Steer ClearSteer ClearHow Credit Unions Help How Credit Unions Help

Car Buyers Avoid Car Buyers Avoid Predatory LoansPredatory Loans

Bill Myers Bill Myers

WMyers@realsolutions.ncuf.coopWMyers@realsolutions.ncuf.coop

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans that drive to work.

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans That drive to work. 88%. Fewer than 5% take public transportation to work.

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans That drive to work. 88%. Fewer than 5% take public transportation to work.

Percentage of US auto finance market that CUs captured in 2007.

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans That drive to work. 88%. Fewer than 5% take public transportation to work.

Percentage of US auto finance market that CUs captured in 2007.

15%. $90 billion in used cars loans, 12% of CU assets.

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans That drive to work. 88%. Fewer than 5% take public transportation to work.

Percentage of US auto finance market that CUs captured in 2007.

15%. $90 billion in used cars loans, 12% of CU assetsPercentage of 8 million used cars sold to low and moderate income borrowers annually that Cus finance.

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans That drive to work. 88%. Fewer than 5% take public transportation to work.

Percentage of US auto finance market that CUs captured in 2007.

15%. $90 billion in used cars loans, 12% of CU assetsPercentage of 8 million used cars sold to low and moderate income borrowers annually that Cus finance

5%

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans That drive to work. 88%. Fewer than 5% take public transportation to work.

Percentage of US auto finance market that CUs captured in 2007.

15%. $90 billion in used cars loans, 12% of CU assetsPercentage of 8 million used cars sold to low and moderate income borrowers annually that Cus finance

5% Credit Unions 30% Banks 60% sub-prime lenders

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans That drive to work. 88%. Fewer than 5% take public transportation to work.

Percentage of US auto finance market that CUs captured in 2007.

15%. $90 billion in used cars loans, 12% of CU assetsPercentage of 8 million used cars sold to low and moderate income borrowers annually that Cus finance

5% Credit Unions 30% Banks 60% sub-prime lenders

50% of CU loan applicants are turned down. If credit unions lend

Below FICO 600, their market is expanded by 15%. To no FICO, their low mod market is expanded by 40%.

Non-Prime Auto Finance is BIG for CUs

Percentage of Americans That drive to work. 88%. Fewer than 5% take public transportation to work.

Percentage of US auto finance market that CUs captured in 2007.

15%. $90 billion in used cars loans, 12% of CU assetsPercentage of 8 million used cars sold to low and moderate income borrowers annually that Cus finance

5% Credit Unions 30% Banks 60% sub-prime lenders

50% of CU loan applicants are turned down. If credit unions lend

Below FICO 600, their market is expanded by 15%. To no FICO, their low mod market is expanded by 40%.

How big is this market?

CUs Help Car Buyers Steer Clear of Predatory Loans

Research funded by Annie E CaseyPartnership between

Aspen InstituteNational Credit Union Foundation

Survey of 251 Credit UnionsInterviews with

12 Credit Unions8 Vendors

SEVEN LESSONS

Communicating Opportunity

Low income

Low wage

Low-mod

Modest means

Low score

No File / thin File

Underbanked

Unbanked

Underserved

Sub-prime

Non-Prime

Emerging Market

Base of the Pyramid

High Net Margins from Existing Members

This marketplace has non-Competitive pricing.Cus may price Non-prime loans for risk and effort.

Members still receive a much better deal.

This need not be charity work

1

Credit Scores areFastInexpensiveSimplify loan pricingCompetitive

Since all lenders have the same dataNo relationship needed

Not subjectiveNon-discriminatoryUniform

Derive from one data source (credit repayment records).

Reduce Underwriting Gap2

Credit Scores areFastInexpensiveSimplify loan pricingCompetitive

Since all lenders have the same dataNo relationship needed

Not subjectiveNon-discriminatoryUniform

Derive from one data source (credit repayment records). Incomplete

Reduce Underwriting Gap2

Missing: 25% of the Population

Reduce Underwriting Gap

Use more data sets in an automated decisioning process

Ask and Verify

Bill payment, Utility records, Rental payments

FICO Expansion Score Fair Isaac

L2C score TransUnion

eBureau Experian

Market Max Equifax

RiskWise Lexis Nexis

2

Get in front of the dealer

Assist the member in finding a carCredit Union Direct Lending CUDL

http://www.cudl.com/ United Buying Service

http://www.ubs4cars.com/ Motor Vehicle Certification Program

http://www.mvcp.com/intro.php Cars for Members

http://www.carsale.com/ Auto Resource Center

http://www.cucompanies.net/pages/auto_about_us.asp Auto finder Autoland

http://www.autoland.com/ Enterprise Car Sale SmartBuys program

http://enterprisesales.com/

3

Build the Loan Correctly

The Hard Close, situation appropriate member education

Thank you for the businessValue of membership

Verify loan application informationEmployment, residence, references, Photo of car

Review all Loan termsPayment amt and due date

Value of on time paymentInsurance requirementsLate fee and penalties

Keep in touchContact CU if there is a problem

Cross sell (Just in Time Education)Direct DepositAutomatic PaymentSavings Escrow

Guaranteed Refinance offer

4

Insure the borrower

Insure what they can’t controlCollisionMechanical Breakdown Insurance or extended warrantyGAP loan deficiency or residual value insuranceDebt Cancellation for divorce, injury, loss of jobCredit Life

Walkaway: Give the car back, no further collection or credit degradation.

5

Export the Risk

Use loan loss insurance products and guarantees.

Lender’s Protection, a risk pool

Charlie Mac CARPooL program

Guarantees (Pride Deposits)

6

Keep in Touch

Allocate resources to collect the loan quickly

Make contact with borrower when one day late

Premium to borrower for visiting Collection Officer in person:

$50 Pre-Paid card

Repossess when 30 days late.

7

Bill Myers Bill Myers

WMyers@realsolutions.ncuf.coopWMyers@realsolutions.ncuf.coop

Steer ClearSteer ClearHow Credit Unions Help How Credit Unions Help

Car Buyers Avoid Car Buyers Avoid Predatory LoansPredatory Loans