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HOUSTON – In retrospect, 2004 was a good year for Credit Union Acceptance Corp. But several of the factors that made it successful for the indirect lending CUSO may get 2005 off to a slow start for the company. CUAC, which was founded in 1998 by eight Houston-based CUs, added 22 new credit union clients to its roster, for a total of 55 CUs it services. That’s an increase of 77% from 2003. The company also expanded in to new markets that include Alabama, Dallas-Fort Worth, Baton Rouge-New Orleans, Mississippi, and Northern Ohio, making seven markets it does business in – the other two are Florida and South Carolina. CUAC doubled the number of indirect loans it funded in 2004 – 32,000 out of more than 100,000 applications it received . CUAC President Adrian Dominguez said about half the loans the company receives are typically approved as submitted. Another 15% are conditioned – the dollar amount is modified – before they’re approved, and the remaining are “flat out denied,” or the borrower backs out of the loan, he explained. Another achievement for CUAC in 2004 was it distributed end of year rebates for the second consecutive year. The $100,000 in rebates were made to non-CU owner clients who have about 17,000 contracts with CUAC and did about $400 million in deals with the company last year. The rebates ranged from a low of $5.85 for a credit union that did only one deal, to $24,000. Dominguez credited the success CUAC realized in 2004 to several factors such as a greater acceptance of the indirect lending model and services in the credit union industry. Even though NCUA has cautioned credit unions about some of the risks of indirect lending, the agency has also taken notice of the service. “More credit unions are realizing that if you want to be in the auto loan business, you have to be at the point-of-sale with a loan program to capture both current and new members,” says Dominguez. Dominguez doesn’t dispute that 2004 was a good year for CUAC, still he says the year held a couple of surprises for him. For one thing he was surprised the captive finance companies still offered rebates and incentives “and they’re stronger than ever. The captives are able to control more of the financing and increase their percentages at the dealerships. The dealers gave rebates to customers for financing with the captives on top of the rebates offered by the Big Three manufacturers. That’s hard to beat and it takes a good chunk out of new car loans.” To deal with that, CUAC is focusing more on the used car market for loans and is also increasing loans in the mid-prime market through CUNA Mutual’s Lending Protection program. While celebrating the new markets and CUs it began relationships with in 2004, Dominguez realizes they will likely get CUAC off to a slow start in 2005. “The first six months of 2004 were gangbusters for us, but then the double rebates put a slowdown on our business. We expect to see some increases in 2005, but it will take longer,” he said. Dominguez explained that it typically takes 90 days to six months for new markets to develop in to productivity – in the past the company could bring a new market up to 5% market share in 90 days. But that ramp up cycle may be longer than usual for the newest markets, said Dominguez, because of the double rebates dealerships are offering consumers. Dominguez also expects CUAC to develop an additional two to five markets in the next 12-18 months. “There are a lot of new ones on our radar screen, but there’s nothing concrete yet,” he said. -

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