Conference 7.286::dcu

    Several points to cover here...
    
    First, it is DCU's responsibility to make sure that any money loaned
    can be re-paided.  Since re-payment of this loan would be based on 
    future income (which was uncertain), I don't think it was unreasonable
    for DCU to not make an unsecured loan (if that is what was asked for). 
    It appears other financial institutions arrived at the same conclusion. 
    With the economy the way it is and the company laying people off, DCU
    has been experiencing increased loan losses.  Last month was the
    highest write-off I have seen to date, about $110,000 I believe.  So you
    can see DCU is under pressure to cut these very real and large loan
    losses.
    
    On the other hand, I am disappointed that other avenues were not
    explored, such as the possibility of a stock secured loan.  Auto
    deposit into checking in no way assures the re-payment of a loan. 
    Collateral usually does.  I am uncertain of the details of home
    improvement loans and whether this might have also been a possibility.
    
    This situation points out the need to have a readily available source of
    credit for emergencies.  Don't wait until you can't qualify or have to
    wait to get the money.  But that is all dependent on a person's
    individual situation.  Hopefully it can be done.
    
    This type of situation really stinks for everybody involved.  The way
    in which it is handled is very very important.  I believe the person in
    .0 got the "policy" line at the info center.  I believe he should have
    requested to speak to somebody in consumer loans to discuss his
    particular situation and try and work alternatives, if there were any.
    But on the other hand, .0 also needs to understand that sympathy can
    play no part in the decision.  I hope .0 doesn't leave the credit union
    based on this experience.  I think it could have been handled a little
    better on both sides.
    

The average Joe or Jane  can go to HR Block and file a tax return and
get a loan based on the tax refund.

Why can't a similar thing be done with the TSFO payment? For
example, the payment could be direct deposited to the DCU.

Of course, I am assuming that the individual involved has had no
credit problems.


Gim

    I see your point Phil but in this case we are dealing with a fairly
    special situation. It involves the closer relationship between the
    DEFCU and Digital and between a member and their Credit Union. As
    Gim points out H&R Block and lots of similar organizations do this
    sort of thing all the time with tax refunds. Granted this may not 
    be easy to do on short notice without program work being done but
    perhaps DEFCU management will think about doing this for the future?

    I don't see TFSO going away anytime soon. :-(

    		Alfred

First off, I spoke to Larry and he has secured the loan he needed. I'd
prefer not to go into the details of where the loan came from since I
didn't ask his permission to publish the details.

Secondly, playing devil's advocate here for a moment, he could get a loan
based on his TFSO, and when he received the TFSO he could choose not to
pay off his loan. DCU would have no guarantee of being paid. This I believe
was the point Phil was making. It would be nice to come up with some sort
of security.

Still, my personal opinion is that DCU could have done a better job with
him. He was discouraged from even applying for a loan so he didn't bother.

I suggested he write to Chuck directly with his experience.

His suggestion was that DCU should NEVER answer any question with the
words "Because it's policy." There should always be a reason.

My further idea is that DCU should NEVER discourage anybody from even
filling out an application for a loan.

    
    The whole point of DEFCU is DEC employees helping each other.
    
    Who is potentially more in need of help than a TFSOee?
    
    Layoffs are a relatively new phenomenon at DEC. The corporation has
    shown some willingness to learn how to better handle the situation;
    DEFCU should do the same, rather than automatically spouting "policy".
    

    
    RE: .2 & .3
    
    Alfred, you have hit the nail on the head.  What the person was asking
    for is not currently being offered by DCU, but possibly can be.  I'm sure
    H&R Block didn't just start loaning money like this the same day
    somebody called them and asked them about doing it.  That's why I think
    this person should have sought (and been directed to) more personalized
    attention to see if any other current DCU loan program could have been
    used to fill his need.
    
