Practice Makes (Nearly) Perfect

Credit unions with large indirect lending portfolios manage them better than credit unions that dabble in the trade.


We’ve profiled individual credit unions before that have had success with indirect lending. Some credit unions and industry experts discourage indirect lending for a variety of reasons. They say indirect lending may divert focus from the core base of members, complicate risk management, or cause difficulty in trying to convert indirect members to become full members of the credit union. Each credit union needs to make the best decision for its membership.

In this brief peer group analysis, credit unions that hold larger concentration of indirect loans manage them better in many ways than those that have less involvement with the portfolio.

  • The heaviest lenders have maintained their concentration of indirect loans in the past few years. Those with smaller concentration levels have seen them fall through the recession.
  • Credit unions with a heavy concentration in indirect loans are more likely to be using point-of-sale arrangements than any outsourced relationship.
  • All of the groups have seen growth slow over the last few years, but those with heavier concentrations have grown loans year-over-year.
  • Those credit unions with the lowest concentration of indirect loans have higher delinquency and charge-off rates than those with greater concentrations.
  • While heavy indirect lenders have lower member relationships, they are growing members at a quicker rate on average.
  • Additionally, when we exclude the number of indirect loan accounts (as a proxy for the number of members with an indirect loan), these lenders are growing members from other sources.

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