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A Soft Landing?

Financial news headlines last month trumpeted analyst projections that the Federal Reserve had indeed achieved its goal of managing the economy away from a recession and into a soft landing. The Fed’s September decision to cut interest rates by a half point – the first cut since the pandemic four years ago – was the agency’s long awaited victory lap. By all reports, the economy remains strong, consumer spending is robust, manufacturing is up, and labor continues to gain, although at a slower rate than expected.

Another quarter point reduction, announced November 7, reflects policymakers’ response to slowing inflation and a desire to reduce borrowing costs. The Fed believes it has not finished taming inflation, and a continued series of rate cuts are needed to keep the economy chugging along. Concerns about the labor market and the impact of the election results mean officials will keep their hand on the rudder for several more months.

However, the view from the Fed’s high-rise towers diverges greatly from the average consumer’s front lawn. Grocery prices continue to climb, mortgage rates have ticked back up, and the interest rates for an auto loan remain near decades-high levels at more than 9.61% for a new vehicle and nearly 14% for a used car or truck, according to Cox Automotive. What happened to that soft landing?

While interest rate cuts may boost consumer desire to purchase, it won’t impact new vehicle sales as quickly or by as much as some may expect. As we all know, auto loans are a function of longer-term bond yields that are based on loan performance. Cox Automotive chief economist Jonathan Smoke commented recently that vehicle affordability challenges will not be solved by this new rate path.

As a credit union searching for a soft landing in your auto loan portfolio, how are you steering the rudder? Are you taking innovative steps to capture market share from competing banks? Are you offering unique, value-driven deals to new and existing members? Fortunately, as a credit union, you have the power to make incremental shifts that can have a measurable impact on the bottom line.

Take an innovative mindset to give your customers more personalized loan and F&I options versus what might be available at the dealership. Be competitive on the APR and offer a customized suite of complimentary protection products on new, pre-owned or even refinanced loans. Foster a spirit of innovation among your loan officers, encouraging them to offer new ideas. And listen to those ideas when they make sense!

Innovation doesn’t just exist in terms of products and services. It lives within the culture of the company, its employees, and leaders. I know this firsthand. For the eighth year in a row, EFG Company employees have ranked the company as one of the most innovative business services companies in North Texas, scoring higher than our industry peers. Based on our annual employee survey results administered by Energage, the company that powers the nation’s premier employer recognition program, Top Workplaces, our employees feel respected, know their ideas are encouraged, and believe the company is committed to fostering a collaborative culture that delivers more value and profitable results for its clients. Can your employees say the same?

No doubt, it’s been a challenging, tumultuous year and we’re all looking for a soft landing. With over 50 years of experience, we’re more than an F&I provider, we’re your business partner and can be a valued resource to your credit union. Contact us today to learn more about how our team can help you achieve your auto lending goals.

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Tax Season Will be Bigger…But Take Longer

Here’s some good news. According to the most recent IRS data, the average tax payer will see a four percent increase in their refund versus the same time last year. This boost in 2024’s average refund size is due to the IRS’ adjustment of many tax provisions for inflation. The standard deduction and tax brackets were set seven percent higher for the current 2023 tax filing year. Because of that, workers whose pay didn’t keep up with last year’s high inflation are on track to get bigger tax refunds, with some lucky ones likely to receive up to 10 percent more in 2024.

And now the bad news. It might take longer to receive that tidy refund than in years past. While the IRS says it issues more than 90 percent of tax refunds within three weeks of receipt, the agency is quite a bit behind that pace in 2024. Several reasons factor into the delay. The agency had an additional week to process returns last year and the overall number of taxpayers filing on time is down. Changes to the tax code, increased safeguards against identity theft, as well as new “Where’s My Refund” tracking software have all impacted processing speed.

For retail automotive dealers and lenders who are counting on the April refund bump in car sales, it’s time to put another plan in place. According to a new study from Bankrate, half of all Americans scheduled to receive a refund are planning to use their checks to pay down debt or bolster savings versus a making a big purchase such as a vehicle. However, there are opportunities for credit unions to boost the odds of capturing those consumers who do decide to apply a tax refund towards a vehicle.

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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?