Should You Establish An Indirect Lending Program?

Fort Worth Community Credit Union’s three-year-old program has helped boost its auto loans by 37% in the third quarter.

 
 

Auto loans have been “the major driving force” behind Fort Worth Community Credit Union’s lending in recent years, giving the credit union roughly $15 million in loans per month lately, says CEO Richard Howdeshell.

Fort Worth Community Credit Union ($741.7M, Bedford, TX) had focused on indirect lending for more than a decade, using a vendor to help with the services, before it decided to branch out with its own program in 2008. Since then, the credit union has forged partnerships with more than 90 dealers in the Fort Worth area, and has been offering online incentives for members to refinance their auto loans. It approves its loans conservatively, resulting in delinquency rates dropping to less than 0.5% over the past year, Howdeshell says.

Those moves have contributed to FTWCCU’s surging auto loan originations – which are up 40% in the third quarter, according to Callahan & Associates’ Peer-to-Peer data. And it’s helped boost auto loan growth by 37% as of Sept. 30.

“We’ve done very well over the last couple years,” Howdeshell says. “The program has just grown and is going very well for us. It not only produces good quality loans in quantity, but it also brings in a lot of new members.”

New members are drawn in large part by the credit union’s ongoing auto loan refinance promotion, Move My Loan, which doles out $200 in cash and a $100 gas card to encourage members to switch over online, says Rochelle Drake, FTWCCU’s vice president of marketing. Move My Loan has drawn more than $12.5 million in refinanced auto loans. Membership has grown in the third quarter by 9.3% to 64,781 members as 12-month loan growth climbed to 26.9%, according to Peer-to-Peer data.

Soon, the co-op’s virtual spokeswoman, Gabby, will also start promoting FTWCCU’s auto loans among its other products and services. FTWCCU launched Gabby, who offers financial advice and tools to members, in February to target mothers and women. Her blog posts, Twitter blurts and emails are actually from 11 female communications staff, Drake says.

“We’ve seen a good response from Gabby – she’s become quite the media maven,” Drake says. “She has a lot of followers that use her financial advice and tools. Now we’re just building trust with members, but over the next year she’ll overlap with our goals to promote more auto loans and services.”

Even with outreach and the cash promotion, many of FTWCCU’s members have yet to refinance their auto loan so the credit union will continue to tweak and ramp up its messaging, “There’s a lot of opportunity we’ve not been able to take advantage of right now,” says Howdeshell, who expects the credit union’s auto loan growth to continue through the remainder of 2011.

Along with auto loans, FTWCCU is hoping to shore up more checking accounts from new members who are coming in on the wave of anti-bank fee sentiment, which includes the Bank Transfer Day grassroots effort to get customers of large banks to move their money to smaller institutions by Nov. 5. But executives are not pushing the effort until after the credit union officially swaps debit card processors this week because until then, it cannot offer new members debit cards.

Not until after Bank Transfer Day will FTWCCU push out a marketing campaign to target its fee-free debit card use, Drake says. It will use a myriad of channels – billboards, social media, Gabby’s blog – to underscore the difference between credit union and bank business structures.

For now, Fort Worth Community will focus on shoring up even more auto loans.

“We slowly built things up,” Howdeshell says. “We wanted to establish a good solid program where quality was as equally important as quantity. It’s grown to such an extent that we have a really good volume at this point.”

Click on graph for larger view  |  Source Callahan & Associates' Peer-to-Peer