    RE: .5
    
    Bill, I agree with you, to a point.  I believe DCU must stand ready
    to work with members who have needs.  Sometimes that will involve
    taking a little bit more risk than they normally would.  But there will
    be cases when the facts will warrant a little more risk taking.  I'd
    hate to see DCU members shunned and DCU lose business (and members)
    by a blind following of "policy" with no thought process involved to
    determine if this might be a case that might warrant an exception.  And
    even if, in the end, nothing could be done to loan the money needed,
    the member would at least know that he was treated well and given a
    fair shake.  And of course, there will be times that no matter what is
    done, somebody will get frustrated or angry.
    

    re .0  Digressing from this notes file a bit, but...
    My house sits on top of a hill with lots of wind and I did the roof
    in November using 4 galvanized 1 1/4" roofing nails per shingle and
    had no problem.  If you use staples (read: stupid), as much of south
    Florida did, or fewer nails, as a lot of midnight contractors do, then
    sealing becomes more important.  Finally, the difference between
    now and November as far as shingles sealing is nil: it takes a good
    90 degree day to melt the asphalt strip, so any roofing done now isn't
    going to seal until next summer anyhow.  Regardless, glad you got
    the loan.  

    RE:.1

   > highest write-off I have seen to date, about $110,000 I believe.  

    	Not to sound to stupid but under what circumstances does DCU write-
    off somebodies loan.  Just because they stop paying, doesn't DCU take
    other steps to collect outstanding loans?

    Joe

It's certainly not a stupid question... quite appropriate...

The gist of it is that if people are in backruptcy or haven't paid for
quite awhile, it gets written off, but attempts to collect on it do
continue. In fact, a small but significant amount actually does get
collected from loans already written off and is separately noted.

    I'm not asking for details here, but what entity decides that a loan
    should be written off?  The DCU, NCUA, generally accepted accounting
    proceedures, a combination of all of them?
    
    How does a loan become 'non-performing' and how does it move from
    'non-performing' to 'written-off'?
    
    Thanks,
    
    Bob

    
    
      I believe banking regulations require loans overdue for more than a 
    certain amount of time  to be classified as "delinquent"  and to be
    written off after a further time period.  (I think it 
    is probably 3 and 6 months, but I don't know for sure.)
    
    
      The idea is to ensure that banks list only those "assets"  which
    are performing  as "assets"  on its balance sheet.   (Investors/members
    have no way of otherwise judging the quality of a bank's loan 
    portfolio.
    
      As stated earlier,  I believe efforts to collect written off debt
    can continue after the asset has been written off.   Any money
    that gets collected is then listed in a separate line item  as
    some form of "income"  (But is clearly separated from the income
    which results from normal operations.
    
    
    						-al
    

re .7:  It doesn't take a 90 degree air temperature to seal the roof,
it takes a high roof temperature (I don't know what it is but 90 degrees
sounds reasonable).  On a sunny day, the roof is much warmer than the air,
so any warm sunny day ought to do it.  There may or may not be such a day
in November, and there may or may not be a serious storm before spring.


re H&R Block's tax refund loans:  There are three caveats here.  

    o	I believe this was *only* available to people getting their
	tax refund through H&R Block, and involved signing away rights
	to the refund.  Just because DEC deposits the TFSO money in a
	DCU account doesn't give the DCU the right to grab the money
	right away.  So the situation wasn't completely analogous.

    o	H&R Block was able to check with the IRS to find out how big
	a refund people were getting.  I suppose the DCU could have
	verified the pending TFSO payment with Digital in the same way.

    o	Even so, H&R Block lost out on a lot of loans because in many
	cases the IRS gave them bad information -- and wasn't liable.
	They couldn't get their money back because it had already been
	spent and some people had no other assets.  Loaning to someone
	with limited assets is risky.


My conclusion was that DCU's policy in this case is perfectly reasonable.
However, refusing to consider whether an exception should be made is not
good customer relations and is not serving the DEC community well.  As
someone else said, answering "why not?" with "it's policy" is particularly
infuriating and should be avoided whenever possible.  Inviting .0 to
fill out a loan application that the service rep knew would be rejected
would also have been a bad choice.  The best alternatives I can think of
would have been to explain the risks of bridge loans and suggest that .0
speak with someone at a higher level.  Of course, that's assuming someone
at a higher level has the time and interest to deal with this!

	Larry

    As mentioned in .7, yes, Larry has secured the loan he needed... 

    FROM HIS FAMILY!!!

    NO thanks to the DCU.

    Larry's friend, and former co-worker, 
    Paul

DCU might consider the following with regard to loans stated by the member as
backed by TFSO payments:

	1. TFSO payments are CURRENTLY auto deposited to a DCU account.
	2. The DCU has the right to deduct the agreed-upon payment from
	   the auto-deposited amount before depositing the remainder in
	   any other DCU account.
	3. Upon receiving the final TFSO lump sum, the balance of the
	   loan is to be paid.

