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DENVER – Indirect lending is undisputedly accounting for a larger portion of credit unions’ auto loan portfolios, which makes successfully managing a program all the more important. Key to that, says Aimbridge COO Ann Schmitt, is managing dealer relations. “It’s incumbent on the credit union to be comfortable with the business relationship they have with a dealer, that is with the contract. If there’s a problem, the credit union has to know it can rely on the contract to assist them in a lawful way,” says Schmitt. Callahan & Associates’ first quarter 2005 data shows credit unions increased their total auto loan balances by $1.5 billion, down from the total auto loan balances increase by $2.1 billion in the first quarter 2004. New and used auto loans increased by $700 million and $800 million, respectively, for the first quarter 2005. While CUs’ total auto loan balances increase for the first quarter 2005 was down compared to the same period 2004, the driving force behind the increase remains indirect lending. Callahan & Associates reports indirect loans outstanding reached $53.7 billion and now account for more than a third of all auto loans, compared to 18.1% for the same period 2004. In addition, indirect loan balances increased by $1.6 billion, outpacing direct auto loan balances, the firm reported. Schmitt says “credit unions have done a good job emphasizing at the indirect phase what they do well which is the member relationship.” On the dealer side though, she adds, “there’s room for improvement. Dealers are notorious for testing the envelope with lenders, seeing if there’s an opportunity to get the loan completed through a variety of means. It’s incumbent on lenders to make sure they’re holding dealers accountable for what they’re doing.” As for indirect lending making up an increasingly larger portion of CUs’ auto lending portfolio, Schmitt says, “To a great degree, indirect lending is inherently a bit more risky. If the credit union can control and manage those risks, then the product can be a healthy part of a credit union’s loan portfolio and complement their direct loan portfolio.” -

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