Loan Zone: Indirect lending

first_img ShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr As car sales pick up, are you ready to face the risks?by: Andy KeeneyIt is beyond dispute that automobile sales continue to gain steam. As automobile sale records are being set, credit unions are realizing an increase in indirect automobile lending. In 2012, the National Credit Union Administration estimated that indirect lending for auto loans increased more than 10 percent; in 2013, more than 18 percent; and in 2014, in excess of 21 percent. Today, approximately 2,000 credit unions have an indirect lending program and all seem to focus on the benefits of such programs, including potential new loans, membership growth and cross-selling opportunities.However, in today’s environment it is important to take a hard look at the risks and potential drawbacks of indirect loan programs. Threats like fraud, increased loan losses, uncontrolled growth and lost income can lead to unpleasant membership experiences and do great harm to a credit union’s reputation.These risks have become a significant safety and soundness concern for NCUA, and while regular reporting to the board of directors is critical for problem prevention, it is also important for management to recognize potential  risks, including;rapid growth, which can lead to a material shift in the balance sheet,credit risk,liquidity risk,transaction risk,compliance risk,reputation risk, andincreased delinquencies. continue reading »last_img

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