NASHVILLE, Tenn. -
Jolicoeur said the percentage of credit unions with indirect auto loans continues to increase each year, going from 41.6% in 2002 to 63.4% in 2006, providing more credit unions with opportunities to grow membership from indirect borrowers.
"These are borrowers who we have to turn into members," he said. "We need to work hard to deepen that relationship by selling them additional products and earning the right for their deposit relationships over time."
Jolicoeur told the group that the magnitude of indirect lending is best explained through numbers. At $5.5 billion, indirect lending accounted for 80% of the net auto loan growth in 2006, making it a key source of credit union membership growth. "These new members are younger and in their borrowing years," he added.
Despite the opportunities indirect borrowing presents, Jolicoeur admitted that converting these borrowers to members is not easy. It takes time and tenacity to grow membership through the ranks of indirect borrowers.
Doing The Steering
"We have to remember that these people are there because the car dealer steered them there," Jolicoeur said. "You aren't going to win them over in one day. Earning their primary checking account is key, which isn't easy. People are loyal to their financial institutions and don't change that relationship overnight. It's a take-away business."
The opportunity credit unions have with indirect borrowers is the access to their financial information, a process Jolicoeur calls data mining. This gives credit unions the ability to research the borrowers at their location and develop plans that provide them with individualized help for their specific circumstance.
This could include refinancing at the credit union, debt consolidation, home equity loans or other types of products.
"Data mining allows you to look at what they have outstanding," Jolicoeur said. "You have to be able to show them there's a really good shot at helping them financially."
On the flip side, statistics show even when credit unions manage to cross-sell products, balances tend to be very low compared with the average member. For example, the average deposit balance for retail households is $11,300 compared with $269 for indirect households. Additionally, relationships with indirect borrowers are fragile and profitability is questionable, Jolicoeur said.
Doing The Capturing
That said, there are credit unions that are succeeding at enticing indirect borrowers to become members. Taylor Murray, dealer program manager at Baxter Credit Union in Vernon Hills, Ill., told the audience it's critical to dedicate resources to calling new members in a timely manner, to create and set reasonable expectations and to offer attractive promotions.
For example, Murray said his credit union has offered auto loan buyouts that beat the lowest auto loan rate by 1% as well as a deferral of 90 days for the first payment.
Adding to the discussion was Steve Koenen, vice president of business development at Altra Federal Credit Union in LaCrosse, Wis., who said his top strategy for indirect borrowers is having the dealer relationship drive the business. By selling dealer finance managers on credit union membership, they become advocates for the credit union, which sets the tone for converting indirect borrowers to members.
For More Resources
Subscribers can get more information on indirect lending, including turning indirect members into more active members, by going to www.cujournal.com and searching by keyword in the left-hand navigation bar.
