down many CEOs and even entire credit unions. Credit unions also make a lot of poor underwriting decisions, our PUDs as he not-so-affectionately termed them. Common underwriting mistakes he called out include not recognizing bankruptcy risk, incorrect loan-to-value decisions, putting members in the wrong car and car loans, overly aggressive unsecured lending, and denying good loans.
Christensen stated that it's more profitable to serve members with lesser credit files rather than sticking with A paper, outlining four "undeniable facts": very thin A-paper margins; D- and E-paper loans are more profitable; members with bad credit need a car to get to work; and members with bad credit can choose to pay their credit unions on time. D- and E-paper members given a chance are very loyal, as opposed to A-paper members with other options.