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NCUF, Filene non-prime auto loan program gives hope on wheels
MADISON, Wis. (4/23/14)--The National Credit Union Foundation (NCUF), in partnership with Filene Research Institute, announced this week that a product incubator for its Non-Prime Auto Loans is full, with 14 credit unions across the country participating.
 
Non-Prime Auto Loans, an NCUF product, is one of five products in the Filene Research Institute's accessible financial services incubator funded by the Ford Foundation.
 
"Credit unions have a long history as being the proving ground for consumer-centric, innovative financial products," said Cynthia Campbell, director of innovation labs at Filene. "Partnering with the NCUF to test the viability of non-prime auto loans with mainstream financial institutions was a natural fit since their experience in working with low- to moderate-income consumers is extensive."
 
One of the 14 participating credt unions--Seasons FCU, Middletown, Conn.--has offered subprime auto loans since 2011. The $137 million-asset credit union joined the NCUF-Filene incubator initiative to share its experiences and learn from other credit unions, according to Senior Vice President Betsy Sommers.

One lesson Seasons FCU has already learned: Done right, subprime auto lending can change members' lives. Members give priority to their car loans because they use their vehicles for essential daily tasks such as getting to work and taking children to school, Sommers told News Now.

But unlike many subprime lenders, Seasons FCU takes a holistic approach to its relationship with its borrowers, according to Jeff Rindfleisch, vice president of financial services. "We really believe in developing a deeper relationship with the member," Rindfleisch told News Now. "We look at if they have direct deposit with us, if they have a debit card with us. If we're approving or denying a loan it's based on the relationship the loan officer has with that member."

"In a lot of cases when a member is struggling, they are more likely to go to the loan officer proactively," Rindfleisch continued. "We view it as a partnership. So it's about us getting the member into a car that makes sense at a payment that makes sense, and really being there to consult and advise the member."

The NCUF-Filene initiative comes at a time when obtaining a vehicle may soon become more difficult for subprime loan candidates. A new study by financial tracking firm Moody's shows that U.S. subprime auto lenders are "exercising more caution," especially when it comes to higher-risk customers (NBC News April 22). Less competition from non-traditional subprime lenders decreases the need for independent finance companies to lend to subprime candidates, said Peter McNally, Moody's vice president senior analyst.
 
The other 13 participating credit unions are:
  • CALCOE FCU, Yakima, Wash., with $23 million in assets;
  • Cy-Fair FCU, Houston, with $191 million in assets;
  • Denver Community CU, with $256 million in assets;
  • EECU, Fort Worth, Texas, with $1.5 billion in assets;
  • Freedom First CU, Roanoke, Va., with $315 million in assets;
  • Laramie Plains Community FCU, Laramie, Wyo., with $38 million in assets;
  • Missoula (Mont.) FCU, with $383 million in assets;
  • SchoolsFirst FCU, Santa Ana, Calif., with $9.8 billion in assets;
  • Shreveport (La.) FCU, with $99 million in assets;
  • Soo Co-op CU, Sault Ste Marie, Mich., with $147 million in assets;
  • Summit CU, Madison, Wis., with $1.9 billion in assets;
  • University FCU, Austin, Texas,with $1.6 billion in assets; and
  • US FCU, Burnsville, Minn.,with $928 million in assets.
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