Point 4. would cover DCU:

	4. If auto deposit is canceled before the loan is payed back, the
	   remaining balance of the loan becomes due and payable on the
	   date of cancellation.

If the member retains autodeposit, no problem.  The lump sum put there will pay
off the loan.

    
    
    For sure there needs to be policy as a "guideline", but in a case 
    like this just a bit of thought and negotiation could certainly
    have brought about an agreement that would yield a level of risk
    for the DCU no greater than the risk they incur when loaning money
    according to policy.  It would simply have been a matter of a loan
    officer with the authority to reach agreement with the member working
    it out with the member.  "It's our policy" is just a euphemism for
    "we really don't want to bother with this."
    
    Steve
    
    

    
    
      On the other hand:
    
      We don't want DCU to simply become the lender of last resort...
    
      There are several types of loans  that DCU should _not_  
    	be participating in.    (Commercial real estate comes 
    	to mind... :^)   
    	
    	For example,  Aircraft loans have a very low default rate,
    	and are backed by a high quality asset.  Even so,  in order
    	to be competitive in this business,  DCU has to develop 
    	enough expertise  to do it right.   Is it really worthwhile
    	for the anticipated low volume?
    
    	Likewise,  is it really a sound business practice for DCU
    	to go out on a limb offering other special-case loans which
    	really aren't profitable?  (How much interest can a few 
    	thousand dollars borrowed for a month net?  Probably not
    	enough to cover the staff time to manage it.  (And there
    	is probably the question of how the federal regulators 
    	would view such activity...)
    
      I agree that DCU might want to investigate whether there is 
    	enough volume and quality in 'bridge'  loans  to make them
    	worth doing, but  I think that overall,  the DCU strategy
    	should be to stick to the mainline loans that they can
    	do well,  and not try to be everything to everyone...  
    	(Even DEC has realized the folly of that mindset...  )
    
    
    
    						-al
    

I spoke with Chuck and he was suprised that Larry got this response (I
didn't use Larry's name, nor does Larry know with whom he spoke). He
sent a memo to the phone center instructing the phone center folks not
to respond in this way. Never discourage anybody from filling out an
application.

    
    Re: .16
    
    Here we go again.
    
    A simple financial analysis approach is the type of thinking which
    led to the attitude that prevailed at this time last year AND, lest
    we forget, led to the ousting of the BoD.
    
    Since We, the members, are the OWNERS.  Is it unreasonable for us to 
    expect that the institution WE own for OUR benefit will when
    considering cost err a bit on the side of satisfying the customer?
    
    Steve
    

    
    Re: .17
    
    > Hopefully it's solved.
    
    Whoa.  Wait a minute.  So now they'll take the application before
    denying it because it's policy.  That's not a solution.
    
    A solution would look more like Chuck instructing that a loan officer
    with the authority to grant or deny such a loan meet with
    the applicant and attempt to work out a solution acceptable to the
    DCU and to the applicant.  If after this level of review, the DCU 
    would be left with an unacceptable risk by granting the loan, then you
    deny it.
    
    Steve
    

Re: .19
Perhaps I should have explained more. The objective after taking the
application would be to work with the member to figure out some way
in which DCU could reasonably grant the loan. Nothing I or anybody else
has said (including Chuck) indicated that anybody should do anything
just "because it's policy". People who know me know that I refuse to
tolerate anybody who uses that excuse.

However, it's still possible that the loan should not be granted. I don't
know the details, but DCU's responsibility is to protect
members' investments in DCU. It's often difficult to find the balance
between taking a risk or protecting the assets.

Furthermore, DCU now has in process an appeals process so that a member
that has been denied a loan may appeal the loan and speak not only to
professionals but also some volunteers on the appeals committee.

	Actually, this sounds like just the right situation for the
	appeals committee... But to be fair, the applicant needs to be
	told up front what the prospects are - but should be told 
	about the possibility of appealing to the appeals committee...

					Tom_K

    
    > A simple financial analysis approach is the type of thinking which
    >led to the attitude that prevailed at this time last year etc...
    
      Perhaps,  but we shouldn't rush to give away the store either.
    
