WASHINGTON–Auto loan delinquencies are rising nationally, but credit unions are lagging the increases being seen at other lenders, indicating members are more “resilient,” according to a new report from CUNA that includes revised analysis based on new data.
The findings are included in the June edition of the trade group’s Credit Union Auto Lending Monthly Report , which it said contains updated data from Equifax and which revises the historical data going back to 2005.
According to CUNA, the revision affected the total outstanding balances and originations for banks and auto finance companies, but no changes were made to credit union originated loans.
The Main Changes
CUNA said the main changes include:
• Loan Distribution. “The share of non-prime lending for banks is now higher compared to the previous reports. Reclassified loans consist of a disproportionately large balance extended to non-prime borrowers,” CUNA said. “These loans are made by previously auto finance companies (now owned by banks) that specialize in serving consumers with lower credit scores at high interest rates.”
• Delinquency. The percentage of loans that are 60+ days late is now higher for banks and auto finance companies compared to previous reports, CUNA reported, adding the gap with credit union delinquency has also increased, indicating that credit union members are more resilient.
• Loan Pricing and Life of loan savings. CUNA said previous reports show that credit union members, particularly those at the lower end of the credit score spectrum, are more likely to receive affordable loans than borrowers at other institutions. This update strongly reinforced this finding.
What Was Involved
“This revision involved the reclassification of industry codes for a significant amount of loan balances, recategorizing loans previously reported under auto finance companies as banks,” CUNA stated. “This is largely due to bank acquisitions of auto finance companies not being accurately reflected in credit bureau reporting.’
CUNA said an example of credit union improvement in the data is the median 72-months interest rate in November of last year for deep subprime credit union borrowers is 44% lower at a credit union compared to a bank. Prior to the update it was 30% lower, CUNA said.
As CUToday.info reported here, credit unions were cautioned last week by Pete Hilger, CEO of Allied Solutions, to prepare for a spike in delinquencies.
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