There has been a lot of controversy lately concerning credit unions' involvement in subprime lending, especially as it concerns indirect lending. Even the credit union federal regulator has addressed the issue. My personal belief is that participation in subprime lending can be a very positive and inclusive product for a credit union's membership, if it is done correctly.

Yes, credit unions will need to charge a higher interest rate to cover the risk for a borrower with a lower FICO score. But the alternative to offering a higher interest rate loan is a decline on the application. This sends an even stronger negative message to the member. In my experience I have not seen a great deal of financial service consumers leave because of a higher rate as long as a lower rate is offered when their credit improves. However, I have seen many consumers leave their financial institution because their application was turned down.

Let me share a personal story.

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