MADISON, Wis. (1/19/16)--A blog post authored by Lois Kitsch, National Credit Union Foundation program director, explores transportation as a development issue for credit unions.
The post was the first in of a 12-part series from the foundation that will highlight a different foundation development issue each month.
“Twelve major development issues have been identified as barriers to economic growth and prosperity for the world’s families,” Kitsch wrote. “These issues do provide us with dilemmas and barriers, but more importantly, they provide us with challenges to overcome and opportunities to capitalize on.”
Kitsch cited research that most Americans need cars to function effectively within their everyday lives. Results of an Annie E. Casey Foundation study shows that 88% of Americans drive to work. Two-thirds of jobs are located in the suburbs where public transportation is not readily available.
“Car loans are the credit union ‘bread and butter’ of lending products,” Kitsch wrote. “Yet, many credit unions fail to see the opportunity in providing access to a quality car for members and consumers with impaired credit.”
Kitsch described the Non-Prime Auto Loan Program led by the foundation in partnership with the Filene Research Institute. In July 2015, 10 credit unions completed the pilot, closing 7,605 loans for more than $102 million. The average loan per borrower was $12,136 with a 11.7% annual percentage rate.
“This is a classic example of doing well by doing good,” Kitsch wrote. “Eight of the credit unions had higher yields on these loans despite the higher delinquency and administrative costs (the other two had comparable results to other auto loan products) while members were thrilled with their new autos and auto loans.”