Auto lending has been on regulators’ radar for a number of years as an enhanced-risk lending sector. In particular, the Office of the Comptroller of the Currency has been discussing auto lending in its Semiannual Risk Perspective since 2012. Considering that credit unions have a sizeable share of the auto lending market (roughly 20% of the outstanding balance), it is important that this message of enhanced risk be effectively communicated to the credit union industry. ALM First proposes not abandoning the asset class, but ensuring prudent underwriting and lending practices, especially with respect to indirect auto lending.

It’s no secret that auto sales have been exceptionally strong. Annual auto sales in the U.S. have increased for several years in a row – an unprecedented growth streak – setting an all-time high number of units sold last year. This growth has trickled down to auto lenders. Specific to credit unions, the industry’s total outstanding auto loan balance is roughly $320 billion as of the second quarter of 2017, according to aggregated Call Report data. This balance has grown at double-digit annualized rates for 17 quarters in a row, another unprecedented streak since data tracking began in 1994.

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