Tag Archive | "Credit Unions"

CUDL: Credit Unions Capitalizing on Bank Retreat

ONTARIO, Calif. — Credit unions and captives continued to take advantage of the pullback by banks in the second quarter. The message coming out of CU Direct (CUDL)’s Sept. 28 webcast is that credit unions need to act fast before banks reconfigure their strategy.

Banks continued to hold the largest share at 32.3% in the second quarter, although the segment’s hold on the market fell 2.5 percentage points. Captives picked up some of that, increasing their share by 1.6 percentage points to 28.6%. Credit unions were the biggest benefactors of the pullback by banks, increasing their hold on the auto finance market by 1.6 percentage points from a year ago to 20.3%.

CUDL executive Michael Cochrum said the subprime pullback was only partially to blame for the bank retreat, noting that competition also played a role in the segment’s pullback. “They feel like competition is too strong, and it’s difficult to maximize your profitability in a market that’s highly competitive,” Cochrum said, adding that the real competition lies in the used-vehicle space.

On a quarter-over-quarter basis, captives continued to pick up share in the second quarter, while credit unions led the way in terms of auto lending growth. Despite the pickup in originations, credit unions saw their share fall two percentage points from the previous quarter to 24%. Banks, however, saw their hold on the market fall 5% from the first quarter, while captives took back some share from the previous quarter.

In the new-vehicle space, captives continued to dominate with a share of 53.2%, up from 52.2% in the year-ago quarter. Banks saw their share of new financing fall from 31.7% in the year-ago period to 28.8%, while credit unions increased their share slightly from 11.4% to 12.7%.

In the used space, banks held the largest share at 35.2%, which was down from 37.3% in the year-ago period. Closing the gap were credit unions, which increased their share 1.6 percentage points from a year ago to to 26.7%. Captives captured 8.1% of that market, down from 7.4% in the year-ago quarter.

Cochrum said the used-vehicle market represents a key opportunity for credit unions to grow their share. The key for that lending segment is strategizing with dealers to create more reasonable loan terms, especially since leasing seems to have plateaued after five years of growth at about 30.8%.

Cochrum attributed the flattening of leasing to residual values, with the glut of off-lease vehicles causing collateral values to fall. He said captives are likely to respond by shifting from leasing to buying programs, which he believes could present credit unions with an opportunity to offer leases on late-model used vehicles to buyers looking for affordability.

In the second quarter, used-vehicle leasing accounted for 3.61% of the lease market, down from 3.71% in the year-ago quarter.

Focusing on the high-risk tiers represents another option for credit unions to grow share. The segment, however, has mostly focused on high-quality buyers — the reason for the segment’s higher average credit score than all other lending segments.

To move downstream on the credit spectrum, however, will require a better understanding of the risk associated with lower credit scores, Cochrum said. Credit unions have also been known to underprice loans involving borrowers with credit scores below 700, the executive noting that the segment will need to rethink pricing strategies in order to maximize returns in the high-risk tiers.

“Even above a 700 credit score, credit unions are priced 50 to 80 basis points under their competitors,” he said.

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Four Trade Groups Ask Lawmakers to Instate Five-Person Board to Lead CFPB

WASHINGTON, D.C. —  Four associations representing 12,000 banks and credit unions submitted a letter to Senate leaders urging them to consider replacing the Consumer Financial Protection Bureau (CFPB)’s single-director structure with a five-person bipartisan commission next year.

The associations listed in the letter, which was sent on Wednesday to Senator Majority Leader Mitch McConnell (R-Ky.) and Minority Leader-elect Chuck Schumer (D-NY),  include the Consumer Bankers Association (CBA), the Credit Union National Association (CUNA), the Independent Community Bankers of America (ICBA), and the National Association of Federal Credit Unions (NAFCU).

