Since the 2009 credit unions' indirect lending peak of $76.4 billion, indirect loan volumes have also returned to pre-2008 levels, the data showed. As of the third quarter of 2011, indirect auto loans accounted for 43% of credit union auto loans outstanding versus 37% for the same quarter of 2007.

Prior to the credit crunch of 2008 and 2009, credit union indirect delinquencies and chargeoffs hovered near or below 1%, according to CU Direct. As unemployment climbed, the national average for credit union indirect delinquencies and chargeoffs rose from 1.34% and 1.45% in 2008 to 1.36% and 1.74% for 2009, respectively.

Research from CU Direct acknowledged that some credit unions have struggled to make their indirect programs take off while others have been wary of starting them for fear that loans conducted via an external channel would be harder to control.

To address those obstacles, the white paper reminded credit unions that they have the ability and authority to enforce dealer agreements, which establish credit union lending guidelines and proper procedures to determine member eligibility.

Credit unions can also access reports that provide loan metrics at the dealer level so that they can manage and review indirect lending portfolios to make early intervention and corrections possible to ensure loan quality, according to CU Direct. 

In 2010, credit unions started to see their indirect delinquencies and chargeoff rates fall, according to the data. Since then, both have been below 1% for the past three consecutive quarters.

To find out the components of a successful indirect lending program, CU Direct identified several credit unions that had lower charge-off and delinquency rates when compared to the national average for credit unions obtained from Callahan & Associates' Peer to Peer software. 

The credit unions interviewed said it was imperative to measure, track and monitor metrics that report the overall health of the program, in addition to more detailed reports at a branch, dealer, loan officer, and underwriter level.

Tools to prepare for the NCUA's examinations are also essentials, the credit unions said. CU Direct cited Victoria Bennett, stating, “[The NCUA] is very much in favor of indirect lending…we're just concerned that it's a well-run program.” 

Through open communication with dealers, the credit unions interviewed said it keeps the credit union top-of-mind, helps to understand dealer needs, educates about market changes, and uncovers information related to competitive actions.

CU Direct said in recent years, a few dealers had to be eliminated from the auto lending program due to repeated violations of the dealer master agreement or the credit union's program guidelines. One credit union representative said, “It's all about that constant reinforcement, building that trust, assisting when they need help, cleaning up problems on delays for funding. Just working hand-in-hand with them is huge.”

A successful indirect lending program also includes communicating loan and member eligibility requirements to dealers as is consistency in underwriting, according to the paper. A consistent review of pricing guidelines is also critical. 

“I'm a fan of getting all the players in the room on a regular basis, monthly,” wrote one credit union. “We talk about pricing, performance, performance by dealer, and credit tier. We may change our credit tiers once a year, just based on how they are performing.”