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Data Security Beyond Your Front Door

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

Credit unions are guided by a series of internal, state and federal rules and regulations pertaining to data security. One example is the requirements established by the National Credit Union Association (NCUA). This entity has set forth the IT Security Compliance Guide designed to summarize the obligations of credit unions to protect information in specific situations. One specific situation is the proper capturing – and disposal of information. It is often this situation, and the role of credit union partners and administrators, that puts a credit union at risk for a data breach.  Let’s take a look at the guidelines and the opportunity for risk.

The proper disposal of information requirements in the Security Guidelines applies to any personal information a credit union obtains about an individual. But those requirements also extend to a credit union’s providers. A credit union must require its service providers that have access to consumer information to develop appropriate measures for the proper disposal of the information, regardless of whether a loan is ultimately secured. In essence, if a dealership provides credit information to a potential lender, that information must be disposed of properly whether the loan is completed or not. How often do you assess the information disposal practices of your partners?

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Is Your Auto Loan Affordable?

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

According to a recent study from Bankrate.com, the average new-car price tag is too high for the majority of medium-income U.S. households. Here’s the breakdown:

In May, Kelley Blue Book updated the average new-vehicle transaction price to $33,261.

Using that transaction price, Bankrate applied the traditional 20-4-10 rule to conduct the study – i.e.:

  • a down payment of 20 percent
  • a four-year loan
  • principal, interest and insurance payments accounting for 10 percent of the household’s gross income

From looking at your own portfolios, you probably know that the majority of American consumers don’t put 20 percent down on their vehicle, and they are often financing for upwards of seven years. The fact that consumers don’t use the 20-4-10 rule should give you a good picture of the state of American finances in comparison to vehicle prices.

It should come as no surprise that Bankrate’s study came back showing that only one metro area could afford the average-priced new vehicle – Washington, D.C., where the median income is nearly $100,000.

Despite the fact that, according to Bankrate, most households can’t afford to purchase a new vehicle, new unit sales are still on par with last year’s levels. The most recent LMC Automotive/J.D. Power forecast puts 2017 new vehicle sales volume in the low 17 million-unit range for the year.

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Managing Rising Consumer Debt

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

The data says it all. According to Euromonitor and JATO, between 2009 and 2016:

  • U.S. consumer spending on vehicles grew by 36 percent
  • The outstanding balance of consumer auto loans increased by 36 percent
  • Disposable income only grew 15 percent
  • The outstanding balance of consumer loans as a whole decreased by 7 percent
  • The average auto debt per car in circulation rose by 44 percent

Everyone knows that since 2009, auto manufacturers and lenders aggressively pursued unit sales and loan volume. Manufacturers have hit a peak when it comes to providing deep incentives, while lenders loosened credit standards, increased terms, and dove into the deep-subprime space.

Morgan Stanley recently reported that the percentage of deep subprime loans rose from 5.1 percent in 2010 to 32.5 percent in 2017.

Now dealers, manufacturers, and lenders are beginning to see what the other side of this rapid expansion looks like. Sales are plateauing regardless of dealer or manufacturer incentives. Defaults and delinquencies are up, and loan originations are on the decline.