Educators CU Sheds Used Car Lot

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RACINE, Wis. – Educators CU said it has surrendered in its three-year fight with the state’s auto dealers and will lease its used car operation to an employee, who will operate it as AutoWerks.

AutoWerks will end a long battle between the $1.3 billion credit union and the Wisconsin Automobile and Truck Dealers Association. The association had challenged ECU's right to sell cars – a practice that started with the credit union selling newer-model vehicles coming off rental car fleets.

An April compromise, under which Educators would have operated a lease-to-own program, apparently did not pass muster with state regulators, prompting the credit union to quit.

Instead, the employee, who ran auto sales in his last two years with Educators, will lease space from the credit union and start the for-profit AutoWerks. Early this year, the employee, Werner Kant, took early retirement from Educators.

The new arrangement was prompted by an ongoing disagreement with the Wisconsin Automobile and Truck Dealers Association and was required by state regulators, who directed the credit union to either get state lawmakers to pass legislation allowing a credit union to own a car dealership or to sell it. Lawmakers had gotten a clause included in the state budget last year to grandfather the credit union's ownership of the dealership, but it was vetoed by the governor.

Educators has been buying used cars at auction and reselling them at the lot since 2002, when it was approved by the state regulator.

But a complaint lodged by a local car dealer led the state Office of CUs to ban the dealership, ruling the credit union charter allows vehicle leasing but not sales. The agency ordered Educators to cease selling cars, but agreed to give the credit union 18 months to either sell the business or get the law changed.

The order found that Educators' used auto sales were impermissible because they were not routine daily operations of credit unions.

 

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