Who Benefits From Outsourced Indirect Auto Lending?

Sponsored by Origence

With everything that’s going on these days—from rising interest rates to the Great Resignation—credit unions are well served by solutions that solve problems on multiple fronts.

During a recent Origence webcast, Thelma Matthews, assistant VP/lending production for $1.3 billion/115,000-member MECU Credit Union of Baltimore, noted that her credit union’s “great” partnership for indirect lending with Origence, which was put in place in 2019, is one of those win-win-win generators. She says that this outsourcing arrangement has benefitted the credit union, its employees, partner dealers and—importantly—indirect members.

CU Benefits Realized

For example, outsourcing its indirect auto lending program to Origence has led to more than a 14% increase in funding, says Matthews. In addition, MECU of Baltimore added almost 1,300 members via the indirect channel through the first three quarters of 2021. According to Matthews, “that's something we would not have had without this indirect program.”

Matthews says moving to Origence has reduced the credit union’s staffing costs. With the third-party arrangement, “You don’t need a full-time equivalent to address every single need you have with indirect lending,” she explains “We have improved our efficiencies.

“Prior to Origence we had a loan officer who had to look at every application, contact the member, everything,” Matthews recalled. “Once we got with Origence, we increased volume.”

Outsourcing the indirect relationship also takes the burden of managing the staffing level as lending volume goes up and down.

Staff Benefits Realized

Members of the credit union’s team benefitted as well. For example, staff no longer need to work late into the evening or on holidays to meet dealers’ needs.

“We used to have people in on holidays and weekends because if you are not available to answer calls from the dealerships, you do not get the business,” Matthews says.

Dealer Partner Benefits Realized

Origence’s SmartFund helps MECU of Baltimore do electronically more of the process of writing an indirect car loan.

According to Matthews, the credit union has a list of the needed documents, and employees can see the documents in the system as they are labeled.

Access to lending support systems that incorporate leading-edge technology, such as optical character recognition and artificial intelligence/machine learning, can provide lenders with a significant marketplace edge. Origence data shows that system technology that automatically orders lending documents experiences as much as a 98% success rate, saving time and increasing lending process efficiency.

Plus, when all the documents move faster, the dealers get paid faster.

“Instead of cutting checks to the dealers, the dealers get paid faster, so they like us. That has been a great benefit,” Matthews added.

As another benefit, if a specific document is needed for an audit, it can be retrieved quickly.

Indirect Members Benefits Realized

Car-buyers who become MECU of Baltimore members are not only going to get a great rate and fantastic loan service but poised to benefit from doing business with a financial cooperative.

Traditional Outsourcing Versus Today’s Outsourcing

Outsourcing lending support traditionally has supported credit unions’ business continuity plans, helped them provide after-hours service and handle overflow volume. However, lenders now are starting to use lending operations support to reduce risk as they grow loans through expansion into new geographic areas or to bring new product offerings into the marketplace.

“Everything is much better than when we were doing it all ourselves,” Matthews says. “Working with the Origence team has improved our operations, and it also has helped our dealer relationships. They have expanded the markets we have access to. To me, that is key.”

Lee Easterwood is VP/business development, origination services, for CUES Supplier member Origence.