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Financial institutions are great with sticks. Slow to pay? Whack! Late fee. Thirty days late? Whack! There goes your credit score. This system of penalty, punishment, and pain was designed to encourage borrowers to repay loans as agreed, but it is neither encouraging nor effective. Where are the carrots? Where’s the reward for borrowers who pay as agreed? Where’s the incentive for consumers to outperform their credit scores?

LIFT (Lower Interest For Timeliness) is a loan feature that reduces loan interest rates when members make on-time payments. By giving borrowers a chance to earn their way to more affordable credit, LIFT helps credit unions drive down delinquency, improve member satisfaction, and gain confidence in lending to seemingly riskier borrowers.

The LIFT Administration application is completely customizable by the credit union to configure all the necessary components for automating the administration of the feature. This back office component is designed to take in a standardized extract file of qualified loans from any core system, determine action on qualifying loans, and return an import file to update loan rates back to the core system. The interface also provides the credit union’s staff the ability to research the status of loans in the program. The application also features an automatic email notification tool for the credit union. The application communicates through the credit union’s email server, and offers customizable templates for both a six-month letter of encouragement and a 12-month congratulatory letter.

Contact us to learn more about this idea from Filene i3.

Categorized: 'Year 2010'

Tagged: 'lending' 'borrowing' 'consumer behavior'

Project Updates

November 21, 2011

Only a few people ever achieve liftoff of the astronautical kind, and one of them spoke last week to the group that is turning Filene Research Institutes i3 innovation LIFT into reality. 

LIFT is being tested as a way to improve repayment behavior and financial capity. Guest speaker and astronaut Janet Kavandi, Director of the Flight Crew Operations at the Johnson Space Center, spoke to Filene and five partner credit unions during the launch of this idea that provides incentives for timely load payments. The University of Wisconsin–Madison's Center for Financial Security will study automobile loans to 1,200 LMI consumers with subprime credit scores, with the results to be published in 2013. 

"It is a fantastic experience to see an i3 idea get into the field for testing," says Matt Davis, Innovation Director at Filene. "The LIFT program will provide credit-challenged consumers with the help they need, while managing the inherent risk in doing so."

Credit unions piloting LIFT during its research phase include:

  • Del Norte Credit Union ($392 million, Santa Fe, NM)
  • Industrial Credit Union ($144 million. Belingham, WA)
  • Innovations Federal Credit Union ($148 million, Panama City Beach, FL)
  • Public Service Credit Union ($1 billion, Denver, CO)
  • 1st Advantage Federal Credit Union ($540 million, Newport News, VA)

Astronaut Janet Kavandi spoke to the assembeld group about her experiences in space on three different missions and about how to plan, train for, and execute a complex mission. Credit unions piloting LIFT face all of these challenges as they recruit and test this innovative loan program with more than 1,200 consumers. 

The Filene i3 innovation team behind the LIFT idea includes: Shelly Berryman, SchoolsFirst Federal Credit Union ($8.8 billion, Santa Ana, CA); Matt Henry, Elevations Credit Union ($1 billion, Boulder, CO); Jackie Edwards, Connexus Credity Union ($351 million, Wausau, WI); Mike Kenzie, Patriot Federal Credit Union ($432 million, Chambersburg, PA); and, Lisa Randall, Vermont Federal Credit Union ($330 million, Burlington, VT). 

March 9, 2011

Filene’s getting a Lift! In a field of 246 applicants, Filene was one of five selected for a grant from the Center for Financial Services Innovation (CFSI) to continue work on Lift: Lower Interest for Timeliness.

The CFSI Financial Capability Innovation Fund provides $1.5 million in grants to support promising nonprofit-led projects that help consumers better manage their finances and acheive financial prosperity. 

The ‘ingenuity and measurable positive outcomes’ of Lift, an i3 idea, earned Filene this generous grant from a field of 246 other applicants from 44 states.

Lift is a loan feature that provides incentives for healthy financial habits. As users make timely payments on their loan, they are rewarded with a lower interest rate. This pioneering concept allows users to pay off their loans faster and reduce the amount of interest paid. It also helps them establish healthy financial behaviors and earn the opportunity to bring down their interest rate.

The i3 innovation team members who created Lift deserve heaps of the credit:

  • Shelly Berryman | SchoolsFirst Federal Credit Union | Santa Ana, CA
  • Matt Henry | Elevations Credit Union | Boulder, CO
  • Lisa Randall | Vermont Federal Credit Union | Burlington, VT
  • Jackie Edwards | Connexus Credit Union | Wausau, WI
  • Mike Kenzie | Patriot Federal Credit Union | Chambersburg, PA

The Financial Capability Innovation Fund is supported by a collaborative of funders, led by the Citi Foundation. It also includes Bank of America, Capital One, Morgan Stanley, Experian, U.S. Bank, and Visa Inc.

In addition to the financial award, CFSI will provide Filene with strategic guidance, technical assistance, visibility, and an unparalleled network in the financial services industry.

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