Build transparency into dealer relationships
Conduct oversight to ensure compliance with your policies and procedures.
Auto dealerships and credit unions are different animals, but with the proper guardrails the two can work together for mutual benefit.
That’s according to Josh Bisson, vice president of lending and collections at $595 million asset Fort Liberty Federal Credit Union in Fayetteville, N.C., and John Warner, director of consumer lending at $608 million asset Embold Credit Union in Milwaukie, Ore. They addressed the 2023 CUNA Lending Council Conference Tuesday in Denver.
Dealerships, for example, aren’t held to the same regulatory standards as credit unions, says Bisson, a former finance and insurance manager at several dealerships.
“Dealers have little regulatory oversight or accountability, while credit unions are incredibly structured,” he says. “Even if you have a good relationship with your dealer, they won’t understand why you can’t buy a certain loan. Be upfront about your policies and why you do things. Tell them, ‘here are the nonnegotiables.’”
The best way to ensure proper guardrails are in place, Bisson and Warner say, are with:
- Clear policies. Well-defined policies provide the framework for these relationships.
- Compliance. Collaborate with your compliance and legal teams to ensure your policies are compliant.
- Audits. Regular audits will ensure dealers remain in compliance with your program parameters.
- Guidance. Have a dedicated team to provide guidance on policy questions.
“Clear policies and procedures build transparency and trust in credit union-dealership relationships while ensuring regulatory compliance,” Bisson says.
This includes auditing indirect loans after they’re booked to verify members’ income, employment status, and address. Dealers may present inaccurate borrower details by adjusting figures to fulfill lending requirements, Bisson says.
“Set clear expectations with the dealerships up front,” Warner says. “And be a fast funder. If you are, they’ll want to work with you. They want their money.”
Other keys to success in dealer relationships:
- Set realistic sales targets. Work with dealerships to set goals.
- Align sales strategies. Ensure dealership sales plans support the credit union’s financial objectives. Consider dealer targets to better manage expectations.
- Know your programs intimately. Dealer reps must be experts on the credit union’s lending programs and aware of competitors’ programs.
- Originate loans strategically. Use prudent underwriting to align loan amounts with risk profiles.
- Conduct onboarding sessions for dealers and credit union staff to make the relationship run more smoothly.
As challenging as dealer relationships can be, they can be an important part of credit unions’ success.
“We’re business partners,” Warner says. “Without these relationships, a lot of us wouldn’t be here.”