Fewer Tums Needed As Compliance Is Addressed
There's less bellyaching about disclosures, risk management and reporting on dealership auto loans at Prevail and Sierra Central credit unions, thanks to compliance automation.
"Now I only take a couple of Tums instead of an entire bottle," when addressing dealer auto lending compliance, said Mark Mykleburg, loan origination manager at the $300-million Prevail CU here.
When the Federal Reserve began requiring adverse-action and risk-based pricing notices last year, Yuba City, Calif.-based Sierra Central CU was ready, said David Kelsay, SVP-lending, at the $600-million CU.
"The car dealer just clicks a link to generate our disclosure," he explained. "On our end, we can look in the system and see 99.9% compliance."
Compliant disclosures at the point of purchase are provided via the CU Direct CUDL indirect and point-of-purchase vehicle lending platform, Kelsay continued. "We put the disclosures in the CUDL system, and CUDL was able to get the auto dealers to use them."
CUDL automation saved Sierra Central from generating and mailing thousands of disclosures every month, he added.
Prevail cut back half of the employee hours charged to processing dealer loans, thanks to CUDL automation, Mykleburg said. Meanwhile, retail loans require twice as many FTEs and garner half the volume. Prevail funds about $2.1 million per month in CUDL indirect car loans.
"CU Direct was ahead of curve on these disclosures," he added. "I'm still trying to get my core system to automate these disclosures on the retail side."
Complying With CFPB
The new Consumer Financial Protection Bureau (CFPB) will require credit unions to provide more and more information about loan terms and decisions, Kelsay said. "The CFPB seems to come up with new regulations over cocktails. Compliance is extremely costly. CU Direct is good at quickly making required information available on their systems and bringing an economy of scale that no smaller credit union can afford."
The CU Direct Lending Insights system provides calculators and filters that make it easy to show examiners how better rates are assigned to higher credit scores, for example, said Mykleburg. He said he can project loan loss and prove that B paper is performing well. "I have the data to back up my decisions."
A static pool analysis tool delivers current and forecasted data from specific loan pools, whereas a credit score migration tool identifies shifts in portfolio risk. "What used to take four hours in Excel now takes 10 minutes with Lending Insights," Kelsay said.
Sierra Central recently implemented a "significant" change to maximum advances, he said. "We used Lending Insights to instantly go back to the date we made the change and see how the loan portfolio performed before and after that date. That analysis would have take me a month in Excel."
Recently, "examiners came in ready to rip us apart on our dealer portfolio," Mykleburg continued. "But I was able to push a button to instantly display data-drilled-down to the person submitting the app at the dealership-for a couple hundred dealers."
Satisfied, the examiners were gone in a day, he said.
Compensating For Limited Resources
CUs generally lack the core systems and funds necessary for suitable risk and compliance analytics, suggested Michael Cochrum, lending director with Lending Insights.
"Clients choose the Lending Insights Loan Portfolio Management System because they don't have the resources to conduct the level of analytics required by regulators, Cochrum said. "The cost of the hardware and software-and the cost of the expertise to gather and validate data and create these reports-is prohibitive for most credit unions."
CU Direct could clean up the compliance mess for consumer lending on the retail side, too, added Mykleburg. "We're thinking about originating and funding all loans in the Lending 360 system. CU Direct addresses all the regulations in one fell swoop."
Source: CU Journal
By Kevin Jepson
Source: CU Journal
By Kevin Jepson