Consumers Credit Union Finds Success Blazing An “Indirect” Trail With CU Direct In Western Michigan

by Bill Meyer

Consumers Credit Union wanted more – much more – out of its indirect auto lending program. The credit union was frustrated with the inefficient way dealer partners sent the credit union applications through many costly systems, which ended up in their separate loan origination system. This, combined with a desire to work with a credit union service organization (CUSO) that would be focused on its needs, Consumers Credit Union chose CU Direct’s CUDL platform.

Steve Owens, Chief Lending Officer at Consumers Credit Union, and Tim Kosak, Vice President of Consumer Lending for the $1 billion credit union, headquartered in Kalamazoo, Mich., explained that the credit union’s original indirect lending software platform was subsequently sold twice, which began the search for a new partner.

“It was a perfect storybook of what can go wrong when a loan origination system is sold to a larger company,” Kosak recalled. “[It] went from the main product to one of many products, then later it went to one-thousandth of the business. Compare that to the CUSO world – CU Direct owns CUDL, breathes it, has a passion for it.”

Owens said the credit union’s long-term goal was to find a partner with a system that would be able to deliver “exceptional value” today, and would be positioned to adapt and develop tomorrow’s solution. When he is evaluating business partners, particularly for critical business systems, he places a high priority on the strategic vision of the parent company. “Ownership structure, investment in technology, and their willingness to change and adapt in this dynamic environment is of the highest importance,” noted Owens.

Added Kosak: “CU Direct offers a partnership that goes well beyond what is available in the loan origination system marketplace today. It offers technology and indirect lending expertise, delivered using a credit union-centric model that works because it offers high value to both sides of the transaction – dealers and credit unions.”

Consumers Credit Union went live with CUDL in July 2017. The credit union considered a number of platforms, but it concluded CUDL provided the technology and capabilities that best suited its needs.

According to Kosak, the implementation process was “participative and responsive.” He said the staff at CU Direct was “engaged, even excited, to help set up our system to match our program and our very high efficiency demands.”

“We can fund an indirect loan in two screens, down from five or six screens with our previous relationship,” he added.

A better approach to indirect lending

Kosak revealed that Consumers Credit Union was tired of the approach taken by auto dealers through other platforms, sending bushels full of loan applications to the credit union even when the dealers knew the credit union would buy few, if any, of those loans. He said the switch to CUDL has helped the credit union grow its relationships with dealers.

“It is all about breaking out of the old shotgun model,” he said. “Consumers was committed to making a clean break – we wanted to be a CUDL exclusive shop to get the maximum benefit out of the CU Direct relationship.”

Western Michigan area auto dealers showed they were committed to the new Consumers Credit Union/CU Direct partnership by logging in to the CUDL portal and submitting applications specifically to the credit union, Kosak explained. “This very quickly demonstrated why this model works so well.”

The credit union’s staff also offered positive feedback after the switch to CUDL. They remarked how fast and easy the system was to operate and how well organized it presents.

Trailblazing in Western Michigan

About the only obstacle to implementing CUDL was the relative newness of the platform to Consumers CU’s marketplace. Owens said CU Direct previously had a presence with dealers in the Detroit area, but dealers there were using it only to serve their existing members.

“We are different in that 80 percent of our business is member acquisition,” Owens explained. “One by one, our dealers switched away from other indirect platforms to CUDL. It took a lot of hard work and planning, and we are anxiously awaiting other credit unions in the region to recognize the benefits of the platform and adopt it. There are some wheels in motion and we expect more credit unions to join soon.”

“This efficiency improved our approval speed dramatically and allowed us time to make calls out to dealers – and dealers noticed our improved responsiveness immediately,” Kosak recalled. “Our application quality actually improved as well.”

Another positive – and one that occurred without prompting by the credit union – dealers self-converted to CU Direct’s SmartFund program, instantly eliminating hundreds of hours of document movement and scanning. “Dealers love the convenience of SmartFund and they love how it speeds up the funding process – SmartFund became its own selling point,” noted Kosak.

Kosak pointed to numerous key numbers, virtually all of which were trending positively after the conversion to CUDL. Using received loan vehicle data (Rec excluded) from the credit union’s previous LOS for the first six months of 2017, compared to CUDL data for the first six months of 2018, the credit union experienced: an increase in weighted average credit score from 687 to 697; a decrease in weighted average LTV from 101 percent to 95 percent; a decrease in weighted average DTI from 34 percent to 29 percent; a decrease in PTI from 9 percent to 8 percent; and, an increase in look-to-book from 22 percent to 44 percent.

“This tells me that when dealers choose to send a loan to us via CUDL, they are sending Consumer credit union deals specific to our program,” Kosak assessed.

Booked loans results had similar improvements: an increase in weighted average score from 737 to 740 and a decrease in weighted DTI from 30 percent to 27 percent. Weighted LTV remained relatively flat (88 percent vs 91 percent), while weighted PTI was level at 8 percent.

The credit union’s days-to-fund decreased from 14 days to 7 days, which Kosak said “dramatically improved” member service, allowing the credit union to connect with the new borrower while the transaction is fresh.

Furthermore, Consumers CU consistently funds loans in 12 to 36 hours, which Kosak observed is evidence of the improvement caused by dealer adoption of SmartFund. “Prior to conversion, we received about 25 percent of contracts electronically. We now receive 85 percent or more of deals electronically. We expect this to increase as we continue to build relations with new dealers.”

Happy dealers = Happy staff

The new CUDL dealer platform CU Direct released in 2018 was a “big hit” with dealers, Kosak noted, adding, “happy dealers make for happy staff.”  “CU Direct clearly listens to credit unions and works diligently to improve the system, a never-ending routine,” Kosak said. “We just signed on for analytics from the company’s Lending Insights platform. We are excited to collaborate with folks that have an analytics background.”

Owens noted that because Consumers CU is just a little over one year into the conversion to CUDL, his team is still monitoring performance closely to assure all expectations are met. “I do have a very high level of confidence we will achieve our long-term growth and productivity goals,” Owens added.

About the Author

Bill Meyer
Bill Meyer is the PR and Corporate Communications Lead for CU Direct.