    
      Let me try re-stating this a bit:
    
    	To continue the "last year"  analogy,  there was a big witch-hunt
    	(to borrow a term)  over whether Mangone got a special loan 
    	which wasn't otherwise available to  the rest of the membership.
    	A lot of the "last year"  situation  occurred because DCU went
    	outside the bounds of their normal lending practices and into
    	markets they were ill equipped to play in.  While it may be
    	reasonable for DCU to earmark a _small_  portion of its loan 
    	portfolio  for "higher risk"  "growth"  investments,  it should
    	be done in an orderly fashion,  not through haphazard exceptions.
    
    	IMHO,  DCU should not be in the exception granting business.  
    	If DCU wants to grant "bridge"  loans,  then so be it.  Put a 
    	program in place,  and grant them to everybody who wants them,
    	or don't grant them at all.  
    
     Again,  just because we own the store,  doesn't mean we should 
    	give it away...
    
    
    						-al
    

    
    Re: .20
    
    > The objective after taking the application would be to work with
    > the member to figure out some way in which DCU could reasonably
    > grant the loan. 
    
    That's more like it.  So the goal would be to figure out how to
    grant the loan rather than summarily deny it.  That sounds much
    more like a customer-focused organization to me.
    
    > However, it's still possible that the loan should not be granted.
    > I don't know the details, but DCU's responsibility is to protect
    > members' investments in DCU. It's often difficult to find the
    > balance between taking a risk or protecting the assets.

    This goes without saying.  No one would expect otherwise.  There'd
    be no point in granting a loan that the DCU, *after looking into it*,
    judged that the risk was high that the applicant couldn't repay.
    
    > Furthermore, DCU now has in process an appeals process so that a member
    > that has been denied a loan may appeal the loan and speak not only to
    > professionals but also some volunteers on the appeals committee.

    Again, this has the ring of a customer-focused organization.  I like
    it.
    
    Now since there's a loan application/review process defined or nearly so,
    what would be the need of a policy other than to say that loans are
    granted only via the defined process.
    
    Steve
    

    
    Re: .22
    
    See .23 where I essentially agree with you.
    
    Actually you could make the argument that the root cause of the mess
    with Mangone wasn't because the DCU got into an area that it didn't
    understand but that they ignored their own established process.  If
    that had not happened, it's likely that the risk, etc. with the Mangone
    loans would have come to light and the loans would have been denied. 
    Why do you think Mangone wanted to go around the established process
    to begin with?
    
    If there's an established process for evaluating/reviewing each loan
    then what difference does it make what kind of loan you call it.
    Bridge, mortgage, personal, unsecured, whatever.  If the process
    ensures that the application and all pertinent data is appropriately
    reviewed with the right checks, balances, and guidelines applied,
    then the result will be the right one.
    
    Steve
    

    
    
    >If there's an established process for reviewing each loan,
    >  what does it matter what you call it?
    
    
      Here's the problem:
    
      I'm sure that each loan type has a different approval criteria,
    and a different approval process.
    
      For a car loan,  the standards are generally somewhat relaxed.
    	The money is more or less covered by asset value,  a car is
    	pretty high on a consumer's "must pay"  list,  and it's a 
    	high volume business.
    
      For a credit card,  the money is unsecured,  allowing a greater risk
    	of loss,  but offset by the higher return.
    
      For a mortgage,  the rate is LOW,  meaning that the margin between
    	cost of funds and income from loan is very small.  Additionally,
    	big amounts of money can be lost.  It's  a desirable business
    	to be in because of predictability,  but a borrower's credentials
    	are scruitinized more carefully than other types of loans,  because
    	of the potential cost of a mistake.
    
      Now - somebody comes in the door wanting a bridge loan.  What should
    	the approval criteria be?  What should the interest rate be?  
    	What are the predicted loss statistics?  DCU has no clue!  
    	
      Again,  it may make sense for them to investigate entering this
    	line of business,  but not on a "by exception"  basis.
    
    
    
    						-al
    

    
    Re: .25
    
   >  Now - somebody comes in the door wanting a bridge loan.  What should
   > 	the approval criteria be?  What should the interest rate be?  
   > 	What are the predicted loss statistics?  DCU has no clue!  
    	
    OK, I agree with all of what you said, but as to the above since
    you call it a bridge loan, there must be data available from 
    somewhere BUT... that is an aside anyway.
    
