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CUs work with members on auto delinquencies
PERRYSBURG, SYLVANIA TOWNSHIP and HOLLAND, Ohio (7/13/09)--Several credit unions in Ohio are doing their best to work with their members who become delinquent on auto loans. Great Lakes CU, Perrysburg, Ohio, has been working to reduce the burden on its members who have had their cars repossessed. Instead of sending the cars to auction, the credit union has begun selling the vehicles itself--a situation CEO Dave Seeger describes as a “win-win.” Great Lakes received about 40 cents on the dollar when it auctioned cars. Now, the credit union receives 94% of the National Auto Dealers Association value of the cars. Auctions drove the price of the cars down, Seeger said. Although the sales process is more labor intensive for the credit union, the member, buyer and credit union receive a higher return than they would at an auction, he added. Great Lakes CU uses its website to advertise the cars it has for sale. It also has a partnership with a local tire store and parks two to three cars in the store’s lot to advertise. The credit union also may partner with a local dealership. One of the reasons the credit union’s auto sales have been successful is because the cars are in good shape. Generally, repossessed cars are in “tougher” shape because they weren’t taken care of, Seeger said. Today’s repossessions are due to job loss. The vehicles are newer, and the owners took care of them--but the owners happened to lose a job, Seeger said. When Great Lakes receives a car, it has the car detailed. Then staff look at repairing the car if there is something wrong with it. If a high rate of return is expected on the investment of the repair, the credit union will have the car fixed. Such investments have paid off, Seeger said. The credit union has sold more than 50 cars in the past year. Delinquency rates at Great Lakes have leveled off a little, but rates are higher now than they had been in previous years. However, repossessions are starting to decline, Seeger said. The most important thing a credit union can do to help members with delinquencies is to be proactive, according to Ron Patton, senior vice president of lending at Directions CU, Sylvania Township. The credit union’s real estate department will call members if they are late on their payments, Patton said. “They’re thankful we’re proactive,” Patton said. “Some are embarrassed about calling us. You can be proactive in a nice way--and it really helps to solve problems early.” When members are delinquent on their auto loans, the credit union will determine if their financial troubles are long term or short term. Often, they’re short term, he said. The credit union can modify the loan, reduce payments for a period of time, or rewrite the loan. “[We do] anything we can do to help them out, within reason,” Patton said. “It’s important to work with them as soon as you can--after two or three months, it’s really hard.” The three primary reasons for delinquencies are job loss, divorce and death. If the repossessed vehicle is in good shape, the credit union will try to sell it. If the vehicle needs repair or is in poor shape, it will be auctioned. About 60% to 65% of repossessions are taken to auction, Patton said. The money earned from the auction is not usually enough to pay off the loan--just a portion of it, he said. Jeep Country FCU, Holland, sells repossessed cars through sealed bids. After the car is repossessed, the member has 20 days to redeem it. If the car is not redeemed, the public can submit bids on it. The highest bid wins, Joyce Jones, collections manager, told News Now. The money earned from the sealed bid is seldom enough to pay off the member’s loan. The credit union also can choose not to take a bid if it’s too low, she said. Delinquencies at Jeep Country are starting to level off--but they’re still much higher than they were last year. The credit union has repossessed 27 vehicles so far this year--most of them due to job loss, Jones added. Jeep Country wants to work with members who are struggling to make payments because it does not want to repossess cars. “You call, we listen,” Jones said. “We do the best we can.”
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