Breaks Put On Auto Loans

Register now

Due to growing concerns over indirect loan programs, the NCUA board passed a new rule last week that will limit the amount of indirect loans a credit union may purchase from any one third-party servicer to 50% of net worth for the first 30 months, then 100% of net worth afterwards.

Credit unions that prove their expertise or ability may obtain waivers o the new limits from an NCUA regional office.The rule exempts from the limits third-party servicers that are owned by federally insured financial institutions, such as CUSOs, because of those institutions expertise and risk programs.

The new rule was adopted because of growing concerns over concentrations of loans in credit unions made by outside vendors, such as auto dealers, which may not have the same mind of credit risk analysis as the credit unions.

For reprint and licensing requests for this article, click here.