“The CFPB is an independent regulatory agency that provides the sole director unprecedented authority over financial institutions, with minimal oversight,” read the letter, which was sent to Senate leaders on Wednesday. “As the sole decisionmaker, the director can promulgate regulations and levy enforcement actions that have sweeping and long-lasting effects on credit availability for consumers. The current single-director structure leads to regulatory uncertainty for consumers, industry, and the economy.”

The associations cited the recent federal appellate court decision in PHH Corp. v. CFPB D.C. Circuit Court Case as further evidence of the need to replace the bureau’s structure. In that case, the appellate court ruled the in favor of the mortgage company, deeming the the bureau’s single-director structure unconstitutional. The court also gave the president the power to remove the CFPB’s director at will, as well as direct the regulator’s activities.

“This result makes it even more apparent what a whipsaw effect the single-director model presents, inhibiting the ability for financial institutions to plan for the future, which in turn limits economic growth and hurts consumers,” the associations stated in their letter.

A five-person bipartisan board or commission would be more in line with other financial regulators and would provide a balanced and deliberative approach to supervision, regulation, and enforcement over financial institutions, the associations stated. A five-person commission would also be better suited to handle the bureau’s authority over rules and regulations within the financial industry, the letter added.

“As we approach the beginning of a new administration, it is crucial we finally put in place a governing structure at the CFPB to ensure it does not become a political weapon, something we are certain Senate leaders McConnell and Schumer can appreciate,” said CBA President and CEO Richard Hunt. “In addition, the governing structure of the agency makes the potential for abuse of power and political influence not only possible, but inevitable.”

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GrooveCar Connects to Dealertrack Credit App Network

HAUPPAUGE, N.Y. — GrooveCar Inc., a national auto buying resource for the credit union industry, announced this week that its AppTrac system is now connected to the Dealertrack credit application network. Officials said the Dealertrack network will play an integral role in GrooveCar’s future expansion plans.

Through the expanded process, credit unions using GrooveCar will receive credit applications in their AppTrac system. They will also be able to send loan decisions back to dealers through the Dealertrack network.

Initially, the Dealertrack credit application network will be available for activation by New York- and California-based credit unions, and access to the network can be purchased as part of the national roll-out of GrooveCar’s service offerings later this year.

“We always came back to the fact that we have long been an innovator in the credit union loan origination arena,” said GrooveCar CEO David Jacobson. “Our teaming with Dealertrack, the national leader in automotive financing technology and services, was a natural partner that will benefit all parties.”

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Open Dealer Exchange, CUDL Announce DMS Integration

SOUTHFIELD — Open Dealer Exchange LLC announced an agreement for integration with CUDL. Through the alliance, CUDL will be offering direct credit application and contract validation data integration from the dealer’s point-of-sale system directly to the CUDL system.

“The agreement with Open Dealer Exchange allows our credit union members a more streamlined approach during the contracting process,” said Tony Boutelle, Credit Union Direct president and CEO. “With our combined technology expertise, lenders will have access to critical information directly from the DMS, something that is tough to do today without the connection to Open Dealer Exchange.”

Open Dealer Exchange, a joint venture between ADP Dealer Services and Reynolds and Reynolds, integrates a finance source or F&I product provider directly within an auto dealership’s DMS, according to the company. From within the DMS, dealers will be able to send complete customer and deal information directly to CUDL then complete the credit application process within CUDL. They also will have the ability to perform contract validation on each deal directly from their DMS.

“Our agreement will enable CUDL to take their credit and contracting services to the next level, which is a step in the right direction for the industry as a whole,” said Steve Luyckx, general manager for Open Dealer Exchange LLC. “Dealers have had limited or costly connectivity between their lenders and their DMS, and this alliance bridges that gap and combines the strengths of each system.”

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CUDL Credit Unions Picking Up the Pace

ONTARIO — After hitting a monthly low in March, CUDL credit unions have increased their market share by nearly 2 percentage points, and have maintained a share of more than 17 percent since May, CUDL, which provides an indirect lending platform that connects dealers to about 950 credit unions, revealed in late September. On a year-to-date basis, credit unions own a 16.7 percent share of the auto finance market.

