Kansas Department of Credit Unions Title

Credit Union Resources

Indirect Lending

Indirect lending occurs when the credit union has an arrangement with a dealer to submit loan requests directly to them. The dealer may prepare some of the documentation or may not, depending on the arrangement.

Most credit unions state in advance the type of loans that they want to consider from the dealer. Once the agreement is made, the dealer submits applications and deals to the credit union by fax or electronically for consideration. The credit union is then expected to make a decision quickly.

Many of the arrangements require the credit union to pay the dealer a fee for the granting of a loan sent to the credit union. Many are also allowed to up charge the interest rate. Depending on the arrangement, the dealer may also be allowed to add maintenance agreements and insurance to the deal.

Most credit unions do their own underwriting on indirect lending although there are arrangements where the dealer can do the underwriting within guidelines issued by the credit union.

NCUA issued a white paper on indirect lending in 1995. This white paper gives an excellent description of how indirect lending works, but is not considered guidance or regulation.

If a credit union is interested in indirect lending, it should spend some time visiting other credit unions with successful indirect programs.

There are third party sub prime indirect programs available to credit unions also. Each credit union considering this type of indirect lending should be sure they understand the system well and refer all contracts to their attorney.

The Kansas Department of Credit Unions neither endorses nor recommends indirect lending. If a credit union gets involved in the program, it will be reviewed closely by the examination staff.

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The next Credit Union Council Meeting is scheduled for September 25 at the Department of Credit Unions, 109 SW 9th Street, Suite 610, Topeka, KS 66612

Risk Based Capital PCA Comment Letter

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Department of Credit Unions
109 SW 9th Street
Suite 610
Topeka, KS 66612
Phone: 785-296-3021
Fax: 785-296-6830
E-mail: kdcuoffice@kdcu.ks.gov