Credit Unions eye growth after flat 2020

Credit union total loan balances rose 5% in 2020, though auto loan volume remained flat, according to CUNA Mutual Group . But, this year, the tide will likely turn, and auto loan outstandings will inch higher while total outstandings stagnate. The pace of growth for total loan outstandings at credit unions has declined for four straight years. In fact, the rate recorded in 2020 was the slowest rate on record since 2011, according to CUNA Mutual. On the flip side, consumers’ savings balances at their credit unions shot up 20.6% last year, the highest rate of growth in more than two decades. Consumers were seeking to keep those balances short and liquid, said CUNA Chief Economist Mike Schenk . Also, some CU members used stimulus check funds to pay down debt. On the auto front, new- and used-car volumes diverged last year. New-car volume declined 3.8%, to $144.0 billion, while used-car financing increased 4.0% to $240.6 billion. Consumers shied away from big-ticket items because of job insecurity triggered by the pandemic, or they applied funds secured by refinancing their mortgages to pay off their auto loans. But with vehicle sales on track to regain almost all of the volume lost in 2020, credit union auto loan outstandings should climb, too, spurred by record low interest rates, rising consumer confidence, an improving employment outlook and low debt burdens. Credit unions have mapped different paths to generate that growth. Some are charting expanded footprints, while others are focusing on incremental changes to attract new members and increase originations. Oregon Community Credit Union , for one, has been tweaking its auto loan offerings, which cater to the prime and super-prime sectors. Rich Black , the credit union’s indirect lending sales manager, tries to introduce programs at least once every few months that will enhance its competitive advantage. For instance, OCCU debuted a multiple-credit-bureau option for dealers. Typically, the credit union pulls only one credit report for underwriting, but it will allow dealers to use all three of them for pricing. “So, if you get an approval, and we approved the loan at a [lower] tier-4 [rate], and you submit a TransUnion [credit report], for example, that shows a tier-1 [rate], we're going to let you use that for pricing and advance and those sorts of things,” Black said. Unlike some lenders, OCCU cares little about vehicle mileage for the loans it underwrites because its core consumers exhibit strong credit fundamentals. “There's a huge market of Dodge diesels with 200,000 miles on them,” Black said. “They run a long time, but most lenders won't touch them. As long as we're prime/super-prime, we don't much care about the car. The car isn't going to make the payments; the member is going to make the payments. And they have a history of doing that really well.” While OCCU is focused on incremental growth, Teachers Federal Credit Union has plans to nearly double its auto loan and lease origination volume this year. In November 2020, the Hauppauge, N.Y.-based financial institution redesigned its website to attract a wider membership base and allow consumers to easily apply for loans. Teachers FCU’s anticipated growth hinges on its newly secured open charter, which allows consumers anywhere in the country to open accounts and apply for loans. Only two other credit unions have open charters: Pentagon Federal Credit Union and Bethpage Federal Credit Union . Fintechs are deepening their roots in the credit union space, as well. Last month, auto-refinancing startup MotoRefi scored $10 million in funding, led by Moderne Ventures . Four-year-old MotoRefi matches drivers looking to refinance their auto loans with credit unions and community banks. It has facilitated more than $250 million in auto refinancings. One potential hurdle for credit unions is the slowdown in membership. Credit unions added 3.8 million members in 2020, the slowest pace in six years. Granted, a midyear-2020 report from CUNA Mutual had membership growth on track for just 1.5% for the year, which would have been the lowest annual growth rate since 2011. But according to preliminary yearend numbers, membership grew 3.1%, outpacing population growth seven to one, Schenk noted. Membership growth is driven, in part, by job growth. In 2020, the economy lost 9.3 million jobs, according to the Bureau of Labor Statistics . This year, 4.5 million jobs should be added to the workplace, which would put credit union membership growth in the 2% to 3% range this year. Credit union auto loan outstandings will likely rise 7% to 10% by yearend. Auto Finance Innovation Summit, the premier event for technology in auto finance, returns March 16-17, 2021, as a virtual experience. The virtual experience will offer the quality networking and education of past events, all through an online platform. To learn more about the 2021 event and register, visit www.AutoFinanceInnovation.com .

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Credit Unions eye growth after flat 2020

CU auto loan outstandings could rise along with consumer outlook

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Identifying and addressing the rise in credit washing, synthetic fraud

CPS sees decline in Q4 originations amid low-interest competition

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