By Ray Birch
TUKWILA, Wash.—BECU recently lowered loan rates for thousands of borrowers—without members ever asking for the pricing change.
BECU’s annual reprice program, where it checks borrowers’ credit scores and then lowers rates when reports improve, not only builds goodwill and deeper relationships, it keeps members and their loans at the credit union, BECU says.
The program is offered for members who have credit cards, lines of credit, personal loans, auto, boat and RV loans—a $3.5-billion portfolio. This year more than 40,000 BECU members had their interest rates automatically reduced, saving them more than $2.7 million in interest. The program does not negatively adjust the rates of members whose credit scores drop.
The program began 12 years ago. Scott Strand, BECU senior vice president and chief lending officer, estimates that the total member savings are closing in on $11 million.
“This goes back to the fundamentals of a member-owned cooperative. We focus on how much we can return to members through lower rates and fees, And this is a very unique way to do that. I am not aware of another financial institution that does this,” explained Strand, who said the CU pulls “soft scores” on members so the move does not affect their credit standing.
150 BP Reduction
Members who improve their scores, on average, receive about a 150-basis-point rate reduction across all eligible loan types, Strand said, adding that the smallest reduction is 25 basis points and that many members exceed the 75-basis-point average. Strand said how much the rate lowers depends on how many credit tiers the member moves up.
He also explained that members receive the savings for all of their qualifying loans.
“So when members have all six of the qualifying loans, they receive the reduction on all six loans, a considerable savings,” explained Strand, who said that the reduction amount can vary between loan type for each member.
The program tends to benefit lower-credit-score members the most, since they have more room to move up in their credit standing.
Scott Strand
“This program, too, tends to pull in younger members who are trying to build their credit, which is good for us because we want these members to benefit from the program as they grow in their financial lives. And, over time, we get stronger members,” Strand said.
Starter Card
Strand said that the $15.1-billion BECU promotes its “starter” credit card that’s given to members who have no credit score or a thin file.
“We grant them starter cards based on their BECU relationship,” said Strand. “After two years with the program we have about 18,000 of these cards on the books and already 3,000 have benefitted from the rate reduction program.”
Strand believes that once members learn about the program they stay with BECU, and they don’t look elsewhere for loans, particularly when refinancing.
“This program helps with member growth and retention,” said Strand, who noted that BECU is closing in on one-million (988,691) members. He said the credit union’s annual membership growth rate has not fallen below 5% in the last seven years, peaking at 10.5% in 2011 and coming in at 6.1% last year. “The program also eliminates the hassle of refinancing the loan with us or outside the credit union, as the new rate is updated to a competitive market rate for the member’s credit score.”
Fun E-mail To Send
The best part of the program, according to Strand, is notifying members of their lower rate.
“It’s a fun piece of mail to send,” said Strand. “The reaction is fabulous—astonishment, shock—and members say they can’t believe their financial institution would do this for them. We get great social media reaction to this every year, too.”
Strand believes the program helps members grasp the concept of credit unions and gain a better understanding of the co-operative structure.
“It also helps us stand out from other financial institutions, including credit unions,” said Strand. “As I said, I don’t know of anyone else doing something like this. It’s a great program, and we like it a lot because of its uniqueness.”