The Power of Partnerships in Sub-Prime Lending

Although sub-prime lending can be a risky endeavor, Patelco Credit Union has been successful in providing sub-prime loans to its members.


Many credit unions have faced the challenge of providing affordable auto loans to those with mid- or sub-prime credit in their fields of membership. While some credit unions have developed their own in-house sub-prime lending programs, others have used strategic partnerships with vendors and CUSOs to effectively serve their members.

Effectively Serving the Sub-Prime Market

Patelco Credit Union ($3.6 billion, San Francisco, CA), originally started in 1999 with an in-house sub-prime lending program, but dropped the program within a couple of months because of losses and collection challenges. They, along with Wescom Credit Union ($3.1 billion, Pasadena, CA), chose instead to partner with ACC Consumer Finance (ACC), a company focused on helping credit unions provide sub-prime financing through indirect channels with better financial results. Both credit unions also made cash investments into the company in order to have in ownership stake in the results of the business.

“The exposure to the inner workings of the ACC sub-prime servicing operation immediately highlighted our inherent weakness in both origination and servicing of these higher risk assets,” said Chris Oldag, senior vice president of lending at Patelco. By partnering with ACC Consumer Finance, Patelco is able to provide sub-prime auto loans without making a large investment in staffing to originate and service these loans. ACC does a thorough verification of all credit application components, going into such detail as speaking with landlords and employers and seeking the down payment proceeds.

A Partnership Tied to Results

Since partnering, Patelco attracted $46 million in loans through this channel and has a net yield in the mid-6 percent range from several thousand new members. In addition, their charge-off rate on these loans is lower than the rate on its other loans in its auto lending portfolio (see chart below). Finally, Patelco learned many best practices from ACC that it has incorporated into its own lending operations.

Source: Patelco Credit Union




Oct. 3, 2005


  • Hi sysop, clawing about here in the uk for worthwhile additions to our credit union act. croydon merton + Sutton CU We have been railroaded into machine checking of requests for credit by a division of our goverment here in the uk. got to make it work! ABW, jlt
    john l. tooze
  • Age will have an affect on the charge-off ratio. Can you update this article on an annual basis. It will take 3 years at least to judge weather this is a sound portfolio or not.
  • I understand that ACC is closing down. Do you know why?
  • I understand that this partnership has come to an end and ACC is closing it's doors. Is this true? What happened?