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February 20, 2019

Compliance Blog tackles auto loan delinquencies following Berger's FBN exclusive

auto lendingA new Compliance Blog post out today explains the compliance risk of indirect auto lending as auto loan delinquencies are on the rise. NAFCU President and CEO Dan Berger also talked about those risks, in addition to other economic indicators worth watching, earlier this week on Fox Business' Countdown to the Closing Bell.

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NAFCU Regulatory Compliance Counsel David Park, in the Compliance Blog, references a post from the Federal Reserve Bank of New York's Research and Statistics Group that revealed "there were over 7 million Americans with auto loans that were 90 days or more delinquent at the end of 2018." The post also showed that auto loans originated by credit unions outperformed those originated by auto finance companies: "6.5 percent of auto finance loans are 90+ days past due, compared with only 0.7 percent of loans originated by credit unions."

"Because of the credit risk that arises whenever a credit union makes loans, the rise of indirect auto lending, and the performance of auto loans trending downward, it seemed like a good idea to revisit some of the NCUA's guidance relating to indirect auto lending and delinquency rates," Park explains.

The blog post includes various NCUA resources: The credit risk categories from the examiner's guide, the agency's report from 2017 on managing indirect lending programs and a letter to credit unions on indirect lending and appropriate due diligence.

Park recommends credit unions whose indirect auto lending programs are seeing similar downward performance trends as flagged in the New York Fed report review the NCUA resources for guidance about best practices to manage those programs.