Pen Air Recaptures Its Way To Auto Loan Growth

The Florida cooperative uses direct mail and digital techniques, plus a guarantee of 2 percentage points less than the member is paying now.

Top-Level Takeaways

  • Members have saved more than $4.4 million in three years with the 2% off guarantee.
  • Direct mail and multiple digital delivery channels are used.
  • Social media plays a large role as stories of positive impact are gathered and shared.

Pen Air Federal Credit Union ($1.5B, Pensacola, FL) has captured the loyalty of thousands of members in the three years since it rolled out an auto finance recapture program that knocks up to 2 percentage points off loans brought in from another lender.

The program began in mid-2016 and is highlighted twice a year with marketing campaigns that use internal data to identify loans held elsewhere that might be attracted instead to the Panhandle cooperative.

The inspiration for the strategy arose from the realization that a lot of A paper was already coming in from indirect lending, and that something was missing. When we started looking at who our members really are, for the most part, we decided to reach out to members in that B and C paper group, says Pam Hatt, Pen Air’s vice president of marketing.

Pam Hatt, Vice President of Marketing, Pen Air FCU

The eligibility requirements are simple: a record of six months of continuous payments on the current loan means Pen Air, with no credit check, will guarantee its recapture loan will lower the interest rate by as much as 2 percentage points, or at least $25 a month. The current lowest rate works as the floor for the offer.

The floor is the lowest we’ll go, Hatt explains. So when rates were 2.99% we would reduce the rate 2%, but not lower than 2.99%. So now with new loan rates being as low as 3.49%, that is the lowest your loan rate could be.

The offer stands all year, but twice a year ? in May to capture the summer crowd and in November before the holidays ? the direct mail campaign is conducted, offering targeted members an additional incentive: 90 days without payments.

Since the program began in mid-2016 through April 2019, Pen Air has originated $96.2 million in those recapture loans, saving members about $4.4 million in interest payments. Delinquencies have not been an issue, either. The credit union’s overall auto portfolio of $488.7 million had a delinquency rate of 0.32% in the first quarter of 2019, compared with 0.46% on average for the 302 credit unions in the $1 billion to $10 billion asset class in the Callahan database and 0.53% for all U.S. credit unions.

Any time you can save people money, help them get financially fit and stay there, reduce their stress and enhance their lives, it’s good for everybody, Hatt says. It’s good for business and it’s the right thing to do for us as a credit union.

Pen Air uses the services of digital marketing specialists Ser Tech to identify potential recapture borrowers in the Florida credit union’s database and then market to them. Typically about 2,000 direct mails are sent in a month.

Google Ads and SEO techniques also are part of the digital marketing repertoire, and recapture also occurs within the existing loan portfolio, as predictive analytics are used to target members who may be looking to soon make another vehicle purchase.

If they have a car loan on the book that’s about 18 months to 24 months old, that’s a good time to send them an offer for their next car purchase, Hatt says. We also will use any digital method we can think of to reach out.

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Callahan & Associates |

The number of financial institutions continued a long-term decline in 2018, a year that ended with 197 fewer credit unions and 264 fewer banks.



Callahan & Associates |

Pen Air’s auto loan penetration was below its asset-based peer group average when it began the recapture effort, and now that measure of engagement is on par with peer.



Callahan & Associates |

An emphasis on B and C paper has not driven up delinquency rates at Pen Air. In fact, the cooperative is now well below peer in that metric, according to Callahan data from the 302 credit unions in the $1 billion to $10 billion asset class as of March 31, 2019.

Capturing Stories And Capturing Loans

Capturing stories is another key tactic for capturing loans and in educating members and non-members alike to the value proposition of doing business with Pen Air, Hatt says.

For instance, the credit union actively uses social media to attract attention to its money-saving offerings. One recent example is a Facebook video featuring president and CEO Stu Ramsey touting the half-million dollars members saved in the holiday season campaign late last year.

Hatt says individual stories circulate, too, especially in the face-to-face encounters between staff and members. We’ve talked to people who have really good credit who were paying really high rates, like 8% before and 2% after they refinanced with us when we started out the program, the Pen Air marketing vice president says.

Member-facing staff and social media alike are used to capture and share such stories, often through the credit union’s Facebook page. Staff are incented ? typically through fun activities at work, such as a soap box derby ? to gather instances of impact.

The members tell us about what they’re going to do with the money they save and how we’ve improved their finances and their lives, and then we share them, Hatt says. It’s a great way to get the story out about how we’re meeting our mission of improving people’s lives, and people have noticed.

That includes the competition. They stepped up after they saw what we were doing, but, especially when it comes to the big banks, they don’t have the flexibility we do, Hatt says.

That agility will come into play later this year. The 2% thing is still doing well but you can only go so long with something before it’s run its course, Hatt says. We haven’t ironed out the details yet, but we’ll be trying something new.


June 3, 2019

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