Posted by Mr. Bill Meyer, Communications/Public Relations, Credit Union Direct Lending on 7/3/2018

CU Direct recently partnered with Visions Federal Credit Union on a case study that took a close look at the credit union’s success in the indirect lending marketplace, and the steps the credit union took to overcome the challenges it had in growing loans through the indirect channel.

Visions FCU's indirect lending program had been a manual process. Dealers would fax purchase orders to the credit union, and employees would manually enter the information into its loan origination system. The credit union’s loan officers would then have to call the dealership with loan approval or denial.

In 2013, the credit union began researching loan origination systems, as well as what dealers were looking for from them as an auto lender. Simply, the dealers were looking for a digital process. The credit union was looking to implement a digital indirect lending system that would enable it to meet current and future loan growth goals, while fostering and supporting a relationship with dealers that made the credit union a valuable business partner.

At the time, Visions had agreements with approximately 80 dealers to provide indirect financing. However, only a small percentage of the dealers sent the credit union applications, and even fewer produced loans that were eventually funded, creating a look-to-book issue. A lack of quick, digital loan decisioning was partly responsible.

Visions was also competing against other lenders that offered markup incentives to dealers, something it firmly believes goes against the credit union philosophy. The credit union needed an indirect partner that would provide it with attractive market differentiation that wasn’t tied to paying any markup.

Visions looked at many indirect lending systems, and ultimately selected CU Direct’s CUDL lending platform for several reasons. CUDL provided Visions with the ability to fund and retain more auto loans, increase profitability and fuel membership growth. Additionally, CU Direct’s superior business model allowed Visions to protect its look-to-book ratio.

The first year using the CUDL system, the credit union experienced a 60% increase in indirect auto loans, achieving $11 million in new originations. Over the next three years, loans through the indirect channel continued to increase, with $28 million in loan originations in 2014, $79 million in 2015, and $90 million in 2016.

In 2017, the year the credit union hoped to reach a once unthinkable goal of $100 million in auto loans, Visions ended the year with over $120 million in new indirect loan originations. In total, Visions’ overall indirect portfolio grew from $30 million at the outset to nearly $250 million. In addition to dramatic year-over-year growth in loans, the credit union has also grown membership 1,000-1,600 members annually since implementing CUDL in 2013.

Another important aspect to Visions’ indirect lending success was its commitment to seek out annual dealer feedback and use the data to make program enhancements that strengthened dealer relationships and increased originations. Taking advantage of CUDL’s wide dealer network helped fuel immediate growth for Visions’ indirect lending program.

When Visions committed to its goal of originating $100 million in new indirect loans per year, it took an “all-in” approach for three primary reasons:

• It could be used as a strategy to achieve new market penetration
• It was a way to serve members in a non-branch environment
• It supported loan growth goals

After five years of strong commitment to indirect lending, the credit union pointed to these major benefits for incorporating the CUDL indirect lending platform and executing its new lending strategy:

• Increased member and loan opportunities at the point-of-sale
• Joint marketing opportunities
• Loan portfolio diversification
• Opportunity to strengthen partnerships with community businesses

Visions’ “all-in” indirect lending strategy has been so successful, the credit union has increased its cap of how much indirect lending it can hold compared to other loan assets. “It used to be $300 million, and they thought we’d never hit that,” notes Tom Novak, Visions’ Director of Digital Banking. “But we recently increased it to $500 million, and we’re already halfway there as an overall indirect loan portfolio.”

Categories: Business Partners, Strategic Planning & Consulting, Technology Consulting & Compliance
Posted by Len Naidoo, CUDE, Director – Electronic Payment Services , Catalyst Corporate FCU on 6/28/2018

In our industry, it’s difficult to get experts to agree on any one thing. But when that one thing is fraud prevention, the viewpoint is unanimous – fraud must be stopped.

It’s happening with cards.
In a recent study on fraud prevention by the Federal Reserve Bank of Minneapolis, 96 percent of debit card issuers and 77 percent of credit card issuers responding experienced card fraud losses in 2016. Eighty percent of respondents reported counterfeit debit card use at point-of-sale outlets and fraudulent use of card data online as the top two most frequent debit card fraud attacks.

Card protection features, such as Catalyst Corporate’s CardNav, give cardholders additional safeguards for their finances. Users can turn cards off when they’re not being used, set geographic boundaries and dollar limits to deter unauthorized use, and choose to receive real-time alerts for certain types of card activity. Cardholders set all these controls on their mobile devices.

