Did You Know That Credit Unions Are Less Responsive Than Banks When It Comes to Indirect Auto Loans?

Credit unions are member-focused and excel at being more responsive than banks, right? Commitment to service is a critical attribute of the credit union brand, and represents a key differentiator versus banks. Not so fast-at least when it comes to indirect lending programs. A recent survey of auto dealers from Automotive News showed that credit unions are the slowest in responding to lending inquiries.

Who did the survey show is the fastest to respond to indirect lending inquiries among the financial institutions? All banks-Ally, Chase, and Capital One. While you might argue that their national brands and national footprint garnered them enough responses to rank as the top three, this is not the only nugget gleaned from this survey.

When asked who were the slowest, credit unions were specifically cited by 26% of the respondents as being slow to respond. For those of you ‘glass-is-half-full’ readers, yes, this does mean that 74% did not specifically cite credit unions as slow. But when viewed in conjunction with the fact that credit unions were not singled out anywhere on the ‘fastest’ list, it is at least cause for a renewed focus.

Anybody who has been in sales knows the risk of injecting delay into the sales process. In this regard, it truly is like fishing-the longer a fish is on the hook, the more time they have to wriggle off. And that risk is real in this case, given the ultra-competitive market for car finance, where offers from competing lenders and captive finance arms of auto dealers are coming in as they wait on yours. The longer you delay, the more money you’re leaving on the table from your members and from prospective members.

Marketing and relationship building related to indirect lending is on the rise now, as credit unions are looking for more lending volume. What this survey tells us is that all the marketing and relationship building in the world won’t deliver results if your infrastructure for servicing the channel is not sufficient, and that at least some of you are short of where you need to be.

Dealers want fast and accurate approvals, and they want them when they need them. Put on your MBA hat and do some business process re-engineering, and take a hard look at your work flows and customer service standards.

Business process re-engineering is “… the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary modern measures of performance, such as cost, quality, service, and speed.”

First and foremost, gather some channel feedback. When was the last time you asked car dealers participating in your indirect lending program how your response times stack up against their other indirect lenders? Or if they prefer to work with some other lender for any reason, like complexity, manual steps, etc.? Dig deep to find out why. If you do nothing else after reading this blog post, I’d urge you to gather some input directly from your car dealer partners. If this survey is at all representative, at least some of you are not going to like what they have to say.

On that note, when was the last time you took a good look at your indirect lending process as a whole? Is it as efficient as it can be? Understand that compliance is a complicated issue, but given that, is the process as simple and straightforward as it can be?

What are your response criteria, and how often have they been met (or not met)? What metrics do you use to measure success? Are you sure you’re measuring the right things? Do you track your ‘look-to-book’ ratio? If you’re having some difficulty in tracking down the answers to these questions, do you have sufficiently advanced reporting and analytical capabilities to be able to measure results and identify problem areas?

Are you leveraging IT to the maximum extent, or are there still manual steps in the process? Do you have a process and technology in place to automate approvals to the maximum extent possible, while still retaining underwriting standards and loan quality? Are your fraud detection systems as efficient and effective as they need to be?

And don’t forget the people part of the equation. A successful indirect lending program requires leadership and a team that all understand the sales process, and its needs. Do you have the right people involved in your program, both at the top, the middle, and on the front line? Are they dedicated to the indirect channel, or is this just a part of their job responsibilities? Do you provide them with enough training and development opportunities?

We’re just scratching the surface here when it comes to best practices for indirect lending programs. Clearly, they represent a potentially significant source of growth for a credit union, if done right. If done wrong, though, you’re just wasting time, energy, staff resources, and marketing dollars.

Post written by Dave Frankil, President, NAFCU Services Corp.

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