Trust in CU/Dealer Indirect Lending Relationship a Two-Way Street

LAS VEGAS – It takes two parties to facilitate an indirect lending relationship – the credit union and auto dealer – and while CUs are well-aware of what they need and expect from dealers to make this service work, attendees at CUDL’s 2004 Symposium held at the Venetian Hotel and Casino June 16-18 had the chance to hear from general managers of some CUDL dealerships on their thoughts about indirect lending and what credit unions can do to enhance relationships and insure a long-term commitment from dealerships. “The trust agreement starts from the moment the customer comes into the dealership,” Chris Duggan of Merchants Auto, N.H. told listeners. “We need to trust each other. We’ve made our customers credit unions’ members, we’re sending you our customers. The trust needs to be reciprocal, it goes both ways.” Credit unions will surely agree with that, so what are some of the problem? What makes for a good indirect lending relationship with between credit unions and dealerships, and what don’t dealers like about credit unions? The general managers concurred one of their major beefs with credit unions is that they’ll send their customers to a CU for financing, and the credit union will then turn around and send that customer to another dealership . “It’s a loss of control issue. If a dealer sends one of their customers to a credit union to become a member, the credit union shouldn’t send that member to a tent sale at another dealership,” said Terry Hoisington, of Donald Craig Mazda, Suzuki. Henderson Chevrolet and Fairway Chevrolet, Nev. agreed. “We can’t sell vehicles to most of our customers without credit unions. Indirect lending has to be a win-win situation,” he said. “The dealer has to prove it’s there to protect the credit unions’ interest, but the credit union has to do the same for the dealership.” Another habit some credit unions have, said the general managers on the panel, is they change their lending policies and documentation too often. “Inconsistency is just plain wrong,” said Helmi Felfel of Donald Cradig Mazda, Suzuki, N.C. “Dealerships need consistency with loan documentation evaluation and policies. Credit unions can’t change their program like it’s the flavor of the month,” he added. Because, as one GM put it, “nothing can happen without a financing source,” credit unions also should send the loan funding fast to the dealerships and have a single point of contact GMs can discuss problems with. Dealerships and credit unions are both concerned about fraud, and the GMs on the panel had some suggestions on some safeguards dealerships and credit unions can take to prevent becoming victims. Hoisington offered that, “Dealerships have to balance their zeal for the car sale with good common sense and judgment.” Verify all loan information and the customer’s drivers license, he advised. “Remember, if a credit union catches one fraudulent contract, the dealership has caught 10,” he added. It’s fine for credit unions to request proof of income (POI) from dealerships, “but if a credit union’s going to ask for POI from a dealership, they should make sure they’re going to use it” because it’s very time consuming, the GMs said. Credit union listeners wanted to know who they should go to at the dealership if they have a problem with a contract. The panel unanimously concurred CUs should deal with the general manager. “A repeat customer at a dealership is the best thing that can come out of a trusting indirect lending relationship,” said Felfel. -