    The real point here is that they had nothing to lose and much to gain
    by having a process for dealing with loan applicants that don't
    leave the customer feeling brushed off.  The lack of that was
    a much bigger defect than not being ready to grant a bridge loan.
    In any event from Paul Kinzelman's reply it seems that the problem
    is now fixed.
    
    Now the reason that I beat this dead horse, is that it wouldn't hurt
    for all of us to look at an incident like this in view of the things
    that Bob Palmer said yesterday about customers. Over the last year what
    we, whether agreeing or not, have witnessed with the DCU has given us
    the perfect opportunity to see what an unhappy customer look's like
    since there were at least several thousand of us and we were vocal
    about what we didn't like.
    
    As anyone who has or does now work in the field or at least who may have
    attended a DECUS symposium or two already knows: many, not a few -
    MANY, Digital customers over the years have felt about Digital just as
    some of us felt about the DCU a year ago, and the incremental effect of
    that customer feeling is at least one contributor to our current level
    of business.  If we solved EVERY other problem which has contributed
    to our downturn and didn't fix this one, we would still be at significant
    risk.  Companies which learn from experiences like this will have
    a chance to survive. The DCU was unique: its owners are its customers
    and had the power to MAKE it learn.  Digital won't have it as easy as
    that.
    
    fwiw,
    Steve
    

    	I haven't been in this conference for a while, so it was
    	interesting that I came upon this topic in light of my 
    	recent experience with DCU loans.
    
    	I have (had) a CRT loan (now called ACL loan) for overdraft on
    	my checking account with a $2500 limit.
    
    	Due to certain events in my life, I recently filed bankruptcy.
    	In the process, I made sure I owed nothing to DCU on the loan
    	so that I wouldn't have to list it in the bankruptcy.  And
    	that's how it worked out.
    
    	I recently got a letter from DCU notifying me that because I
    	filed bankruptcy, they were revoking my line of credit.  I called
    	and asked why.  Since I was no longer burdened with the debt that
    	I listed in the bankruptcy, I no longer have a credit problem.
    	I cannot bankrupt again for 7 years.  I was a much greater risk
    	to them in the 6 months before it than I am now.
    
    	"It's policy" was the message I received from the person who
    	signed the revocation letter when I called her.  I can understand
    	that a general guideline would suggest the action they took,
    	but there are all kinds of bankruptcies, and all kinds of
    	circumstances that lead to it, and all kinds of conditions
    	a person's finances end up as after the fact.
    
.4>My further idea is that DCU should NEVER discourage anybody from even
.4>filling out an application for a loan.
    
.17>to respond in this way. Never discourage anybody from filling out an
.17>application.
    
    	Not unlike the two quotes I cut from this topic, she also
    	suggested that I re-apply for the loan, although she made it
    	clear that policy would most likely cause me to be turned down.
    	Period.
    
    	Someone mentioned an appeals process and an appeals committee.
    	I'd be interested in hearing more about it, or seeing a pointer
    	to another topic where this is being discussed.
    
    	I have already counter-proposed that DCU give me a limited
    	overdraft line -- $500 or so -- and I would secure it with
    	a $500 CD that they would hold.  I'll see where that goes.
    	I would have expected that someone at DCU would have been
    	creative enough to think of something so simple (and risk
    	free to the DCU), yet at the same time I suspect that it
    	will be rejected because of "policy".

If you get turned down, you can just request a hearing before the
credit committee.

    	What channel do I use to request it?  Who are they?  Do I
    	have to be there in person?

    re: .28
    
    Didn't the BoD dissolve the credit committee recently and replace it
    with some sort of credit appeals committee?
    
    Bob

RE: .30
	Yes, but I don't know the logistics involved.

I'd suggest .29 request a hearing before the credit appeals committee.

The name was changed to more accurately reflect the committee's responsibility.

>I'd suggest .29 request a hearing before the credit appeals committee.
    
    	How?  Do I just go up to a teller and request it?  Is there
    	a proper office to whom I should address a letter?
    
    	Anybody know?
    
    	I'm trying to decide whether to pursue this, or wait and see what
    	results my proposal brings.

    	To answer my own question (and for the benefit of others) I
    	found out that you can appeal a credit decision in writing
    	by sending it to:
    
    	DCU
    	141 Parker St.
    	Maynard, MA 01754
    
    	Attn: Credit Appeals.
    
    	Include your phone and account numbers in your letter.  There
    	is no special format for this letter, no form to fill out, etc.
    	Just state your case in writing.