Auto Lending Much More 'Personal' At Maine Credit Unions

August 15, 2014

According to a recent article in The New York Times, roughly one in four new auto loans last year went to borrowers with credit scores at or below 640. While the vast majority of banks rely on dealers, most Maine credit unions consider personal relationships, payment history and other attributes rather than solely relying on credit scores to determine rates and loans.  

Phil Moreau, President/CEO of Rainbow FCU, explained, “We have an indirect program in place but approval is made by our staff. Our underwriting standards allow us some flexibility besides credit scores. Although rates are based on the credit score of the member, they are still much lower than the industry standards. The ability to pay and our relationship with the member are a very important in our decision making.” Sandy Cloutier, Acting President/CEO of Infinity FCU, reflected on the history of credit unions shapes their decisions.

"Infinity FCU’s lending philosophy reaches back to our roots. As a credit union, we are here to serve our members. We were created not for profit, but to serve our members as a credit cooperative, and that includes all members, not just those with A+ credit. While we, of course, appreciate our A+ membership and serve them without hesitation, we also recognize that many members struggle from month to month, or from year to year, as economic conditions sideline their plans for their future financial goals, and it is these members we are here to help. History has proven that when we take a risk and lend a helping hand, along with counseling and valuable information many members are unaware of, a relationship is formed and a loyal member is developed,” Cloutier remarked.

Dan Daggett, President of Consolidated Solutions, a CUSO owned by Down East CU, which provides indirect auto lending services to a number of Maine credit unions, agreed, adding, “Credit unions know their members, and the dealers we work with understand and appreciate that. Our results and figures back up that as a successful model.” In 2013, nearly one-third of the loans granted through Consolidated Solutions were to members with C credit scores or lower. “Because credit unions focus on the individual rather than just the credit score, we were able to provide these loans at significantly lower rates than banks and other lenders. For instance, our highest average APR was 13.70% for members with E credit scores, while many other financial institutions are charging upwards of 22% APR for consumers with the same scores, noted Daggett.  

Maine Credit Union League President John Murphy said the article and the attention it has received once again highlights the benefits of using a credit union. “Credit unions in Maine and across the country are about serving members’ needs with responsible and sensible lending practices rather than returning to the same irresponsible practices of many banks that caused the financial crisis in 2008.”