Wachovia ranks highest among home equity loan servicers in satisfying customers, according to the recently released J.D. Power and Associates 2008 Home Equity Line of Credit/Loan Servicer Study.
Now in its second year, the study measures customer satisfaction with home equity line/loan servicers. Four factors are examined to determine overall satisfaction: Product features and functionality; billing and payment; funds access; and contact.
Wachovia ranks highest in customer satisfaction with home equity line/loan servicers with a score of 746 on a 1,000-point scale and performs particularly well in the billing and payment factor. Bank of America follows Wachovia with a score of 743 and performs particularly well in the area of funds. SunTrust Bank ranks third overall with 741.
"Highly satisfied customers can yield tremendous financial benefits for lenders," said David Lo, director of financial services at J.D. Power and Associates. "For instance, customers of Wachovia are particularly loyal, with only 5 percent saying they would 'definitely' or 'probably' switch lenders in the next 12 months compared with 11 percent for the industry average. Additionally, a six percentage point drop in attrition rates can translate into $134 million in 'saved' balances for every 100,000 borrowers, which further emphasizes the importance of satisfying customers."
The study finds that overall satisfaction across the industry has declined from 721 in 2007 to 716 in 2008. The challenging economic market plays a key role in the decline, with actions taken by lenders to reduce risksuch as tightening credit availability and terms, extending fewer credit limit increases and offering less flexibility for locking ratescontributing to the decrease. In addition, poor performances in fundamental areas of home equity servicingsuch as billing and payment processes, and customer contacthave also driven the decline.
"In 2008, we saw an increase in problems and poorer problem resolution, primarily as a result of many lenders not providing customers with timeframes for solving issues or not following up with customers in a thorough and timely manner," said Lo. "In tough economic times, lenders may adopt a 'bunker mentality' and focus on managing risks and costs at the expense of customer satisfaction. However, now is the time for lenders to differentiate themselves from competitors by providing a superior experience for their customers. In doing so, those that succeed will retain more customers and gain greater utilization of existing home equity lines."
The study also finds that demonstrating greater flexibility and understanding toward late-paying customers can lead to increased satisfaction, retention and loyalty for lenders. Among those late-paying customers who rate their lender particularly high for willingness to work with them, satisfaction scores average 812. Conversely, among late payers who rate their lender particularly low in this area, satisfaction scores average only 544. Additionally, 62 percent of late payers who report that their lender made special payment arrangements for their circumstances indicate they "definitely will" or "probably will" choose the lender for their next home equity line or loan.
"Accommodating late-paying customers doesn't necessarily mean that a lender must waive late fees, as 56 percent of customers who are charged a late fee still say they will likely choose their current lender for their next home equity product," said Lo. "Generally, customers are willing to accept responsibility for their delinquency, and treating them with respect and dignity during a difficult time can result in higher satisfaction levels. Ultimately, creating an experience that includes empathetic listening, flexibility in structuring payments, and helping customers face their challenges with compassion and integrity can go a long way in optimizing not only the customer experience over the long term, but also the lenders bottom line."
The 2008 Home Equity Line of Credit/Loan Servicer Study is based on responses from 5,035 customers who originated a home equity line/loan. The study was fielded in March through April 2008 and July through August 2008.
For more information, visit www.JDPower.com.