Indirect Lending: Yea or Nay?
CU lenders debate the wisdom of obtaining loans through auto dealers.
Do credit unions do a disservice to members via indirect lending? Or is this practice a powerful tool that allows members to obtain loans when and where they want?
That was the “great debate” between two credit union lenders: Dawn Wade-Brummett, vice president of retail lending and operations for ORNL Federal Credit Union, Oakridge, Tenn. (above, left); and Jim Holt, CEO of MidAmerican Credit Union, Wichita, Kan., (above, right) during the America's Credit Union Conference Monday afternoon.
David Polet, CUNA Mutual Group’s director, voice of customer, moderated the discussion and polled the audience on its views of indirect lending: 58% said they believe it’s a member-focused service, while roughly 30% disagreed somewhat with that statement.
“We must get past the stereotype of the shady dealer,” said Wade-Brummett, an indirect lending proponent. She said reputable dealers often get lumped in with those that are irresponsible—similar to how credit unions sometimes are unfairly equated with banks.
“Indirect lending is about empowering members to get loans when and where they need them,” Wade-Brummett said. “Credit unions should do due diligence with dealers like they do with all vendors—and they should never give up control of underwriting.”
Holt, meanwhile, applauded the 30% of session attendees who “had not gone over to the dark side” by working with auto dealers. “It’s not good to send members into a high-pressure situation where they will be sold high-priced products.
“And do we want the people the dealers send us?” he continued. “Less than 20% of these people even qualify for other services.”
Wade-Brummett offered a firm “yes” to that question. “We want these members, and every credit union should. These people live in your community. They may not fit your model, but credit unions need to extend services to those who need them. Let’s introduce ourselves to them.”
That’s fine, Holt said, “but I don’t want the first contact a member has with us to be a sales guy at a dealership. I want that to be with my employees, who’ve been properly trained and coached. We have trained loan officers who can fit them into the right deal—and maybe change their mind from buying a Cadillac to a Taurus.”