LAS VEGAS — Based on regional conditions, two very different economic scenarios seem to be playing out this summer for credit unions involved in indirect lending, according to speakers at last week's Annual Lending Symposium sponsored by CU Direct Corp.
For one, Henry Wirz, the chairman of CU Direct which goes as Credit Union Direct Lending, said his northern California market is witnessing a 7-8% slide in loan volume from a year ago as CUs grapple with heightened competition, particularly from the captives.
"You know for more than a year now Toyota has been telling dealers to switch their business out of credit unions," said Wirz in warning that the best hope for CUs is to "unite and work together through aggregation," long a CUDL theme. Wirz is also president/CEO of SAFE Credit Union of North Highlands, Calif.
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But while conditions in Wirz' Sacramento market may be trying, Larry Wilson, a conference moderator and president/CEO of Coastal Federal Credit Union, Raleigh, N.C, said his indirect business is booming "as a result of a very vibrant economy and our aggressive move to sign up dealers and members."
In the first quarter, Coastal's indirect business jumped a whopping 81% from the same period a year ago, said Wilson maintaining special factors triggered the increase based on "the implementation of new systems and a marketing campaign aimed at promoting membership and nurturing dealers."
During the period Coastal did $71 million in indirect, but he said that pales in comparison to "the $100 million a month that credit unions like BECU and Security" or even State Employees of N.C., are doing in auto loans. He was referring to CUs in Seattle, San Antonio and Raleigh, N.C.
In the Raleigh market, "the captives are pulling back", but banks like BB&T, a Southeast powerhouse, are active competitors joined by Wachovia and Illinois-based Capital One, said Wilson.
Wilson stressed that indirect "takes a lot of attention" considering the days are long gone when members would simply "walk into your credit union to apply for a loan."
Strong ties have to be built with dealers, he said, even though out of 500 in North Carolina "there are only 20 to 25″ that account for significant business for Coastal. "We're lucky if we get two loans a month from the others."
In his CUDL remarks, Wirz of SAFE maintained that in the Sacramento market and elsewhere, too "consumers are stressed out" making it difficult to bring in new loans.
And stressing the importance of CU unity on indirect, the SAFE CEO said dealers across the country no longer "will deal with individual credit unions but they will listen if we aggregate."
Addressing the CUDL conference, Tony Boutelle, the president/CEO of CU Direct, said significant progress is being made in 2007 toward adding dealers and CUs to the base. A year ago there were 583 CUs and 8,500 dealers and "by yearend our goal is to have 650 credit unions and 9,500 dealers."
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