Is your credit union involved in indirect lending? If so, make sure you are paying close attention to your pricing strategy and fair lending risk.
Do you still offer discretionary pricing to your dealers? This is the #1 fair lending risk factor. If you offer it, make sure you are monitoring your pricing to ensure dealers price fairly. It’s not enough to review dealers or your portfolio as a whole. You should start by looking at your indirect portfolio as a whole, then break it down based on MSA and then by dealer. Ensure your customers are receiving fair and consistent rates in all categories. If you see negative trends, do something about it.
The easier solution is to follow the trend many credit unions have embraced – get rid of discretionary pricing all together. Pay a flat fee or set percentage.
I’ve heard all the arguments for discretionary pricing – the main argument being “everybody does it”! I’m here to tell you that is not true. Reputable dealers across the nation know they have a responsibility for fair lending. Make sure you are partnering with those dealers and not those that just want you to “show me the money”!