Representing the seventh largest auto finance segment through August 2011, CUDL credit unions have financed more than 321,000 loans year to date, a 13.4 increase, reported F&I and Showroom magazine.

The segment’s auto loan penetration rate did decline to 16.1 percent in the second quarter from 16.6 percent in the year-ago quarter. However, credit unions were able to increase their unit loan volume by 13.4 percent through August.

“Although the total number of loans was flat since the first quarter of this year, the number of credit union members continues to grow,” said Andrea Salgado, a CUDL market research analyst who led the Sept. 28 Webinar.

Citing data provided by Callahan & Associates, Salgado added that auto loans represented 29 percent of the average credit union loan portfolio, based on dollar volume.

Salgado also noted that auto dealers continue to be a major driver of new business for CUDL credit unions, with 67 percent of consumer financed at the dealership being new members. Thirty-three percent of loans originated at the dealerships were made to existing members.

“These values have stayed the same for the last several months,” said Salgado, who noted that indirect loans were down 5 percent. “A year ago this was at 67 percent for new and 34 percent for existing.”

Prime new-vehicle originations made on the CUDL platform represented 76.4 percent of auto loans originated, down two percentage points from a year ago. Prime used-vehicle originations dropped 2.9 percentage points to 67.3 percent. Average FICO score for CUDL credit unions stood at 729 vs. 733 a year ago. The industry’s average FICO score, according to J.D. Power and Associates, is 728.

Average amount finance for used vehicles among CUDL credit unions was $17,939, while the industry average through July stood at $17,385. Average amount financed for new was up from $25,680 a year ago to 27,880 through August, according to CUDL data.

As for loan performance, delinquencies and charge-offs for the segment continued to track below the 1 percent mark for auto loans outstanding. Credit unions also claimed the lowest 60-day delinquency rate among other lending segments, including banks, at 0.33 percent, with dollar volumes of at-risk loans dropping by $1 billion.

The Webinar also provided an update on the overall industry, with Salgado reporting that auto loan volumes have increased for all lenders except for Chase and Toyota. Ally, she noted, continues to lead the way, growing its loan volume by 51.9 percent year to date.

Salgado also noted a rise in new-vehicle sales vs. used-vehicle sales, the two segments crossing paths between June and August. In August, new-vehicle sales increased 7.5 percent from a year ago, while used-vehicle sales declined 3.3 percent. Through August, new-vehicle sales have climbed 11 percent from last year, while used increased 4 percent. Combined, vehicle sales grew by 6 percent during the first eight months of the year.

Sales right now are tracking at a 12.1 million-unit rate, an increase from the 11.4 seasonally adjusted annual rate recorded through August 2010. Currently, market analysts predict that the industry will end the year between 12.5 and 12.9 million units sold. Salgado said she believes the industry will end the year at the lower end of that range.

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Navy Federal Lowers 36-Month Auto Loan Rate

VIENNA – Navy Federal Credit Union announced that it has lowered its 36-month new auto loan rate to an APR as low as 1.79 percent.

“We believe this is the lowest rate being offered by any bank or credit union in the nation today,” said Tony Gallardy, vice president of consumer and credit card lending.

Navy Federal reported strong auto lending growth in the past several months, driven by its 1.99 percent new auto rate for loans up to 60 months, according to the company. The credit union plans to maintain this rate, along with the new 1.79 percent APR rate for 36 months, reported F&I and Showroom magazine.

Navy Federal also announced that it will continue to offer a $100 bonus for members who choose to refinance their new-car loans from other financial institutions with Navy Federal.

“We are very excited to offer this unprecedented low rate to members at the start of the fall car-buying season,” Gallardy said. “With a lot of good deals in the market, this is a great time to get a new car or truck.”

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