Re.look = turning declined loan applications into approvals.
Back in 1998, 20 year old Luis was generally a pretty responsible kid. He did OK in school, and managed his Red Lobster paychecks and tips as best he could. When he needed to buy his first car, he went to the biggest dealership he could find, they had a TV commercial on local cable, so they must be legit. Luis was taken for a ride, and not just a test-drive.
Unbeknownced to Luis there was an obvious error on his credit report leading to a dismal credit score. "No problem! We can get ya a loan," the dealership loan shark persisted; rather than getting educated about credit errors from his lender, Luis got a predatory loan. He drove off the lot with a used 1998 Dodge Neon with AM/FM and a 23.99% interest rate.
This story is repeated many times over. United States consumers' limited knowledge of how to manage the, sometimes opaque, world of credit reporting is no match for the predatory loan-pushing of for-profit lending machines.
This sad example, however, is the antithesis of the experience credit unions strive to create. Credit unions grew exponentially in the wake of the Great Depression giving the masses access to financial services only the elite could traditionally afford. Today, they remain not-for-profit entities and strive to serve their local communities with a human-centered approach. They don't charge a penny more for loans or services than they need to to keep the doors open. Pricing isn't set to please shareholders, and while the socially responsible mission of the credit union movement often gets drowned out in a world of big budget bank marketing, their core value of people helping people remains.
This is the platform from which the Re.look idea was birthed. Luis Jara, financial literacy specialist & Nicole Lopez-Conti community outreach manager from Bay Area based Patelco Credit Union, in a true Slumdog Millionaire moment, drew on life experiences to answer the question How do we harness the power of communities to bring financial empowerment to those who need it most? Nicole's upbringing with 50+ foster siblings throughout childhood exposed her to the social injustices of the Bay Area. She learned that people who have the greatest chance of scaling over the wall of poverty are those who have access to education at the right time, when they are ready to change behavior & break the cycle. Re.look is a program in which a credit-expert looks at decline factors, when a borrower has been denied credit, & puts would-be borrowers on a 3, 6, 9 or 12 month track to being able to re-apply successfully for a guaranteed loan. (see User Experience Map). Credit unions have the innate ability to look beyond narrow guidelines & take the whole person and their potential into account.
The credit union community is made up of 6400 credit unions and 98 million members across the United States. The industry generates thousands of declines for loan applications (mortgage, auto and unsecured lines of credit) daily. Currently our community is offering a free credit report to declined would-be borrowers, but not much more. A loan decline doesn't have to mean weâre turning our backs on would-be credit union borrowers. The end user for this idea, arguably a person who needs financial education the most, is coming to the CU community for a solution. True to the core values of the movement, a decline can be a starting point to go on a credit-repair journey with a trained expert who has a laser focus on getting the would-be borrower that loan.
During an IDEO MeetUp in May, local financial education experts, engineers, venture capitalists, students and community leaders got together to ideate and prototype around Re.look (pictured here). In the single best night of our careers we saw Re.look venture from a concept to a viable vehicle to financially empower people who are ready to learn and institute behavior change.
Some industry expert feedback on Re.look:
- "The idea builds upon an existing infrastructure with a pathway to scale (credit unions) and targets an audience that has already identified itself as being interested in the service (access to loans). By trying to improve and iterate an existing process, the idea is able to benefit from past work and experience."
- "This makes so much sense. So many people that get turned down for loans have no idea why. If this became an industry standard post-loan write-up, it would help people get on track for being credit-worthy."
- "If conceived and implemented well, the program could provide a valuable financial empowerment tool to a financially vulnerable population and allow them to meet current financial needs/goals while building credit and a stronger relationship with a mainstream financial institution."
Over the course of the next six months the team at Patelco will develop the business plan, host more MeetUps for further development and launch a Re.look pilot program. The idea could especially use support from folks in visual storytelling, business development, app design support & marketing. If you're interested in giving your input please reach out to firstname.lastname@example.org, email@example.com or firstname.lastname@example.org.