PFFCU's Rate Setting Philosophy

Banks, Auto Dealers, and Mortgage Brokers Negotiate Rates. Why doesn’t PFFCU?

At many banks, you will get a higher CD rate if you complain to the branch manager rather than just let your CD roll over at maturity. At most auto dealers, the interest rate you receive is a function of your negotiating skill and the mood of the finance person at the dealer. During the real estate boom, most mortgage loan brokers were paid on commission and earned more income if you were charged a higher loan rate.

PFFCU’s philosophy with regard to loan and deposit rates is to offer members the best rate possible, period. We don’t think it is fair to make special deals for some members and not others. We don’t think a member’s CD rate or loan rate should be a function of his or her negotiating skill or the mood of the particular person with whom the member is negotiating. We believe strongly in treating all members fairly.

Our fair rate philosophy with regard to CD rates means that we only have one set of CD rates and the rates are available to everyone in the branch, over the phone, or through the website. We have different CD rates as a function of term. We sometimes have higher CD rates for IRAs or large balance CDs. These rates are also available to everyone based upon the term or product they choose. We know of one financial institution that had three CD rate tables. The lowest rate is for people who just let their CDs roll over. A higher advertised rate is available but the customer needs to ask for it. Finally, the highest CD rate is available only to certain customers if they complain to the manager.

Our fair rate philosophy also applies to auto loan rates. If you get an auto loan from an auto dealer, the rate you receive is a function of your ability to negotiate. The dealer typically earns more money if you pay a higher interest rate. You can’t just walk in and ask to see a list of their auto loan rates. At PFFCU, you have access to our interest rates. We give all members the best rate we can based upon whether or not they get a new or used car, what term they select for their loan, and their credit score. Rates are typically lower for shorter term auto loans because these loans have less interest rate risk and less risk of default. New auto loans typically have lower rates than Used auto loans because historically, our loan losses are lower on new auto loans compared with used auto loans.

Unlike some banks and mortgage brokers, we don’t cut secret deals where people get a better rate if they know someone or they complain. At Countrywide, which was the largest mortgage lender that failed during the recent economic crisis, there were secret loan rates for politicians that were better than what were given to the general public. PFFCU doesn’t believe it is fair to give some members a special mortgage rate that is not available to all members with the same credit score and loan-to-value ratio. Our loan rates are available to members and our Mortgage Advisors work with members to help them get the best product to meet their needs. Our Mortgage Advisors don’t work on commission.


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