Diamond Seeks Boost To Indirect Auto Loans

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POTTSTOWN, Penn.-As a way to boost its auto lending portfolio, Diamond CU here has implemented the Loyalty Assurance Program from Tranzact. But Diamond VP of Lending Lori Levengood also acknowledges that the program's long-term success is tied to a weak economy and competition from dealerships.

After participating credit unions supply Tranzact with a file of their member base, Loyalty Assurance alerts the institution within 24 hours of a member seeking financing elsewhere. "When the member's credit is pulled for the purpose of an auto transaction, we get that lead," said Levengood. "The primary goal, of course, is to try to get the initial financing before the member has actually closed the deal, but if they've already done so," the CU still has the opportunity to try to steal the loan back from the dealership and re-finance it through the credit union.

The 39,500-member, $375-million Diamond Credit Union has more than $375 million in assets and has closed more than $400,000 in auto loans since implementing Loyalty Assurance in January, said Sales Manager Mike Gellis. That translates to just under 550 leads, about 35% of which are successfully contacted, although the CU is only capturing about 3% of those leads.

"The biggest challenge right now is the incredibly low rate offers" that dealers are able to provide, said Levengood. "The 0.9% and 1.9% that's offered through the manufacturer-that's tough to beat."

At press time, Diamond CU was offering rates as low as 3.49%. Levengood added that the CU has been tweaking its underwriting criteria, but declined to divulge details "There's just really good dealer financing out there that's hard to beat, so we're just working through it."

Gellis pointed out that while the program's success is still a work in progress, sales staff are working on cross-selling other products to members. "I know that a 3% conversion rate sounds low, but once we get the member on the phone we're looking at the entire situation. We cross-sell MasterCards, we've done a lot of signature loans and paying off of debt; it's a great touch point to get in touch with the member and [inform them about other available products] and we have captured some of that."

Each Loyalty Assurance lead is pre-approved for $25,000 (subject to collateral and income) and Gellis said that CU staff does not reveal to the member that they have been screened; rather, Diamond's reps inform the member that they have been pre-selected, which usually elicits a surprised response from the member who was already in the process of car shopping.

As of its March 31 call report, Diamond CU reported 10,821 new and used auto loans totaling more than $107 million-a decline of more than 200 loans and an decrease of about $3 million dollars since its year-end 2010 5300. However the program had only been in effect for two months at the time of the more recent call report and has run an additional two months since that time.

As for the future of the program-to say nothing of auto lending at Diamond CU-Levengood said that it will mostly be a matter of waiting until the market improves. "We'll take what we can and keep plowing forward with that, along with the other channels that we might be looking at," she said. "There's really no silver bullet today, there's just little base hits I think you can get that really pulls your lending growth together."

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