BY REX JOHNSON
Are Your Loan Policies Making It too Easy for Your Lenders?
In my years working with credit unions, one of the most frustrating things I come across is when I review credit union’s turndowns and see they turned down loans to really good people. More times than not, this is not due to a lack of desire on behalf of employees but rather employees adhering to policies stricken with unnecessary barriers. As I go around the country and work with credit unions, I see firsthand there is no better feeling than helping someone who needs it. We as credit unions need to make sure our policy always allows judgement to prevail and to always have the right of first refusal. I am providing a copy below of what I believe should be the first page of every credit union’s policy manual. Coincidently, this is also what every employee should have to read and learn to believe from day one of employment. While many things have changed over the years in lending, my philosophy listed below has withstood.
Credit Union Philosophy
Our Board of Directors, our various Committees, Senior Management Team and staff all support this philosophy. All of our new employees or volunteers will read and have explained to them what this philosophy means and will subscribe to this philosophy.
It is the philosophy of (Insert Name) Credit Union to help as many of our members as possible with their credit needs. Our credit union believes in relationship lending. We have strong evidence, based on years of experience, that members pay us when they do not pay others. While we will not ignore the fact that others may not be getting paid, we also will not solely use that as a reason to deny the loan if it is evident the member has and will continue to pay the credit union. We also will consider a member’s credit score, but will not deny a loan due to a credit score. We understand that credit scores are very volatile, and can and will change quickly. Our mission is to counsel our members, showing them how to dramatically improve their credit scores so they can pay us less.
We believe lending has been and still is a judgment business. While we will instruct our staff to use good judgment in decision making, they must be careful not to judge someone’s character. We realize that bad things happen to good people. We also understand that under enough pressure, our members can and will make mistakes. Our members deserve a chance to get a fresh start. The only reason we believe a member should ever be turned down is when we believe the member will not pay the credit union. It’s important for our employees to be honest with our members in communicating their decisions and then to listen to their response. We realize that it is far more important that our employees make the right decision than to personally be right.
Finally, our goal is to come up with a solution for all our members. In order to do this, we must have the best trained employees and we will not compromise training. We are the professionals and our members should trust us and not have to come up with their own solutions. This is our philosophy.