Converting Indirect Borrowers Into Active Members

As indirect lending programs become increasingly common, some credit unions are capitalizing on the opportunity to expand their relationship with indirect members.


Over the last several years, credit unions have turned to indirect lending as a way of countering squeezed rates and increased competition from banks for auto loans, according to Thomas Hast, vice president of marketing and indirect lending at JSC Federal Credit Union (Houston, TX, $667M).

As of Sept. 30, 2004, credit unions had over 3.5 million indirect loans outstanding, worth $50.2 billion – an increase of 10.24 percent over the previous quarter. However, converting all these indirect borrowers into active credit union members remains a challenge.

After initial contact with indirect members, credit unions are faced with the task of capturing these customers’ attention and bringing them into branches to explore the array of additional products and service offering.

Some credit unions with very large indirect lending programs, such as Travis Credit Union (Vacaville, CA, $1.4B), segment their indirect borrowers by region and focus marketing campaigns on smaller subsets of potential active members that reside within a few miles of one of their branches.

To target these groups, Travis launched their “Car-in-Box” promotion, mailing a toy car to congratulate them on their recent car purchase, along with an invitation to stop by a branch for a free $20 gas card.

Cathy Rios, vice president of marketing at Travis, reported an ROI of over 400 percent for the initiative.

JSC Federal also has had tremendous success with engaging indirect members. Hast estimates roughly 40 percent of indirect borrowers subsequently opened new accounts at the credit union. JSC Federal has a locally focused and conservative lending approach, with an emphasis on partnerships with small and family-run dealerships. This focus creates mutually beneficial relationships with indirect lending partners and helps fuel JSC Federal’s high success rate in converting indirect borrowers into active members.

Parlaying success in indirect lending into broader use of credit union services often times requires intricate strategies and innovative marketing campaigns. If you have a story to share on your credit union’s approach to converting indirect members into active members, please e-mail the author at (See chart below for the top 30 credit unions by indirect loans outstanding).