The stalled U.S. economy has not only aggravated the downturn in credit union new vehicle loans, it has put the industry’s portfolio of current auto loans at greater risk—adding another recession-related pressure point to credit union bottom lines.
That’s the word from Erik Vandermause, CUNA Mutual Group’s director of product management for collateral protection.
Prolonged high unemployment historically means that more motorists allow their insurance to lapse, according to the Insurance Research Council. Given the grim outlook for U.S. employers, it makes sense to review how your credit union protects its auto loan portfolio against uninsured collateral, Vandermause advises.
In particular, credit unions that self-insure against defaults caused by physical damage loss on uninsured collateral should look closely at their process of managing cancellation and renewal notices from insurance companies.
“Methods of managing this process run the gamut,” he says. “Some credit unions dedicate staff to maintaining files of up-to-date renewal notices for each vehicle loan and following up with members on cancellation notices. Other credit unions simply run insurance documents through the shredder.”
However your credit union handles this, consider that exercising your lien holder’s right to a valid proof of insurance is not only a fiduciary duty, it benefits members who might need prompting to keep their coverage in force, Vandermause says.