To build its auto lending portfolio in a highly aggressive financing market, Diamond Credit Union acknowledges that all potential solutions are on the table.
The $375 million CU in Pottstown, Pa. is hoping its participation in a new entity will take the cooperative into territory that captures the financing interests of car shoppers right away.
Diamond CU recently signed on with Tranzact Information Services’ Loyalty Assurance program, which leverages credit inquiries to identify members who are actively shopping for products within a credit union’s portfolio, including auto loans, credit cards, mortgages and installment loans.
Once a member consents to having the credit report pulled, credit unions can move forward knowing that they are likely in the buying mode. The Loyalty Assurance program can flag this activity within a credit union’s membership in as little as 24 hours, giving them the opportunity to ensure its products and services are considered at this critical moment in the buying process, said Ben Waldshan, president of Tranzact in Boca Raton, Fla.
So far, Diamond is pleased with the strides it has made with the program, said Lori Levengood, vice president of lending. The CU has generated more than $350,000 in auto loan originations and contacted roughly 35% of the members identified through Loyalty Assurance. Of these, 11% have been converted into auto loan sales.
Diamond had been offering auto loans forever, Levengood said. The CU’s $106 million portfolio is driven mostly by used car financing. Still, in this lending environment where silver bullets are few and far between, any sound opportunity to grow loans is strongly considered, she offered.
"We felt that the methodology behind leveraging credit inquiries to identify members who were shopping for an auto loan was sound, so we agreed to a test," Levengood said. "Our initial results have been promising."
One of the keys is contacting members soon after Diamond receives an alert that an auto loan inquiry has been posted on their credit report. The follow-up is a combination of outbound calls, direct mail and email. Levengood said they realize there is a short window of time to capitalize on these auto recapture opportunities so reaching out as quickly as possible is critical to maximizing the number of loans Diamond is able to close.
Even in a competitive arena with dealers and others offering zero financing, Diamond’s immediate follow-ups with shoppers are yielding success, said Mike Gellis, sales manager. Levengood said being in the Northeast part of the country, there is a bank branch on every corner.
In the auto market, it really comes down to financing through the dealer, she noted. Couple that with other financial institutions in the indirect lending space and competing with dealer incentives, and standing out can be a contest.
"This is the first time we’ve used something where the dealer will tell us members were there," Levengood said. "The hits we're getting are members with higher credit scores who have seen low financing. Those are hard to beat. That’s the biggest challenge–sometimes, we just can’t compete here."
Since Diamond signed on with Loyalty Assurance, it has made some marketing tweaks on who it should be targeting based on credit scores, said Todd Rothenberger, vice president of marketing at Diamond. It’s a crucial first step in helping to seal the deal.
"We’ve always had great success with E and D credit scores. We want to continue to make quality loans," Rothenberger said. "That tweaking is going on right now."
Tranzact launched Loyalty Assurance in 2010. There are 14 financial institutions enrolled in the program, including six credit unions, Waldshan said. Another six are prepping to launch. The company works with credit unions with memberships ranging from 5,000 to more than 10,000. Waldshan said asset size is less of a factor than the magnitude of the auto loan portfolio.
In addition to generating incremental auto loans, Diamond has been able to cross sell additional products and services as a result of this member outreach initiative, including credit cards and signature loans, Levengood said.
"Once we have pulled our member’s credit report, we can review their overall financial situation to identify additional products and services that will meet their needs."