SAN DIEGO – Any credit union that wants to be successful in auto lending must develop great relationships with local car dealers and then maintain those relationships through strong communication.
That was one of the key messages as CU Direct gathered four past winners of its "Best Practices in Lending" awards in a panel at this year's DRIVE Lending Conference,
Julie Kinney, indirect senior lending manager for $2.4 billion Summit Credit Union in Madison, Wis., suggested CUs should start building a relationship with a dealer at the initial meeting.
"Share what the credit union can offer the dealership, and then personalize the follow-up," Kinney said. "Once we partner with a dealer we work to sustain the relationship."
Among the strategies she offered: Have fun competitions between dealerships, with the top five dealerships quarterly winning gift baskets.
Summit CU restructured its indirect lending department two years ago, and now makes twice as many visits to dealers as it used to, according to Kinney, who added the CU also makes sure to have consistency of decisioning. "A best practice is clear and ongoing communication, resolving any problems quickly. With CUDL we have had exceptional results."
Portfolio Management
Mark Wild, SVP of lending for $9.2 billion Security Service FCU in San Antonio was noted to be part of the No. 1 indirect lending CU in the country in 2015. Security Service does business in three states: Utah, Colorado and Texas.
Wild said the lending team breaks down portfolio management into four categories: loan origination, balance sheet management, servicing and asset recovery.
"We are doing a lot more consumer lending than in previous years," Wild reported. "We plan to keep on originating mortgages and consumer loans."
Security Service is seeing "record demand" for all loan products: almost $15 billion over the last three years, according to Wild. The CU offers participations to other credit unions: about $2.2 billion worth.
"We have the infrastructure and expertise, and relationships with dealers, to originate more loans than we can safely put on our books, so we originate out," he explained. "Asset recovery is the toughest part of portfolio management. It takes people, processes and technology."
Coast-to-Coast Operations
Laurie Agustin, consumer lending manager for $384 million Alliance CU, noted her credit union operates in both North Carolina and California, and said the time difference can be "challenging."
Alliance runs operations out of its California office. In the Golden State it targets three counties, is partnered with 20 dealers and funds $2 million in auto loans per month. In North Carolina it also targets three counties, in which it is partnered with 10 dealers and averages $3 million funded monthly.
"Relationships are really important to us. We make regular onsite visits for business development," Agustin said. "We have a trained operations staff for underwriting and processing, and we use CUDL SmartFund. When we get an indirect member we call them within 48 hours of funding."
Agustin said the onboarding process starts with thanking the new member and asking about the experience of getting an auto loan from the CU. "We do cross-sell later. We have 20% penetration on additional products."
Alliance CU has a number of marketing outreach initiatives, including special onsite car sale events and frequent dealer promotions, Agustin added.
Golf Tournament Proves Popular
Michael Kramer, VP of indirect lending for $1.6 billion TTCU The Credit Union, Tulsa, Okla., said his credit union started its indirect lending portfolio from scratch seven years ago with recreational vehicles.
TTCU associated with the Oklahoma PTA in 2009, resulting in 47,000 new members. Its indirect division has had an average ROA of 1.30% for the last seven years. It lends in six states: Oklahoma, Texas, Kansas, Iowa, Missouri and Arkansas. It offers credit cards, auto loans, RV loans, motorcycles/ATVs.
"All tier with credit score of 650 or higher get a call back," Kramer noted. "Our underwriters visit locally three times a week for about four hours, and we do weekly lunches with owners of the dealerships."
Each month, TTCU adds and cuts dealers, Kramer noted. It holds quarterly contests, hosts a yearly golf tournament, and has mouse pads with a weekend phone number to leave with dealers. It markets to members through Auto Cash, an outsource company that does gas card giveaways with test drives on pre-approvals. It uses Auto Smart and Smart Approvals on pre-approvals, pushing members to close at the dealership.
"If your people are not happy, the dealers will not be happy," Kramer advised. "You have to take care of your funders, underwriters and managers. Let your people own projects and dealers."
Creating and Managing Dealer Relationships
Wild of Security Service FCU said creating as well as managing relationships with dealers is something credit unions have to work on every day, with every interaction.
"You have to earn their business every day," he said. "The dealers don't have to send us anything. We deal with 750 dealerships in three states. We were very picky when building the network. We look for any red flags popping up, plus an annual review of every dealer we do business with."
Summit CU's Kinney agreed. "It is important to know the people at the dealerships as people, beyond the business relationship. It is harder to get mad at someone you know personally. We look at repossessions on a monthly basis. If a lot are happening at a particular dealership, it is time for a conversation. If we see an issue, we pick up the phone and talk to them. We are partners with them, but it is the credit union's program, not the dealer's program. Have to do what is right for the credit union, not what is right for the dealership.
TTCU's Kramer noted that the CU/dealer relationship is "not a one-way street."
"You want to give the dealer everything they want, but you always need a game plan," he noted. "Otherwise, you can just be a submittal and trash can service. Some relationships get better, some do not and you have to cut them off, especially for fraud. Monitor dealers that used to give you business but now haven't given you something for six months. We find out who wants to be part of our game and who doesn't. With CUDL you can operate that way."
