This year will go down as remarkable, if not for one of the worst play calls ever in a Superbowl (courtesy of the Seattle Chokers, er, Seahawks).

It will also be notable that, for the first time ever, the amount of auto loans obtained through the indirect channel now matches that of the more traditional lobby. Traditionally, it has been much less.

For us, the ratio much higher. Like 10 times higher. Like “wow” higher. Like, “this sounds like NCUA is going to give us a call higher” and that’s exactly what happened.

The examiners had some mild concern regarding our indirect lending growth and subsequent concentration, and presented this in a clear, understanding, and patient manner. They even began with “we hate to bother you” and ended with “thank you so very much.”

I crack myself up. Our argument regarding the lack of concentration risk fell on deaf ears.

While borrowers were geographically diverse, thoroughly vetted, and spread over hundreds of contracts derived from well over 300 dealers, it still came to the same end: “You don’t know them.”

I won’t bother with the details of the issues at hand, but apparently NCUA will give you a temporary pass on indirect concentration if you write, “I will not write anymore indirect paper” 1,000 times on a chalk board.

Temporary.

One of the passing comments, however, piqued my interest: “Why don’t you just get more of these through your lobby like you used to?”

Actually, that is a great question. Let’s look at what all of these indirect loans give us:

►Horrible rates;
►High fees to the dealers;
►Personal attention from the Consumer Financial Protection Bureau.

And volume. Lots and lots of volume.

And that’s the rub. Consumers have changed. A lot.

Since the dawn of the technological revolution, consumers have been on a quest to eliminate and revamp the way they do everyday chores. The carnage of such change is everywhere.

For example, we picked up—for the price of a late fee—an abandoned Blockbuster store which had not seen the shadow of Netflix looming over its business model. Ditto for music record labels who found that their entire value chain had disintegrated overnight with the onset of iTunes (and others).

In essence, this what is happening with auto loans. What used to be a long trip to the credit union to get the loan followed by a second trip to the dealership to find a vehicle is now a one-stop event.

This provides consumers with the same product: a new vehicle at a good price, financed at a fair rate. And while many believe indirect programs put the power in the dealers’ hands, they truly don’t: These programs put power in the hands of consumers.

Consumers can go when they want, where they want for what they need, irrespective of either what is in the best interest of either the financial institution or the dealer.

We never really answered NCUA’s question when we were asked. That’s due not only to the fact that we didn’t know how to turn back the clock, but that we had a sense that we would not be able to anyway.

In retrospect I should have answered the question this way:

NCUA: Why don’t you make more of these loans through your lobby like you used to do?

Us: Because going back in time might invoke a time-travel paradox which could instantly destroy the universe and every living thing in it. Roughly, it’s the same as overbearing regulation; just quicker.

And we’d need a DeLorean.

JAMES COLLINS is president/CEO of O Bee CU, Tumwater, Wash. Contact him at 360-943-0740.