2. Table of Contents
I. Title
II. Table of Contents
III. Executive Summary
IV. Introduction
V. The Opportunity
VI. Benefits & Risks of Strategic Solution Option
VII.Final Recommendation
VIII.References
IX. Appendix
3. Executive Summary
Indirect Loan’s are a problem because of their high
default risk and lack of education provided to
dealer customers who are put into them
(Goldbach, 2014). The credit union will provide
away to bridge the gap in a compliant, low cost
way that will turn these high risk loans into active
participants of the cooperative thus increasing
income and decreasing risk at the same time.
4. Introduction
$12,178,055.96 million dollars per
month is generated in new loans
from the indirect channel on a
monthly basis resulting in major
growth potential for the credit
union on an annual basis (Luzbet,
2014). However, with little
relationship or knowledge of the
credit union or the cooperative
philosophy these newly established
members put the credit union at
great risk for loss. As members and
employees of this cooperative
every person in this room should
understand that there is a solution
that provides a benefit for not only
those here but for our members
and employees of the entire
organization.
5. Opportunity
Currently GTE Financial is
generating over $12 million
dollars a month from the indirect
loan channel. However, over 90%
of these loans are with individuals
that have no prior relationship
with the credit union thus posing
a significant default risk (Burns,
2014). The opportunity here for
the company is to add a level of
“stickiness” to these members
that get them using the
cooperative in a more appropriate
manner thus reducing the risk for
the organization and increasing
the value these members receive.
6. Key Success Factors
• Generation of Consumer
Loans
• Relatively Low Cost in
consumption of loans
• Dealer Rep Penetration
• Dividend return rate on
these loans in the
portfolio to date (Saul,
2014).
• Community engagement
7. Alternatives – What Can Be Done?
• Nothing – This option would
leave the cooperative at risk
which is not an option if the
credit union would like to
continue giving value back to its
members as it does currently.
• Discontinue Indirect Loan
Channel – This option would
result in a net loss of $144 million
dollars in annual loans which
would prevent the credit union
from growing enough to add
products and services that allow
us to remain competitive in the
marketplace.
8. Strategic Solution
• On-Board!
– Outbound call team
consisting of existing
employees in the
community financial
centers will be utilized to
call every indirect loan to
offer appropriate products
and services to increase
new members participate
in the cooperative thus
reducing the risk of default
on these loans.
9. Strategic Solutions Analyzed
Benefits
• Less Risk to the CU
• Increased Net Revenue as
members take advantage of
additional lending solutions
• Increased Participation in
the cooperative
• New Member Growth
• Added value to members
• Community Engagement
• Brand Recognition
Risks
• Potential for calls to “fall
through the cracks” due to
increased lobby traffic
• No guarantee of return
• Need for loan notification
platform may cost money
• Cold Calling does not have
high rate of return
10. Final Recommendation
• Based on research conducted with Compliance,
Consumer Loan Production, and the Project
Management team the approach provides the
least expensive with the highest potential for
return. It also provides an added source of
potential products and services for Community
Financial Centers that have production goals.
Thus it is my recommendation that the
organization move forward with the
implementation of this indirect loan solution.
