Wednesday, February 15, 2023

SECU Risk-based Lending #4

 To: SECU Board of Directors


Dear Chairman Ayers,

Here's an easy one for you and the SECU Board to consider concerning your approval of risk-based lending for SECU. By the way, you do have my full permission to post these commentaries to the SECU website, if you feel they would help inform the membership of your thinking. Have certainly been asked many times: "What were they thinking!?!" Believe members are very interested in hearing from you!

Credit Score Tiers At SECU Under RBL
_____      ______     _____      ______     _______          
l         l      l           l     l         l     l           l     l           l
   A   l      l   B    l     l   C   l     l    D    l     l    E     l
l          l      l          l     l         l     l           l     l           l
720-850            719-660          659-600         599-540           300-539       - credit score ranges
 5.75%                6.25%             7.75%             9.25%            10.25%       - interest rate for tier
     0                   +0.50%           +2.00%           +3.50%           +4.50%       - extra rate surcharge

Above are the credit score tiers and rates approved by Chairman Ayers and the SECU Board for used car loans under risk-based lending (RBL). Chairman Ayers and the SECU Board claim that the RBL rates are fairer for the SECU membership - taint so!

Here's an example of why! Take a look at the two rate scores highlighted in yellow, do you really believe there is any significant risk difference to SECU from a member who has a 599 credit score - "D" paper - and a member who has a 600 credit score - "C" paper? Only the SECU Board evidently believes there is any real difference in risk between these two members - and wants to penalize one of them with a 1.50% rate hike.

Over the life of the loan, that 1-point credit score difference (600 vs 599) will cost the member with the 599 score an extra $800 in interest (see RBL #3) - just shy of a week's pay for the average State Employee ! That sound fair to you?

And, while you're thinking about it, do you really believe there is any difference in risk between a score of  600 and 598? Or for that matter between 600 and 597? Nah, the SECU Board just arbitrarily chose where to "draw the line"  - the SECU Board could have just as easily set that "C" paper range at 580-699! Ask them next time you see them - they'll admit it!

Also ask Chairman Ayers and the SECU Board how they decided that your credit score is more important to them than you are to them - as a person, a member, as a fellow human being .

As Thomas Paine said: " A body of men [and women] holding themselves accountable to nobody, should not be trusted by anybody," 

Amen to that!


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