Credit Union’s New Lending Strategy Brings Unexpected Benefits Beyond Loan Growth
Sandia Laboratory Federal Credit Union, Albuquerque, N.M., thought its switch to CU Direct’s CUDL platform would help the credit union provide more convenience to its existing members who were looking to buy a car. But what the credit union didn’t anticipate was a dramatic surge in new memberships.
SLFCU was founded in 1948 by 15 employees of Sandia National Laboratories. It has grown to more than $2.6 billion in assets, serving some 105,000 members via 11 branches in New Mexico and the San Francisco Bay Area. Diane Kapuranis, the credit union’s vice president, retail lending, said it had participated in an indirect lending program via another provider before launching its relationship with CU Direct, which began when the credit union started booking recreational vehicle loans using the CUDL platform.
In 2016, SLFCU made the full transition to CUDL for all its indirect lending.
CUDL platform brings cost savings, ease of use
“Once we were able to move over to CUDL for all of our indirect lending we saved a lot on costs,” Kapuranis recalled. —The CUDL platform is very easy to use. It is a lot more sophisticated than what we were working with previously. Also, CUDL allowed us to use a fully managed program and interact with dealers, which resulted in further cost savings.”
Initially, Kapuranis and her team had “some reservations” about switching, as they were wondering if the automobile dealers in Albuquerque would transition to using the CUDL platform. “However, a few other local credit unions were having success using the platform with dealers, so we made the switch,” she said. “Dealers embraced the move, so we lost no traction at all — if anything, the move helped us improve our relationships.”
In fact, when SLFCU upgraded from its previous indirect lending provider to CU Direct, it worked with 80 auto dealerships; today, it is working with 110 dealers. Kapuranis said when it moved to CUDL, the credit union had two people building relationships with dealers. Eventually, in 2018, SLFCU moved to a fully managed model, allowing dealers to communicate directly with the credit union.
“We knew we had to commit to the process, and over the years, that has really helped us,” she noted. “When we first moved to CUDL, we established our underwriting criteria for a loan. We gave that to CUDL, and their team would pick up a loan offer from a dealer. The CUDL team knew what our criteria was, so if there were any other elements needed, they would communicate with the dealer. Eventually, we established a direct interface from the dealer to us via our loan origination system. Today, we can communicate directly with the dealer and get everything we need.”
Sparking loan and member growth
When the credit union switched to CU Direct, Kapuranis said the short-term goals were to spark loan growth while realizing some cost savings by volume, and to meet the members where they were — at the dealership. “That is where you risk losing the member, even with a pre-approval,” she noted. “It started more with meeting the members where they were shopping, then we started picking up new members.”
Member growth through the indirect channel since switching to the CUDL platform has been significant for the credit union. In 2016, the transition year to CUDL, it welcomed 2,738 new members. In 2017, the credit union experienced a 157% increase in members, while 2018 saw an increase of 143% from 2016. The credit union is projected to bring in 6,780 new members, up 147% from 2016.
The increase in loans funded, both in terms of numbers and total dollars, followed a similar upswing. Loans booked went from 3,431 in 2015 (with the previous indirect lending provider) to 3,805 in 2016 (up 11%), to 6,778 in 2017 (year-over-year increase of 78%), followed by 7,594 in 2018 (up 12% year-over-year, even with the 2017 figure being dramatically higher than the year before). Projections are for 2019 to see 7,580 loans booked, down slightly from 2018, but in line with auto lending trends.
The dollar amounts of loans funded have also shot up sharply over the past 3 years: from $99,278,656 in 2015 (again, with the previous provider), to $106,500,000 in 2016, the first year with CUDL (up 7% year-over-year), to $184,638,274 in 2017 (up 73% YOY), then up an additional 12% in 2018 to $206,250,227. The projection for 2019 is $191,477,697, off slightly from 2018, but ahead of 2017.
As the loan numbers have been going up, the cost savings for the credit union also have been significant. On a per loan funded basis, SLFCU saved $271,000 in 2017, then $638,000 in 2018, and it expects to save $197,000 in 2019.
Kapuranis said it was an easy decision for the management team at SLFCU to go with the CUDL platform, because of the established relationship and success the credit union had with the company.
“We had been using CU Direct’s CUDL AutoSMART member car shopping program for a few years, and then slowly migrated to using CUDL for RV loans. Once we got comfortable with system, we jumped in,” Kapuranis said.
Lisa Bohannon, the credit union’s consumer lending manager, said the implementation process for the CUDL platform went as well as could be expected.
As with any new system, “there was a slight learning curve, but once we got up and running with the platform, it was very smooth,” Bohannon said.
The credit union saw immediate improvement in overall loan activity as soon as it implemented the platform in April 2016, Kapuranis said. Both Kapuranis and Bohannon noted the experience for the staff working with the CUDL platform has been “very easy and efficient,” as “everything runs flawlessly.”
“Thanks to the savings in costs for booking loans, as we have gotten bigger we have been able to bring on additional staff,” Kapuranis reported. “Before we moved to the fully managed system we had two processors. Now, we have two underwriters for indirect, five processors and a supervisor. This was due to the growth of the program, and fully managing the process on our own.”
Happy Dealers, Happy Members
The credit union’s dealer partners are happy also, Kapuranis continued. She said when the credit union transitioned to CUDL it was so smooth, it did not get a lot of feedback. “After we moved to the fully managed model, when we do hear from dealers it is to convey that they are happy to be talking directly to us.”
The dealerships in SLFCU’s network continue to report the “vast majority” of loan applications are from new members. As for feedback from members: Kapuranis said that members have had a very positive response to their lending experience.
One issue that occurred frequently with the previous indirect lending provider was many new members were unsure of exactly what joining a credit union meant, and in some cases they did not know where to send their first payment. Thanks to the efficiencies of the CUDL platform, SLFCU has been able to develop a system of proactively reaching out to new members within days of booking the loan so they have a really good experience from day one.
“We’ve created a team of indirect processors who are dedicated to the process,” Kapuranis said. “They have created a consistent view for both dealers and the members. We established a direct phone line for dealers to call the indirect team. We supply dealers with checklists, so they know exactly what we need to get a deal done and the CUDL platform makes it really easy to communicate with them.”
All in all, Kapuranis said, the indirect lending platform has ?definitely met, if not surpassed? all expectations.
“It works flawlessly. And if we do ever need assistance, the CUDL team is very good at responding quickly to our needs,” she said. Bottom line, the credit union’s new indirect lending strategy has delivered remarkable results and has set the foundation for future success. SLFCU has provided a much improved, more convenient member lending experience, while significantly growing its loans through the indirect channel. In addition to attaining these desired goals, the credit union has also experienced dramatic member growth and substantial cost savings on loans funded, helping to further strengthen its indirect lending program.