Security Service Federal Credit Union ($8.1B, San Antonio, TX), the nation’s eighth biggest cooperative, has the industry’s largest indirect auto lending program, one that began in 1990 and has grown to include more than 600 dealers today. Here, Security Service’s Charles Goss, chief lending officer, and John Worthington, chief communications officer, talk about how the credit union fosters and maintains close ties with so many dealers without diminishing the quality of those relationships.
What are the most important elements of a good indirect lending program?
Charles Goss: We stress relationships and consistency. We work on these every day. Back in 2009 many organizations stopped lending or severely cut back. To be sure, we became more conservative — safety and soundness were our first priorities — but we made a point of being there for our dealers. We felt it was a matter of consistency and service. We found that they were grateful for that and that acting as we did strengthened our relationship with those dealers. We also learned they have long memories. They remember who stood by them and who bailed out.
Charles Goss, Chief Lending Officer, Security Service Federal Credit Union
When we say relationship we mean lots of things. Relationship includes how fast you can get money to the dealer, how consistent you are in purchasing decisions, and so on. A dealership is a cash flow business; getting funding to them means a lot. Our goal is to transfer money the same day or within 24 hours.
In addition, communication is important. We want to listen to dealers with a sense of urgency. Dealers have the ability to rehash deals with us and that is important to them. They want to be able to call someone they know and re-talk a deal. We work to have someone on our end of the line who knows them, can listen well, and resolve the problems. We want to give dealers answers quickly, send them funds quickly, and be consistent in our dealings. When you boil it down, this is a people business.
How important is technology?
CG: We work hard at having the best technology and a competitive advantage with our technology. Speed is important in indirect lending.
But we also look at the program holistically. We can’t just focus on technology. We monitor what others are doing. We work to be competitive with our rates. We may not always be the rate leader but we work hard to deliver the best service and to be the most consistent.
Does a program improve over time?
John Worthington: We’ve been doing indirect auto lending since 1990. Our program has improved with time. It improved because we worked at it and continue to work at it. We question our paradigms and wonder if what we did yesterday is going to be relevant tomorrow. We look for incremental improvements, which over time amount to large improvements. We’re always looking for ways we can be more efficient and effective and build better relationships with dealers. It works. Otherwise, you don’t improve; you get stale.
John Worthington, Chief Communications Officer, Security Service Federal Credit Union
You said indirect lending is a people business. How do you work on the people side of it?
CG: We send our staffs out regularly to meet with dealer people, talk to them, take them to lunch, put a face to a name. We send our staff during slow times in the middle of the week. Dealer people like to do business with persons they know and like. One benefit of having been in indirect lending for a long time is that you meet the people who work at dealers when they are young and getting started, and you grow and evolve as they grow and evolve. We now know lots of dealership owners, general managers, and top finance people from when they started in the business.
How can you make a relationship better?
JW: One way is to understand the relationship is two-way and symbiotic. When dealers hold events to raise money for their charities, we join as sponsors. When we hold events for our foundation, the dealers who really want to develop the relationship help out as sponsors. Mutual aid makes stronger relationships.
How do you turn members brought in through indirect lending to be multi-product members?
CG: This is a constant challenge with all credit unions that have indirect lending programs. Much of that success has to do with the products and services you can offer these members. Intelligent data mining and longevity help. You try one thing after another and over time learn what works and what does not. You keep trying for steady improvement. We’ve found that over time we get better at broadening new member usage of our products.
How important is personnel consistency?
CG: It’s pretty important. Lending in many ways is subjective, and each loan officer is a little bit different. The dealer gets used to particular loan officers. If he’s working late at night and knows the loan officer is off-duty, he’ll craft a deal in a particular way because he knows this is the kind of deal that the loan officer wants and can approve. If he does not know that loan officer well, he won’t be able to do that. People should work with one another over time. It really helps.
What could harm a relationship?
CG: Not providing world-class service, not being consistent with your decisions, and not funding the dealer contracts in a timely manner. There are other things too: not listening to dealers wanting to rehash a deal, taking too long to deliver funds, things like that.
How difficult is expanding an indirect lending program?
CG: It’s difficult. First, there are the limitations of the field of membership — you cannot just go anywhere. If you want to try, though, you need some economies of scale that will back you up. You will be new in an area and that’s tough. You also have to staff your new effort and that’s costly.
Boiling it down, what has made for Security Service’s indirect lending success?
JW: Three words: relationship, relationship, relationship.