GREEN BAY, Wis. — Trans Union's Vice President for Credit Unions Linda Moynihan Vance says that just because CUs have mostly "flown under the radar for the most part (likely due to member loyalty) doesn't mean the current economic trends won't affect them. They'll hit credit unions, maybe down the road," and so now is a good time for credit unions to do a portfolio analysis to segment the risks.
When members' credit scores go down they do so for a reason, and CUs need to be prepared for dealing with the eventualities. "Once you see that scores are migrating you can develop a plan, then put the policies and procedures in place. Every credit union needs a strategy for that," said Vance. That strategy should include providing tools for collectors.
The part of Trans Union's business (apart from the credit reporting agency side) is analytical, Vance said. "That's one of our primary focuses." Taking so many variables into consideration involves lots of information gathering, number crunching and then close study. "What if there is an unemployment effect at a credit union's SEG or at the city, county government levels? It's important to always look at the industries a credit union serves to get a jump on planning for a possible downturn."
On the positive side, a CU may be looking at expanding into another county, so the employment starts there should be researched. "The same is true for the placement of branches. Trans Union partners such information with the credit union's historical data and other economic issues that surround them and how they might be affected by it all, Vance said.
"Score migration is becoming more important to the credit union world, especially as credit unions aspire to serve the underserved," said Vance. "What strategy do they have
if the scores migrate south?" she asked.
Even if scores are stable, a credit union that uses risk-based pricing should do this kind of analysis, she said. "Credit unions have always been in that market, but we're seeing a trend to risk-based pricing in the industry," said Vance. The philosophical argument of its inherent fairness will no doubt continue, Vance remarked, but "even so, the rate the member gets will still be better than one they would get elsewhere." And getting that little extra may help to fund financial education and help raise a member's credit score, essentially improving the financial outlook of both the member and the credit union. "It's a strength that credit unions share, that they are tasked with having the tools in place to teach their members how to manage their money."
Vance, who is responsible for introducing new, innovative ideas and services to credit unions, said analysis is aimed at taking them to the next level. "We're very engaged with our credit union partners in this, and it always leads away from the 'rear view mirror' to looking down the road."
"The risk is changing out there and the economic situation will catch up to credit unions. Overall, the industry has stayed focused on its foundations, but consumers (and members) have multiple financial relationships." That makes portfolio analysis more important.
–cburger@cutimes.com
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