AUSTIN, Texas-Lending profitability is credit unions' biggest challenge in today's marketplace, but opportunities do abound, according to Teres Solutions CEO Tim Kelly.
Should the broader economic recovery start to gain some steam, Kelly believes a pent-up demand for new cars will be unleashed and that could be very good news for credit unions that have stuck with dealers in a very rough environment.
"The banks still have not re-entered that marketplace so there is a unique opportunity for credit unions to establish a deeper relationship with local dealers," he said. "The better relationships they establish with those folks, the better position they will be in when we get out of this current economic situation."
National lenders with upside-down balance sheets have also all but abandoned merchant lending products as well, leaving that market ripe for the plucking by CUs. Teres Solutions put together a product that hooks up local merchants, such as pool companies, dentists, cosmetic surgeons or even fence builders, with credit unions to allow those businesses to offer consumer financing. CUs get two bites of the apple in those transactions via a fee from the small business as well as the interest earned on the acquired loans. Kelly did caution CUs that the current credit market is "dynamic," and presents possible potholes, including credit scores that can shift dramatically from one month to the next due to weakness in the housing and job markets.
"Our regulator is going to require credit unions evaluate their portfolios on a consistent and more frequent basis than they have in the past," he reminded.
