Westerra Credit Union Forms CUSO to Help Navigate 'Misunderstood' Business of Car Repossessions
DENVER -- When Westerra Credit Union made the move into indirect lending a few years ago, management soon discovered that the program's back-end infrastructure needed to be top notch for such a "high-risk" area. The indirect loan program brought with it collections, car remarketing and repossessions, but the $900 million credit union felt it could cull experienced staffers and resources to start its own outfit rather than outsourcing, said John McCloy, chief lending officer at Westerra. On Jan. 1, the credit union did just that: it launched Westerra Services, Inc. to help other credit unions in a number of specialized automotive areas including repossessions, remarketing, real estate disposal and collections.
"It's not a core competency for credit unions. It's such a misunderstood business," McCloy said. "We looked around the Colorado landscape and noticed that credit unions were struggling in this area."
Plans were made to move the idea of helping CUs to implementation and included first hiring a former collector in automotive collections to assist smaller credit unions. Then a search was initiated to find the best of the best. Westerra found its expert in Dennis Eisenbrey, who had previously repossessed and disposed of 75,000 cars annually through HSBC Auto Finance in San Diego. McCloy said his expertise in the auction process not only helped the CU achieve lower fees and greater return in the auction lanes, but also led to forming Westerra Services.
"A lot of credit unions are spending a lot of time retailing cars to the core public and because it's not their core competency, they're utilizing up a lot of time," Eisenbrey said. "At the point they decide to repossess the car, it's done from there." So far, 14 Colorado credit unions including one in Iowa, have signed on with the new CUSO. In January, seven of them brought their reposed vehicles to auction together in Colorado for the first time under the Westerra Services umbrella. Eisenbrey said the CUSO is talking to CUs in other states and is even exploring the possibility of working in Europe. The CUSO ensures CU clients are in compliance with FTC regulations regarding the sale of repossessed vehicles and state laws regarding the timely disposal of vehicles, he added.
Westerra Services aims to have the car repossessed within 72 hours. Once the car is retrieved, it is picked up, taken to auction, a recondition report is compiled and remarketing is assessed. Eisenbrey said he is physically at every sale where there are 20 cars or more. Westerra Services has a network through Falcon International, one of the nation's largest repossession companies.
Eisenbrey said the few competitors that are out there tend to charge between $150 and $175 per car, but the CUSO's pricing is "slightly more than half that." Through negotiations, CUs can save between $45 and $50 in certain fees and they could get more per car, ranging on average between $90 and $100 per car, he added. Westerra Services enables CUs "to keep their collectors collecting rather than being involved with charged-off accounts and the sale of such." Most clients simply hand everything to the CUSO as soon as a decision is made to repossess a vehicle, while some only seek assistance with remarketing, which is the disposal of repossessions at automobile auctions, Eisenbrey said.
Westerra Services works with CUs with assets ranging from under $100 million to $250 million. Eisenbrey said they can work with larger CUs, which tend to "have an immediate need" for repossession services. The difference the CUSO touts ahead of its competitors is the credit union difference.
"There are only two or three others out there doing this. We are credit union-owned and we are credit union-trusted," said Eisenbrey, who worked at Wachovia Bank for 14 years and whose mother managed a CU for 28 years. "The main [difference] is [the competition] use their own auctions. We've been able to negotiate, which saves right off the bat."
While Westerra Services has done a slow rollout of collection services to some of its Colorado CU clients, McCloy said the different technology systems used has hampered progress here. The CUSO is in the process of developing stronger competencies to make the process more streamlined, he explained. Another service that will be added down the road is assisting CUs with the merger process.
"In the area of mergers and acquisitions, we're building a toolkit for those who are considering this option," McCloy said, adding Westerra has grown its assets over the last 16 months as a result of two mergers. "Right now, we're going to stick to our core competency--repossessions and vehicle remarketing and collections will continue in Colorado." --firstname.lastname@example.org