NCUA wants credit unions to exercise significant care when making loans in partnership with third-party vendors or organizations.
"NCUA examiners are reviewing Call Reports for increasing amounts of repossessed autos or increasing indirect lending delinquency and loan losses," the agency wrote in an August letter to credit unions on the topic. "In addition to those obvious danger signs, examiners are also looking for other warning signs or red flags that may require a credit union to slow down indirect lending," the agency said.
Some of the red flags include having a high concentration of indirect loans to total loans or net worth without adequate controls in place; tying loan officer bonuses to indirect loan volume incentive programs; and not performing adequate analysis of overall indirect loan portfolio performance.
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