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LAUREL, Md. – By its own account, Credit Union Auto Lending Network’s lack of standardization for its owner credit unions worked fine for the first five years the CUSO was in business. But the CUSO has learned the same lesson other credit unions involved in indirect lending have come to realize – in a heightened auto lending environment where time is literally money, standardization of loan processing can be the deciding factor on who gets the car buyer’s loan. CUALN is counting on its new relationship with Aimbridge Indirect Lending as being the ticket it needs to gain more share of the auto lending business and build dealer relationships. CUALN, a CUSO owned by 30 credit unions in Maryland, Virginia and District of Columbia of varying sizes – the smallest is under $10 million and there are two over $1 billion -is partnering with Aimbridge Indirect Lending to offer indirect auto lending services in the two states and D.C. area. “The partnership will optimize and streamline the way we do business with dealers and give us a real competitive advantage in this market,” says CUALN Chairman Martin Breland, president/CEO Tower FCU, Laurel, Md. The partnership went live Feb. 15 with two CUALN CUs – State Employees CU, Laurel, Md. and CommonWealth One FCU, Alexandria, Va. The remaining 28 CUs will be phased in every two weeks. According to the terms of the partnership, any credit union in Maryland, Virginia or the D.C. area that wants to work with Aimbridge Indirect Lending will have to sign on to CUALN, so that will give the CUSO an exclusive program in the area. Aimbridge already has relationships with CUs in Florida, Texas, Missouri, Ohio, Colorado and Michigan markets. “Our own network was successful for many years. We did $30 million in loans the first year we were in business, had about a 50% growth over the last two years, and did $170 million in business in 2004. Even though we were happy with that growth, we still felt there was a lot of untapped potential out there for the taking and we needed to make a change,” Breland says. “When we started CUALN we allowed the credit unions to do their own thing. But we found there was a price to pay on the dealer side because of the complexity of them having to deal with the terms of 30 different credit unions. The lack of standardization was an obstacle to building more dealer relations.” That trickled over into CUALN missing out on signing up more members at the dealer site by being able to offer them an auto loan. CUALN has relationships with more than 300 dealers. Breland is confident its relationship with Aimbridge will help that number grow. Raddon Financial Group which compiles industry statistics on auto lending penetration estimates the Maryland/Virginia/D.C. area generates on average $1.1 billion monthly in auto loans, making it one of the largest markets for car sales in the U.S. Of that volume, 22% is cash sales and 30% is captive financing. Of the remaining 48% of the volume, 18% are sub-prime loans, credit unions have about 14%, and about 500 banks and other lenders capture 68%. “Because this 68% of the non-cash, non-captive business which comes out to more than $300 million a month, is highly fragmented among several hundred lenders, we see an opportunity to position credit union indirect lending as a significant delivery channel to many of the dealers and raise our market penetration,” says Breland. “In this market, no one lender has a majority share of the market, nobody owns the dealer at this point, so it positions us as having a good relationship with dealers and for credit unions to be a preeminent channel for dealer loans,” he adds. Aimbridge Lending COO Ann Schmitt says in a highly competitive auto lending market such as the Baltimore/D.C. area, “it’s sometimes difficult for credit unions to cut through the clutter and be heard. Aggregation and standardization combines credit unions into one voice and one approach that cuts through the myriad of lenders in the marketplace.” She added that, “Large banks have established branding and have marketing muscle to create alliances with dealers,” including doing floor planning with the dealers and helping them to finance their inventories. “That means credit unions as consumer driven organizations have to demonstrate by aggregating they can deliver a niche in the market, if they want to be viewed as approved lenders by dealers. You do that through technology and the way you set up indirect lending programs,” says Schmitt. Once it decided to partner with an indirect lending vendor, CUALN had several factors on its priority list it looked for in making its selection. How would the vendor’s approach to indirect lending ensure CUALN would be top of mind with dealers? What was their approach to working with dealers. CUALN Treasurer and SECU President/CEO Rod Staatz, said CUALN considered several indirect lending companies besides Aimbridge and compared their services offered, processes, price and value before selecting the Denver-based company as its partner. “Aimbridge puts a process in place to work with the dealers so our members are more top of mind from the dealer perspective and we get a bigger share of our members’ loan dollars,” he says One of CUALN’s top priorities in making its determination was the flexibility of the partner’s program, and Staatz said Aimbridge fit the bill. “We aren’t a one size fits all organization. Our credit unions handle some aspects of pricing differently and Aimbridge offered unilateral high service while allowing the credit unions to maintain a certain degree of autonomy,” Staatz says. He explains that the 30 CUALN CU-owners decided on the basis of standard underwriting paper. Each credit union does its own underwriting and puts that information in to the Aimbridge Web-based system. When a dealer takes a loan application from a member, all the information is sent to Aimbridge using their technology and the company. The company does a quality control check and then sends the application to the member’s credit union for approval. Since each of the 30 credit unions has different auto loan rates and underwriting policies concerning loans that fall outside the automatic approval circle, it’s up to each credit union to make the determination whether to make those types of loans. “Dealers need very quick turnaround and want to get paid quickly. That’s how you compete in this business, but it’s something small credit unions may not be able to handle,” says Breland who noted that CUALN’s previous application-taking process was fax-based. “You want to be able to approve 50% of the auto loan automatically and the Aimbridge technology will allow us to do that.” What’s more, he says, under the Aimbridge program CUALN will have three people dedicated to fostering and growing dealer relationships. “Once credit unions agree to standardization and understand the principal of speaking as one, then they’ll stand a better chance of getting members’ auto loans away from the banks and funding them themselves,” says Staatz. -

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