For the last few months, in a corner of my mind, an idea has been bouncing around my head, waiting for a Friday to emerge. The idea is simple, really: a new ultra low cost loan product for credit unions that would make members happy, increase a credit union’s loan volume (and its bottom line) and, well, revolutionize the industry.
Ladies and gentlemen, with all the seriousness implied in a Frivolous Friday post, I give you the Ugottaloan!
What do members want? They want money and they want it now. To get a Ugottaloan you need three things (other than a pulse): (1) a driver’s license, (2) an email address and (3) a job. Here’s how it works. The member signs up for the program and gives the credit union all the information required under the Patriot Act, The Bank Secrecy Act and FACTA red flags, etc. Maybe we’ll throw in a genetic scan too and of course a full body search, just to be on the safe side. The important thing, though, is that the member has a job and an email address because that’s how the credit union gets paid and communicates with the member.
The Ugottaloan is pure, raw innovation because it features the Daily Periodic Statement and is 100% paperless (after the ream of initial disclosures of course although I’m thinking we could force the member to scan these in the lobby and then shred them). The Daily Periodic Statement consists of a series of tabular format disclosure that go well beyond anything the Federal Reserve Board could imagine and far exceed any Congressional requirements. Every single day, the member will know exactly where he or she is with the Ugottaloan if he or she chooses to read the email. Just because that will never happen doesn’t really matter, right? Members don’t read what they get now anyway.
But this isn’t even the best part of the Ugottaloan. Members want their money and they want it now. Let’s dig into the inner workings of the product, shall we? I envision this product being in three tiers: $500, $1500, and $3000. After the member is approved (and underwriting here is very simple: pulse, job, email address—approved!) the member can get cash advances any time he or she wants by swiping his or her drivers license in a card reader at the credit union. This loan is hyper-open end. The member can take as many draws as desired up to the balance available at any time. The credit union gets its loan payments via direct deposit every time the member’s paycheck hits the member’s account. The interest rate on the loan is 18% and there are no fees for anything. Totally simple. The monthly payment is based on 4% of the average daily balance.
Wait, you say, this doesn’t makes sense, a member can get cash advances on a credit card right now in a similar fashion. Ah, that’s true, but the member also gets fee’d to death! Here, the member can avoid check cashing companies, overdraft services and cash advance fees. Sure, the 18% rate with a 4% minimum payment is akin to the old company store arrangements that Johnny Cash used to sing about but is it still better than the alternatives!
And Ugottaloan sells itself! Put up a banner: “Gotta job? Ugottaloan!” Later you can add bells and whistles like a Ugottaloan debit card that lets the member use the loan program through ATMs or even allows members to buy things with it. “Doesn’t it become a credit card at that point?” you say. Well, maybe, we’ll have to think about that more, but the point is you can start out slow and think big later. And even if it is, since it is paperless we can pound the member with disclosures and statements constantly and not kill forests in the process.
Ugottaloan is nothing if not honest and it makes everyone happy. The member is happy because money is easy to get and there when the member wants it. Congress and the Fed should be happy because we are bombarding the member with a constant stream of information concerning the loan. The member sees the balance every day and can pay it off anytime he or she want. If that doesn’t happen, it becomes sort of an annuity for the credit union but at the same time the member pays less than with other life blood sucking products available. The credit union wins because it gets paid first through the direct deposit process and if the member messes with that he or she gets cut off immediately and the member gets more tabular format emails explaining what happened. Win, win, win!!!
Ugottaloan: it’s the future of lending.
(Rob Rutkowski has to take the sole blame for this one…)