ALEXANDRIA, Va. - (12/19/05) CENTRIX Financial, which had built alarge book of business in indirect, subprime lending with creditunions that slowed to a trickle when NCUA earlier this year raisedconcerns over such third-party relationships, is calling a newproposal from the agency a positive step. NCUA hasissued for 60-day comment a proposed rule to regulate federallyinsured credit unions¹ purchase of indirect vehicle loansserviced by third parties. Part 701.21(h) would limit the aggregateamount of indirect vehicle loans serviced by any single third partyto a percentage of the CUs net worth. The agency issuggesting a two-step regulatory limit for these indirect,outsourced loan programs during the first 30 months of a newrelationship, with the proposed cap set at 50% of the CU's networth. After 30 months of experience, the CU could increase itsparticipation in the vendors program to 100% of net worth.NCUA added that if a credit union could show appropriateinitial and ongoing due diligence, the credit union couldapply for a waiver to obtain higher limits. Robert E. Sutton,chairman and CEO of Centennial, Colo.-based CENTRIX responded bysaying, The proposed rule appears to be a positive step forthe indirect lending industry as a strong move toward clear andeffective guidelines for the future. We are currently reviewing thetoward clear and effective guidelines for the future. We arecurrently reviewing the proposed rule and will submit a commentletter to NCUA.
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