ALEXANDRIA, Va. – NCUA staff made one small change to its rule on third-party serving of indirect vehicle loans before it was finalized at last week's board meeting.
The final rule retained the 50% of net worth threshold for credit unions with less than 30 months experience from any one servicer. After 30 months, the limit would increase to 100% of net worth.
There would also be a waiver process from the cap if the credit union could demonstrate to the regional director that it knows what it is getting into and has taken steps to mitigate risks. NCUA will be looking to ensure the applying credit union had a general understanding of the vendor, properly mitigated risks, and maintained a certain level of control over the vendor. The waiver would implement a different threshold for that particular credit union with an expiration date.
Recommended For You
The proposal exempted federally-insured depositories and wholly-owned subsidiaries of those depositories from the definition of a servicer. The final rule said that majority-owned subsidiaries are also exempt.
Credit unions that already have more than 100% of net worth in these deals can keep the book of business that they have, but not add to it, or apply for a waiver.
The rule on its face is a good first step, Centrix Financial Senior Vice President Geoff Bacino said. "The next step is we need to get credit unions back to doing this kind of lending," he stated. He explained that you would only know if the rule is workable if it works. Bacino added that Centrix had already adopted the thresholds when they were proposed as fact and has been operating under the idea that they would be finalized.
NCUA Chairman JoAnn Johnson acknowledged that third-party, indirect auto lending was good business for credit unions as well as their members.
Vice Chairman Rodney Hood initially said he was a bit concerned the agency might be trying to micromanage credit unions with this regulation, but he recognized the built-in flexibility of the waiver process.
Some vendors are making offers to credit unions to do everything for the loans. NCUA Board Member Gigi Hyland wanted to remind everyone why the agency was acting on the matter, noting, "As my colleague said, this is a big book of business, this is a good book of business. It sounds like a really good idea for some credit unions." But, an NCUA staffer noted, "There are significant risks to the credit unions and some incentive not to do any due diligence." [email protected]
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
