First Union Corp. said it has formed a "strategic alliance" with Auto Credit Clearinghouse to finance car purchases by credit-impaired borrowers.

First Union will work with Auto Credit to originate subprime auto loans from First Union's client base of more than 1,800 southeastern dealers. The loans will be referred to Auto Credit for underwriting, financing, and servicing. Auto Credit will also be responsible for collection efforts and will assume all credit risk.

Charlotte, N.C.-based First Union said the arrangement will facilitate the financing of loans it would have rejected in the past. Auto Credit, in turn, gets access to First Union's large dealer network.

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