Steer Clear of Predatory Car LoansSteer Clear of Predatory Car Loans™™

ILCUSYS

http:realsolutions.coop/assets/2008/10/17/SteerClearReport.pdf

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans That drive to work. 88%. Fewer than 5% take public transportation to work.

Percentage of US auto finance market that CUs captured in 2007.

15%. $90 billion in used cars loans, 12% of CU assetsPercentage of 8 million used cars sold to low and moderate income borrowers annually that Cus finance

5% Credit Unions 30% Banks 60% sub-prime lenders

50% of CU loan applicants are turned down. If credit unions lend

Below FICO 600, their market is expanded by 15%. To no FICO, their low mod market is expanded by 40%.

How big is this market?

You Are Here

CUs Help Car Buyers Steer Clear of Predatory Loans

Survey of 251 Credit UnionsInterviews with

12 Credit Unions8 Vendors

SEVEN LESSONS

Lessons in non-prime auto lending

1. Financially viable line of business.

2. Transfer traditional character lending into automated decision-making process.

3. Assist members in finding cars.

4. Employ a hard close to cement bonds with members.

5. Insure borrowers against events out of their control.

6. Export risks by using loan loss insurance products.

7. Keep in touch with borrowers by monitoring and collecting loans early.

High Net Margins from Existing Members

Non-Competitive pricing in marketplace.

Price Non-prime loans for risk and effort.Members still receive a much better deal.This need not be charity work.

1

Credit Scores areFastInexpensiveSimplify loan pricingCompetitive

Since all lenders have the same dataNo relationship needed

Not subjectiveNon-discriminatoryUniform

Derive from one data source (credit repayment records).Incomplete

Reduce Underwriting Gap2

Missing: 25% of the Population2

More data sets means “Yes” more often

Payment of monthly rents / leases Payment of telephone, electric, cable television, natural gas and insurance bills Internet and catalog purchases Electronic bill paymentPublic sources of information including tax liens, criminal records, and bankruptcy filings

Ask and Verify

2

Reduce Underwriting Gap

FICO Expansion Score Link2Credit

Market MaxRiskWiseBill Payment VantageScore Experian, Equifax and TransUnion

2

2

Get in front of the dealer

Assist the member in finding a car

Credit Union Direct Lending CUDLhttp://www.cudl.com/

United Buying Service http://www.ubs4cars.com/

Motor Vehicle Certification Programhttp://www.mvcp.com/intro.php

Cars for Members http://www.carsale.com/

Auto Resource Centerhttp://www.cucompanies.net/pages/auto_about_us.asp

Auto finder Autoland http://www.autoland.com/

Enterprise Car Sale SmartBuys programhttp://enterprisesales.com/

3

Build the Loan Correctly

The Hard Closesituation appropriate member education

Thank you for the businessValue of membership

Verify loan application informationEmployment, residence, references, Photo of car

Review all Loan termsPayment amt and due date

Value of on time paymentInsurance requirementsLate fee and penalties

Keep in touchContact CU if there is a problem

Cross sell (Just in Time Education)Direct DepositAutomatic PaymentSavings Escrow

Guaranteed Refinance offer

4

Insure the borrower

Insure what they can’t controlCollisionMechanical Breakdown Insurance or extended warrantyGAP loan deficiency or residual value insuranceDebt Cancellation for divorce, injury, loss of jobCredit Life

Walkaway: Give the car back, no further collection or credit degradation.

5

Export the Risk

Use loan loss insurance products and guarantees.

Lender’s Protection, a risk poolCharlie Mac CARPooL program

Guarantees (NFCDCU Pride Deposits)

6

Keep in Touch

Allocate resources to collect the loan quickly

Make contact with borrower when one day latePremium to borrower for visiting Collection Officer in person:

$50 Pre-Paid cardRepossess when 30 days late.

7

Next Steps

A Toolbox for Asset Builders

Information on common financial problems and solutionsOn-line training for staffTools to better assess client needsQuality financial products and servicesAccess to advanced, experienced helpResources to help your organization

Benefits to Credit Union

Asset Platform is a source of membership and loan referralspartnership with non-profits

No up-front feesEasy Turn-key implementationCompatible with existing underwriting and application systems

Benefits to Credit Union

Credit Union chooses level of service

CU only pays for completed member applications or funded loan

Direct-to-Consumer loans perform better than indirect programs.

Quality controlled by lender underwriters with adherence to lender’s predetermined guidelines.

Lender may enter or re-enter auto lending market with controlled risk.

Four Service Tiers

Credit Union Listing (pre-populated database)

Credit Union Subscription

Auto Loan Underwriting for Credit Unions

Delegated Lending for Credit Unions

mmurphy

Contact information for software mentioned in program: