Credit Union Embraces Digital Lending System, Grows Indirect Lending to Become Wisconsin’s #2 Auto Lender

by Bill Meyer

University of Wisconsin Credit Union (UW Credit Union) has come a long way with its indirect auto lending since first implementing CU Direct’s CUDL Platform – in more ways than one.

Mike Long, Executive Vice President and Chief Credit Officer for the $2.7 billion UW Credit Union, based in Madison, Wis., recalls rudimentary technology and manual processes, resulting in slow turnaround times. The contrast 11 years later, he said, is night and day.

“Back in 2007, we only funded 920 indirect auto loans for the whole year. Now, we are up to 1,300 to 1,500 per month,” Long said. “When we first started with CUDL, our dealer relationships were non-existent. We did not call on any dealerships, we just took what came in. Our service levels have improved greatly.” Through the CUDL platform today, UW Credit Union does seven-minute decisions and same-day funding. Back when the credit union was doing fax deals it might have taken seven minutes just to punch in the details. “What started out as a desire to show inventory online has grown into a great relationship with CU Direct. The company has always been a great partner for us,” notes Long.

Indirect Lending and Member Convenience

Initially, UW Credit Union made the decision to implement an indirect lending program to add member convenience. Long said the CU recognized, even back in 2007, the majority of vehicles were being financed at the dealership, “and we wanted to be there.” In the decade-plus since, he said indirect lending also has evolved into a key member acquisition strategy, as well as a member convenience strategy.

“When we decided to automate the process in 2007, and get involved with CUDL, the lending platform did not have a presence with dealers here in Madison, much less across the state of Wisconsin,” Long recalled. “We took a leap of faith that, because we are one of the biggest auto lenders in our market, we could help push the dealers to use CUDL—and it has worked out.” Today, the credit union is the biggest auto lender in Dane County, and number two overall in Wisconsin. “Before using the CUDL platform, we were not even in the top 20 for the state,” Long recalls.

When the management team for UW Credit Union was performing its due diligence in 2007, the credit union looked at numerous indirect lending solutions. Long said one of the clinching factors in the decision to go with CUDL was the AutoSMART auto-shopping feature.

“We liked AutoSMART, because it linked our members with dealers’ inventory online,” he explained. “We had no inventory online, and we had no online pricing tools. We also appreciated the philosophy of CUDL’s pricing—we only have to pay for booked deals. We are trying to close loans, not collect applications.”

Implementing the Right Technology

The fact CU Direct is a Credit Union Service Organization was an “added benefit” in the decision-making process, Long said, but the key was what the company brought to the marketplace. “We wanted the technology to be strong and drive value for our members. CU Direct’s technology allowed us to integrate with our loan origination system so we could decision loans directly in our LOS.”

Long acknowledges he has been part of numerous projects since UW Credit Union first implemented the CUDL platform, but he remembers the process was “very straightforward.”

As for the credit union’s staff and its experience working with CUDL, Long notes the frontline employees find it simple to use because the integration with the current loan origination system is efficient.

“Our teams are able to work in the same platforms they work in every day with other types of loans,” he said. “CUDL and Lending 360 work behind the scenes and integrate with the systems the dealers use. We have been able to integrate everything seamlessly.”

Getting Serious About Indirect Lending

UW Credit Union enjoyed years of relative success with the CUDL platform, but Long said its indirect lending program kicked into another gear going into last year.

“As we became more serious in 2017, we hired dealer relationship managers,” he said. “Now we have three dealer relationship managers and an indirect sales manager, whose job is to nurture relationships with dealers. We learned all that from partnering with CU Direct and using CUDL.”

In addition, the credit union went from one indirect underwriter to four, and one indirect processer to four. Thanks in no small part to all these changes, underwriting time decreased from 17 minutes to just 7 minutes.

The other big change was seen in loan dollars: In 2016, UW Credit Union booked $88.5 million in indirect loans. In 2017, that figure jumped to $181.5 million, an increase of 206 percent. Not surprisingly, UW Credit Union was a 2018 CU Direct Best Practices winner.

Looking back at 11 years on the CUDL platform, Long said so many of UW Credit Union’s original goals have been met—or exceeded.

“When we started, we wanted to make it easier for our own members to finance their vehicles with us. But as we realized dealers were trying to finance non-members we expanded, and we exceeded our goals each year,” he said. “Through our partnership with CU Direct, we have become a very major indirect lending player in Wisconsin and in Dane County. It has greatly improved our reputation in the dealer network as a real player. Sometimes they see credit unions as going in and out of indirect lending. We have been in it for years, and we provide their customers with great rates and great service.”

One “nice surprise” from this growth is UW Credit Union has been able to convert a good percentage of these new indirect members into full members, Long continued.

“After seeing the success we were having with dealers, and the dealers asking us to approve loans from non-members, we became more comfortable with working with non-members. There was a lot of skepticism internally at first, but our strategy is not just to have an auto loan on the books for 24 months—we want to grow our membership.”

Long explained that the credit union has been successful converting these indirect members through outbound calling, usually offering another loan or a credit card. “If we are successful in getting them to convert a loan, we often are able to get them to make us their full-blown primary financial institution by bringing over their checking account,” he said. “We are generally successful in closing additional business 30% of the time. Over the last 24 months, once we began focusing more on CUDL as an acquisition strategy, we have seen a 300 percent increase in business.”

About the Author

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