NEW YORK — Indirect auto lending and the growth it brings isn't a newtopic, but a July 1 breakout session at CUNA's America's CreditUnion Conference utilized relatively new technology that allowedaudience members to voice their opinions. The debate, which wasmoderated by CUNA Mutual's David Polet, included distribution ofaudio response keypads that revealed the audience changed itsattitudes toward indirect lending following the debate.

Jim Holt, president/CEO of the $209 million MidAmerican CreditUnion of Wichita, Kan., faced off against Dawn Brummet, vicepresident of consumer lending at the $1.5 billion ORNL FCU of Oak Ridge, Tenn. Holt took the traditional positionthat most indirect lending programs are not good for members orcredit unions, while Brummet argued in their favor.

Brummet said credit unions need to get beyond the stereotype ofthe shady auto dealer.

“If anyone can relate to a disservice of a poor reputation, it'sfinancial institutions post-recession,” she said. Just as creditunions sometimes get included in negative talk about banks, shesaid, many auto dealers are unfairly given poor reputations basedupon the bad actions of a few.

Brummet additionally argued that indirect lending doesn'trequire credit unions to give up power to dealers during thetransaction. Instead, she said, the programs empower members to geta loan when and where they need it. The key is to manage indirectlending relationships as closely as credit unions manage anycritical vendor relationship, giving it the same level of duediligence.

“What is the delinquency rate for loans closed out of thedealership?” she said. “What are the charge offs? What does thatpaper look like? You never give up control of underwriting. If youdon't want to take on too much risk, don't put it into yourunderwriting. With the proper controls, indirect lending can notonly be good business for members, it can be good for you.”

Holt disagreed, saying it doesn't seem like good business tosend members into a high-pressure situation where they are sold acar and other products that may or may not be a good financialdecision.

“I don't know how often I've heard dealers chuckle about how 0%brings people in, but few go home with that rate,” he said. “But,they all go home with a car.”

Holt, who admitted his credit union has an indirect lendingprogram that includes 300 dealers – but has also cut ties with justas many due to shady business practices –also questioned whethermembers obtained from indirect lending are “the kind we want.”

They absolutely are, Brummet countered.

“I hope any credit union that wants loans wants these people,”she said. “These are people who live in your community.”

Additionally, Brummet said, indirect lending is a way tointroduce credit unions to people and expand the industry's marketshare.

“We heard earlier today from Bill Cheney that we have anobligation to extend the credit union movement to people who don'tknow us,” she said. “If that first introduction is an auto loanfrom the credit union, we should do that.”

Holt disagreed.

“I doubt you want your first experience with the credit union tobe the car finance guy,” he said. “I want members who come into thecredit union to meet my employees, who have been properly trainedto meet their needs,” he said.

Using the keypads before the debate, 56% of audience memberssaid they somewhat or strongly agree that indirect lending programsare member focused, while 30% disagreed and 11% were undecided.Following the debate, however, the number of attendees who agreedincreased to 77%. Only 19% still disagreed indirect lending is badfor credit unions, and 5% were undecided.