I had the opportunity to attend the Consumer Lending Roundtable at the recent CUNA Lending Council Conference in Denver. There was a goldmine of insights and strategies. Here are some key takeaways:
Consumer Lending Roundtable
Centralizing Lending: Many credit unions are shifting towards centralized lending to minimize branch-level friction. A notable strategy includes enabling branch financial coaches to originate and approve small unsecured loans. This not only streamlines processes but also allows a greater focus on financial wellness coaching.
Income Verification Challenges: For self-employed members, income verification remains a hurdle. Solutions discussed range from requiring two years of tax returns and bank statements to implementing tiered verification processes.
Vehicle Titling Complexities: The varying vehicle titling rules across states, especially near state borders, pose significant challenges. Some credit unions respond by either developing dedicated in-house titling teams or outsourcing to specialists familiar with the intricacies of state-specific regulations.
Navigating Rising Interest Rates: With loan-to-share ratios over 90%, credit unions are feeling the heat from rising interest rates. Strategies to manage liquidity include borrowing from the FHLB, selling parts of indirect loan portfolios, offering higher deposit rates, and introducing reverse-tiered money market accounts.
Adjusting Approval Criteria: To keep pace with market demands, some credit unions are loosening approval criteria. However, there’s caution in the air with warnings about potential rises in delinquencies, especially with student loan repayments resuming in 2023. Emphasis on ongoing portfolio monitoring was a key takeaway.
Fraud Mitigation Efforts: In the face of increasing fraud, credit unions are adopting various measures. These include leveraging enhanced fraud services from credit card processors, monitoring the dark web for member data exposure, and establishing specialized in-house fraud investigation teams.
Handling Fraudulent Applications: The roundtable also discussed the practice of notifying local police about suspected fraud. While this approach is effective, some credit unions expressed concerns about potential reputational risks.
Indirect Portfolio Management
One of our team’s favorite breakout sessions discussed various ways credit unions can more effectively manage their indirect portfolios while understanding the motivations of dealerships.
Competing with Captive Finance Companies: Credit unions need innovative strategies to strengthen dealer relationships, given the inherent advantages of captive finance companies.
Indirect Lending Risk Management: It’s crucial to have robust policies, procedures, and data analysis for risk management at portfolio and dealer levels.
Aligning with Dealer Priorities: Understanding that dealers focus on volume and profits, credit unions should highlight financial benefits and flexible loan structures.
Vetting New Dealers: Thorough onboarding and risk assessment of dealers, especially independents, is essential.
Backend Monitoring: Continuous monitoring of loan performance and servicing is vital for identifying issues and making necessary adjustments.
Building Relationships with Dealers: Credit unions must understand dealer perspectives and offer competitive rates, allowances, and personalized service.
Adaptability and Innovation: Ongoing evaluation and innovation are key to staying competitive in changing markets.
The Credit Union National Association held a great event. It was terrific seeing some of our credit union partners and meeting new people from the industry. Informed was pleased to sponsor alongside several of our industry partners. Origence, with whom we serve several credit unions, had a large presence as you would expect at an important Credit Union industry event.
Matt has spent his career focused on auto lending and fraud and is an Enterprise Account Executive at Informed Previously he held several positions at Point Predictive including Director of Auto Lending Sales and Senior Fraud Analyst.