We have a large amount of indirect dealer loans and have good relationships with our dealers. Under certain risk based circumstances we will go up to 85 to 96 months on a vehicle loan. However, for borrowers applying via the dealership, we want to book these 85 to 96 month loans as direct loans rather than through our indirect dealer channel.

Right now we have a minimum and maximum we will pay for dealer reserve with a percentage of the loan amount that falls within our minimum and maximum payout amounts.

We want to continue to pay the dealer reserve on the 85 to 96 month loans even though those loans are booked as direct loans using our loan documents versus dealer contracts. The reserve is being paid because the dealer will be doing the paper work just like they would be on an indirect deal, except for drawing up the contract. So in essence, the dealer is being paid to do the paper work, more so than it being a referral fee.

However, often times the deal is going to fall within our minimum and maximum payment amount so basically the amount paid to the dealer would vary based on the loan amount.

The risk based pricing we will be using is the same pricing if the loan is referred by the dealer or if the member walked into the credit union and applied.

I would appreciate you sharing any concerns or issues you have with the above mentioned plan.