By Larry Highbloom
One upside to the current credit crunch plaguing the financial industry is that car buyers are flocking to their local credit unions to finance both new and used vehicles.
While the growth in auto loan volume is terrific news for credit unions, proper technologies and processes must be in place to ensure risk-management efforts keep pace with the growth. Credit unions, as well as their members, must be protected from risk, and an important element in that effort is ensuring the perfection of liens and management of titles serving as collateral for auto loans.
The goal for auto lending at Digital Federal Credit Union, Marlborough, Mass., with 377,000 members and $4.3 billion in assets, is to create a hassle-free lending process from application to pay-off resulting in a positive experience for credit union members.
“We began using paperless vehicle titles in 1999 to simplify our auto lending business,” says Mary Ryan, Digital Federal's account services manager. “Our collateral management system manages both paper-based and paperless vehicle titles and enables us to efficiently manage our 76,000 auto loan accounts by decreasing the hours involved in tracking titles.”
Ensuring that vehicle titles are received and perfected without errors, also known as “exceptions,” protects the credit union in case of loan delinquencies. If errors exist on a title, even when a lien is present, the credit union may be barred from legally repossessing the vehicle that is the underlying collateral for the loan.
More important, error-free liens protect credit union members.
“Quickly delivering titles to members after they've paid off their loans is vital to a positive auto financing experience. Our members want their titles back as proof they own the vehicle so they can sell or trade it,” says Ryan. “Now that all of our vehicle titles are electronic, we can't misplace or misfile titles--an occasional occurrence with paper titles only discovered when a member satisfies the loan obligation. Not finding a title once the loan has been paid off can erase an otherwise positive experience that was built during the last five years.”
Members buying used vehicles also benefit from automated title management. The credit union can ensure no existing liens are on the vehicles members purchase and that the dealers sold them their vehicles legally. This can guard members against dealer insolvency issues.
A task as mundane as managing collateral for auto loans has a direct impact on the member experience. Ensuring the right processes are implemented can lead to referrals and repeat business from more-than-satisfied members while maintaining risk-management levels alongside growing loan volume.
Larry Highbloom is president/CEO of VINtek, Philadelphia. Contact him at 888-846-6500.