Why is this important? The study finds that information sharing is the top suggestion for mitigating fraud. Some of the methods cited for information sharing include comprehensive database and alerting and a tracking system to determine the source of the fraud.

It’s happening with wires.
The benefit of sending a wire transfer is payment certainty. The downside is no recourse or avenue for disputing the payment once it goes through.

Fraudulent wire transfers occur most often when members fall for get-rich-quick schemes or romantic scams. The rise of social media and online dating sites facilitates these types of traps by capturing a member’s attention and making them more likely to respond to a wire transfer request.

Email fraud is also on the rise. Fraudsters monitor email accounts for specific types of transactions, such as mortgage closings. During the interaction between the consumer and the mortgage company, fraudsters can insert themselves into the email string, requesting the member to submit payment via wire transfer.

It’s happening inside credit unions.
As much as we hate to admit it, fraud is also occurring because of credit union procedures. Many credit unions allow members to initiate wire transfers via email or over the phone, two vehicles easily hacked by fraudsters. Even when credit unions call a member at their listed home phone number to confirm, a fraudster can easily redirect the number, answer the phone and confirm the wire transfer on a member’s behalf.

If your credit union does allow members to request wire transfers by email or phone, develop additional validation steps, including questions with answers that can’t be obtained through credit reports, social media, etc.

How do you make it stop?
Can we cut out fraud completely? Probably not. But we have to start somewhere. Mitigate wire fraud by training your credit union staff to scrutinize each wire request. Staff should ask questions and follow up with members to identify the reason for the wire requests and document conversations for future reference.

Credit unions should also consider investing in fraud alerts for cards, remote deposits and other transactional services, so that staff – and members – can detect fraudulent activity before it’s too late.

The best offense is a good defense, so make sure your credit union and your members are protected from fraud.

Categories: Business Partners, Education & Training, Employment & Staffing, Technology Consulting & Compliance
Posted by Nathan Quade, Senior Account Executive, Catalyst Corporate FCU on 5/31/2018

For many college-bound students, the homework doesn’t stop when school is out of session. Students and parents are spending a lot of time and energy trying to find financial aid options to cover the growing cost of college. After all, a higher education now requires a higher price tag.

When seeking ways to cover this growing cost, it’s best to look first for scholarships and grants—money that doesn’t need to be repaid. Then, explore federal student loans. In most cases, however, these options don’t cover the full cost. To tackle the remaining balance, families can consider a private student loan.

According to a national study by Sallie Mae, the average American family paid more than $23,000 in 2017 in college expenses. Nearly a fifth of those expenses are covered by loans. Additionally, 84 percent of students receiving loans expect to be solely responsible for repayment – even if a parent or guardian initiated the loan.

Can a credit union help?
As credit unions, we try to meet members’ needs. And as student loans become a bigger part of what members need, credit unions recognize the imperative role they can play in that process.

Why should credit unions offer student loans?
Student loans allow a credit union to expand its product line and membership base simultaneously. Many students seeking loans are currently unaffiliated with a financial institution. A student loan gets them in the door to become a member. Student loans also benefit current members seeking out responsible financial aid options.

Imagine increasing your credit union’s product line and membership base without increasing the balance sheet risk. With loans like the Smart Option Student Loan, offered through a partnership between Catalyst Corporate and Sallie Mae, it’s possible.

Such an arrangement allows credit unions to provide referral-based student loans to members without taking the credit risk associated with private student loans. It also provides a great resource for members and fee income for credit unions, as credit unions receive a referral fee for each loan.

What can members expect?
Students who choose to take out a Smart Option Student Loan may receive funds applicable to any accredited U.S. institution; other loans may have limitations. Schools receive the approved funds directly from the lender, so borrowers don’t have to worry about disbursement dates and amounts. This particular type of loan has no origination fee, no prepayment penalty and offers a 0.25 percent interest rate reduction if the borrower enrolls in monthly automatic debit payments.

Do student loans only apply to undergraduates?
That depends. Some lenders have loans designed for graduate students, too. It’s just as important to look for responsible private loan options for:

  • Dental School

  • MBA Programs

  • Health Professions

  • Law School

  • Medical School

  • Graduate School

How can I learn more?
Now is the busiest time of the year for student loan requests. Take a few minutes and check out this free webinar explaining student loan options for credit unions.

College students are under enough pressure. Let them know your credit union is here to help!

 

Categories: Business Partners, Education & Training, Sales & Service, Strategic Planning & Consulting
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