MIAMI – Non-prime lending continues to be an expanding lending area with opportunities for credit unions, but CUs need to understand the risks, benefits and changes it will bring before getting involved in this lending area. CUNA Mutual VP of Lenders Protection Steve Martin told attendees at the CUNA Lending Council Conference that, “Boards of directors tend to be conservative and it is important to show them how non-prime lending creates new lending opportunities with existing members and new members.” In addition to increasing loan yields, Martin said non-prime provides CUs with as viable lending alternative for underserved members. According to the CUNA Mutual executive, less than half of the 9,100 credit unions in the U.S. do non-prime lending. The first step in getting involved in non-prime lending is acknowledging that it’s different, said Martin, still “it provides an untapped lending opportunity. After that, a credit union has to set goals and expectations and communicate the value proposition to the board and staff. Among the value propositions Martin suggested were: approve more loans, book more loans, generate more applications, increased profitability, enhance member relationships, and serve the underserved. Of course there are risks involved with non-prime lending such as increased loan defaults, working with dealers instead of directly with members, application fraud, and repossessions. “However, these can be addressed through careful planning, commitment and implementation,” said Martin. Key to the success of a non-prime lending program is employee education. Frontline staff should be aware that handling non-prime lending is different from prime, he stressed. “It will take more work, but it is necessary,” said Martin. “Have your staff talk to non-prime members about payroll deduction and credit counseling. Because these members pose a higher risk, validate their application information.” He also recommended CUs take proactive steps such as reminding members before their payment is due and contacting them as soon as possible if their payment hasn’t been received by the due date. Recognizing that many credit unions are reluctant to try non-prime lending because of the risks, Martin said partnering can mitigate some of the risk. The most common partnerships involve default insurance such as through CUNA Mutual’s Lenders Protection program, servicing/collections, vehicle remarketing, and loan referral. According to Martin, CUs deny $50 billion in non-prime loans annually. In addition, $15 billion is approved but not booked annually. -

Complete your profile to continue reading and get FREE access to, part of your ALM digital membership.

Your access to unlimited content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
  • Exclusive discounts on ALM and CU Times events.
  • Access to other award-winning ALM websites including and

Already have an account?


Credit Union Times

Join Credit Union Times

Don’t miss crucial strategic and tactical information necessary to run your institution and better serve your members. Join Credit Union Times now!

  • Free unlimited access to Credit Union Times' trusted and independent team of experts for extensive industry news, conference coverage, people features, statistical analysis, and regulation and technology updates.
  • Exclusive discounts on ALM and Credit Union Times events.
  • Access to other award-winning ALM websites including and

Already have an account? Sign In Now
Join Credit Union Times

Copyright © 2022 ALM Global, LLC. All Rights Reserved.